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The State of American Business 2011
Address by Thomas J. Donohue, President and CEO
U.S. Chamber of Commerce
Outlook 2011: The State of American Business
National Chamber Foundation
January 11, 2011
As Prepared for Delivery
(Note: due to event time constraints, some material may not be delivered from the podium but remains a part of the Chamber's 2011 State of American Business report.)
The Economic Outlook
Thank you very much and good morning ladies and gentlemen.
Let me thank the National Chamber Foundation and all the staff who organized this event--and thank you all for coming.
At the outset, I'd like to express, on behalf of the U.S. Chamber of Commerce, our shock and sadness over the tragic shootings in Arizona.
Under any circumstance, the violence, injury, and loss of life that occurred are an outrage to us all. We are especially offended by the fact that this rampage was directed at our democracy itself--striking down public servants as well as free citizens who had come to engage in a dialogue and express their views.
We are praying for a full recovery for Congresswoman Giffords and the others who were injured. And our hearts go out to the families of those who lost their lives.
While the New Year has begun on this sad note, I can report that when it comes to the nation's economy, we begin 2011 in better shape than we found ourselves last year. The state of American business is improving.
Last year, we worried about a double dip recession. Today, we are cautiously optimistic that the recovery will continue and pick up steam as the year progresses. The new tax package could give growth and jobs a significant boost--which is precisely why the Chamber, along with many of you, worked hard to renew all of the 2001 and 2003 tax cuts.
Overall, we believe the economy will expand by 3.2 percent in 2011 and create 2.4 to 2.6 million net new jobs by the end of the year.
Yet we still face a number of risks that could send us in the wrong direction.
Housing and construction are still very weak. A new wave of home foreclosures could drive down real estate values and household wealth. Oil and gasoline prices are rising rapidly and could reignite inflation. Major states are nearly insolvent and will be looking to raise taxes on consumers and businesses.
And, we face a long list of known and unknown geopolitical and national security threats that could change our economic prospects overnight.
To be sure, November's election results, the tax package, progress on a Korea trade agreement, and a new tone coming out of the White House have addressed some of the business community's immediate concerns. Yet uncertainty among companies, lenders, and investors still abounds. There are many unanswered questions about regulations, taxes, and other policies that must be addressed in order to unleash aggressive hiring by the private sector.
Turning an Economic Recovery into a Jobs Recovery
When it comes to jobs, we have a steep hill to climb.
Unemployment has exceeded 9 percent for 20 consecutive months. That hasn't happened since the 1930s. Some 27 million Americans are either unemployed, underemployed, or have given up looking for work.
Let's suppose we do create about 2 1/2 million net new jobs this year. As welcome as this would be, it would only drive the unemployment rate down by about one percent.
In fact, we must create 1.2 million jobs a year just to absorb the new entrants into our workforce. On our current course, it could take years to get back to where we were before the recession and the financial crisis hit. In my book, that's not good enough.
Therefore, in 2011, the Chamber's top priority will be to turn an economic recovery into a jobs recovery so that we can put Americans back to work.
To succeed, we must work to enact policies that will sustain and accelerate economic growth by removing regulatory uncertainty and doubling U.S. exports over five years.
We must make our domestic economy more attractive to global investors, job creators, and start-up entrepreneurs by clearing away the impediments that are causing them to sit on their capital or invest it outside of the United States.
And we must do right for future generations and our economy by beginning a serious effort to cut runaway spending, reform entitlements, and bring government deficits and debt under control.
Strengthening America's Competitive Position
To successfully improve our own economy, we must take into account what other nations are doing to improve theirs.
Other countries are signing trade deals, forming alliances to share natural resources, and rapidly developing their own domestic energy supplies. Some are cutting taxes and regulations, pushing legions of young people through science and engineering schools, and building brand-new infrastructure in a fraction of time that it takes to build anything here.
In many respects, America is not keeping up.
To deepen our understanding about our nation's competitive challenges, we are doing what any smart coach or political candidate would do before a big game or important campaign--and that is to learn everything there is to know about their own strengths and weaknesses and those of their competitors.
The Chamber is now conducting this kind of competitive analysis. We are examining, in a factual and objective way, the actions by our government and the actions by the business community that are either moving us forward in the global economy or holding us back. We'll then compare it to what our competitors are doing. Our goal is to identify the major factors that shape the decisions of job creators, innovators and investors--to pinpoint our strengths so we can build on them and our weaknesses so we can fix them.
These findings, which we plan to release this spring, will set the stage for a major project to strengthen America's competitive position in the global economy.
At the same time, the Chamber will seek to focus our government's attention on a host of immediate priorities, and we're prepared to work with anyone in order to make progress. Time doesn't permit me to cover them all, so let me briefly touch upon a few issues in four areas:
- Regulatory restraint and reform
- Expanding American trade
- Rebuilding the nation's economic foundation, and
- Reducing runaway spending, deficits, and debt
The Regulatory Tsunami
First, we must rein in excessive regulations and reform the regulatory process.
At the federal level alone, regulations already fill 150,000 pages of fine-print text and cost Americans $1.7 trillion a year. Many of these rules are necessary and business strongly supports them.
Yet in recent years, we have seen an unprecedented explosion of new regulatory activity. Furthermore, the administration is likely to turn increasingly to the regulatory agencies now that getting legislation out of Congress could be more difficult.
The resulting regulatory tsunami poses, in our view, the single biggest challenge to jobs, our global competitiveness, and the future of American enterprise.
For example, the new health care law creates 159 new agencies, commissions, panels, and other bodies. It grants extraordinary powers to the Department of Health and Human Services to redefine health care as we know it.
When the bill passed, Americans were promised that it would lower costs and allow anyone who liked their existing coverage to keep it. Instead, costs are rising and health plans are being forced to change.
Officials have already raised the cost estimates of the bill and have acknowledged that the savings earmarked for Medicare will never materialize.
In some states, Medicare Advantage participants are being told their plans will no longer be available.
Workers who have been banking on employer-based coverage when they retire are being told not to count on it. And as premiums rise, thanks in part to the law's new mandates, many companies are thinking about ending their employer-based plans, and moving workers into government-run exchanges.
By mid-December, HHS had already granted 222 waivers to the law--a revealing acknowledgement that the law is unworkable. And, with key provisions under challenge in the courts by states and others, it's time to go back to the drawing board.
Last year, while strongly advocating health care reform, the Chamber was a leader in the fight against this particular bill--and thus we support legislation in the House to repeal it. We see the upcoming House vote as an opportunity for everyone to take a fresh look at health care reform--and to replace unworkable approaches with more effective measures that will lower costs, expand access, and improve quality.
The regulatory tsunami is also about to wash over our capital markets.
Dodd-Frank contains 259 mandated rulemakings, another 188 suggested rulemakings, 63 reports, and 59 studies. My grandchildren will be old and retired before it is all implemented.
The Chamber's Center for Capital Markets Competitiveness is deeply involved in the regulatory rulemaking triggered by this massive law.
We are particularly concerned that the new Consumer Financial Protection Bureau does not use its broad authority in ways that deny small businesses and consumers the credit and financial products they need.
We want to make sure that Main Street end-users are still able to use derivatives in an effective way to manage their legitimate business risk--without sidelining billions of dollars in productive capital and costing tens of thousands of jobs.
And although our pending litigation against the SEC over its proxy access rule has delayed its implementation, that battle is far from over. We'll continue to oppose proposals that would expand the ability of special interest shareholders such as unions to exploit proxy access rules to the detriment of companies, jobs, and all shareholders.
Even as we actively participate in these and many other rulemakings, we will renew our efforts to create a more modern, coherent regulatory structure with more effective regulators--areas where the new legislation fell far short. If we want to create enough jobs, we must ensure that our nation has the most vibrant, transparent, efficient, and well-regulated capital markets in the world.
Labor Market Regulations and Policies
Job creators are also facing unprecedented regulatory activity and case law changes in the Department of Labor, the National Labor Relations Board, and similar agencies. Over 100 such efforts are underway covering compensation, contracting, leave, ergonomics, workplace safety, hiring and firing, and union organizing.
The Chamber is going to fight hard throughout the year to challenge policies and rulings that are unfair to employers. But much more than workplace rules are at stake here.
Some unions--particularly the public employee unions--are are pushing an extreme agenda that extends well beyond representing their members in the workplace. They have been using their position as a powerful political force to sabotage the nation's trade agenda, which has damaged our standing overseas. Some want to vastly expand the size and cost of government, perpetuate the status quo in our failing public schools, and attack the nation's best companies through destructive tactics.
The sad irony is that all of these activities undermine the nation's ability to create and keep good-paying American jobs.
EPA Rulemakings and Greenhouse Gas Regulations
We will also continue our legal and legislative efforts to stop the EPA from misapplying environmental laws in order to unilaterally regulate greenhouse gases. The Chamber will support appropriate bipartisan legislation to delay or stop the EPA and return the important climate change issue to the purview of the Congress.
While EPA is starting with the largest emitters, it could eventually regulate 6 million entities--including small businesses, hotels, warehouses, and even churches. Before any of these facilities could build or expand, they would have to get pre-construction permits that take 6 to 9 months to obtain at a cost in excess of $100,000 per permit--and even then, the permits can be challenged in court. This could seriously disrupt construction activity across our nation and throw a lot of people out of work.
Beyond greenhouse gases, EPA's regulatory agenda lists 342 rulemakings in various stages of development and completion. Of these, 30 are deemed "economically significant"--each with a cost to our economy of $100 million or more.
Regulatory Reform and Advocacy
I could cite many other troubling examples of regulatory over-reach. Here's just one: By unfairly imposing a one-size-fits-all test that has little to do with academic quality, the Department of Education would make entire higher education programs ineligible for federal financial aid.
As a result, hundreds of thousands of students could be denied access to our excellent for-profit colleges, universities, and technical institutes. The administration should take the advice of many in the Congressional Black Caucus and withdraw the regulation.
How will the Chamber challenge this vast array of regulatory activities across our government?
We will use a range of tools depending on the circumstance. We will work cooperatively with the agencies whenever we can to reach a reasonable outcome. We will support, when appropriate, efforts to limit agency funding to implement regulations. We may pursue legislation or seek the application of the Congressional Review Act.
Yet the time has come to reform the regulatory process itself--to restore some badly needed balance and accountability to the system. This could be done by giving Congress the right to vote up or down on major rules before they take effect--and by strengthening the burden of proof that all agencies would have to demonstrate in court when they are imposing major rules.
Speaking of courts, new regulations mean new opportunities for the trial bar to expand lawsuits. The need for legal reform as well as courtroom advocacy on behalf of business will be greater than ever in the coming year and beyond. Our Institute for Legal Reform and our law firm, the National Chamber Litigation Center, will therefore play a critical role in the Chamber's ongoing program of work.
Finally, the Chamber will soon stand up a new group that will engage one or more respected advocates of stature and experience in the regulatory arena. This group will continually tell the story to the American people, policymakers, and the media about the massive costs of excessive regulations on jobs and on our personal and economic freedoms.
We cannot allow this nation to move from a government of the people to a government of the regulators. That's where it has been headed under Republicans and Democrats alike. We're going to be engaged in this fight for years to come.
A Pro-American Trade Agenda
Another key priority for the Chamber is to create jobs by advancing a pro-America trade agenda that doubles exports in five years, and doubles them again in the five years after that.
Last year, we heard a lot of talk about expanding trade but we didn't see much action. We have a good bipartisan opportunity to change that in 2011.
Market Opening Trade Agreements
A year ago, the Chamber released a study which warned that the United States will lose more than 380,000 existing jobs and $40 billion in export sales if we fail to implement our pending Free Trade Agreements, while within months, the EU and Canada will move ahead with theirs.
The administration must work urgently with the new Congress to approve the FTAs with South Korea, Colombia, and Panama. We will pull out all the stops to help get the votes.
We also strongly support the Trans-Pacific Partnership negotiations to open markets and expand trade with some of the fastest growing Asian economies--and if Japan can make the necessary reform commitments to join the negotiations, so much the better.
Transatlantic Zero-Tariff Agreement
And let's not overlook America's largest commercial partner--the EU. This month, I'll be traveling to Dublin, Brussels, and the World Economic Forum in Davos. One key objective of my trip will be to advance the idea of simply eliminating all tariffs on goods in the $600 billion transatlantic trading relationship.
An independent study commissioned by the Chamber found that doing this would increase transatlantic trade by more than $100 billion between now and 2015.
We think it could also jump-start global trade negotiations and set the stage for similar agreements with other partners.
Protecting Intellectual Property
We also need stronger global rules as well as more effective enforcement efforts to address the rampant theft of intellectual property in both the digital and physical worlds.
This is an issue that unites business and labor as well as Republicans and Democrats. Consumers should not be threatened by unsafe counterfeit products. And we cannot stand by as 19 million jobs in our most innovative and creative industries are threatened.
Modernizing Export Controls
In addition, we need to reform export control rules, which were designed during the Cold War and have cost us billions in lost exports sales.
The administration deserves credit for the progress it has made in creating a single export control list that distinguishes between the "crown jewels" of American technologies and those that are widely available. We urge officials to get the job done soon.
Fair Treatment in China
We must also continue to press our major trading partners to open their markets and create a level playing field for American goods and services.
Our relationship with China was a big issue in many campaigns last fall. China is a vital market for the United States. Our exports to that country are growing faster than almost anywhere else. But we are also concerned about a host of Chinese policies--from its effort to promote indigenous innovation, to the favoritism it shows to domestic industries, to its lax IP protections, to its undervalued currency.
Some progress has been made on these issues. More progress is needed--and soon. But starting a trade war with one of our fastest growing export markets is not the answer.
As we work to persuade China and others to adhere to the principles of free and fair trade, we must live up to these principles ourselves.
That's why we welcome last week's news that the administration is taking a first step towards resolving the long-running U.S.-Mexico trucking dispute.
It's been some 15 years since the United States promised to allow safe, carefully-inspected trucks to move back and forth between our countries. The resulting tariffs imposed against us and authorized under NAFTA, have cost us 25,000 American jobs. It's time to keep our word.
Tax Reform, Visas, and Tourism
We also need to make the United States more attractive to global investors, talent, and tourists. The Chamber will work to reform our tax code and lower the corporate tax rate, which is the second highest in the developed world.
Almost all of us are sons, daughters, or descendents of immigrants. The Chamber will continue to pursue comprehensive immigration reform. We urgently need to improve visa processing, oppose attempts to gut temporary worker programs, and increase the number of worker visas.
A smarter visa policy would also allow us to greatly expand one of the surest job-creating exports to be found - foreign tourists and all the money they bring, spend and leave behind.
Regrettably, many Americans think that trade agreements cost jobs, that foreign investment and immigration threaten our national sovereignty, and that U.S. investments abroad take domestic jobs away. To change these misperceptions, we'll launch a major initiative to educate citizens and policymakers on trade that will clearly link global engagement to American jobs.
Ninety-five percent of the people we want to sell something to live overseas. There are 283 free trade agreements in force around the globe today, the United States has just 11 FTAs covering 17 countries. It's time to get the United States back into the game in a vigorous way.
Rebuilding Our Economic Foundation
Another priority we're putting front and center this year is the need to rebuild America's economic foundation--the platform on which our society runs.
Roads, bridges, rail and mass transit networks, airports, and air transport systems must be modernized. Broadband capacity, power generation, and water supplies must be expanded. If we fail to act as growth returns, we will soon run out of capacity. Our economy will hit the wall and we will be physically unable to grow. We'll lose jobs and even lives as a result.
Investing in Transportation
Our core surface transportation, aviation, and water resources programs are all operating under a series of short-term funding extensions. Neither states nor private investors can get projects off the drawing board with this kind of uncertainty--American jobs hang in the balance.
The Chamber will lead the fight to remove the regulatory, financial, and legal barriers that have locked away hundreds of billions of dollars in private infrastructure spending. But we must also have a strong, consistent, and reliable federal commitment to infrastructure--or these private dollars will go somewhere else.
Developing American Energy
With crude oil prices on the rise again, we are also reminded of the compelling need to develop more of our own vast energy and other natural resources.
According to one study, increasing access to America's domestic oil and gas resources could, by 2025, create a minimum of 530,000 jobs, $150 billion in government revenue, and the equivalent of four million barrels of oil per day.
Yet instead of moving forward, we are slipping backwards. Government delays in issuing permits for energy development in the Gulf of Mexico have prompted companies to move drilling rigs--and jobs--to other oil producing countries. Excluding the Eastern Gulf of Mexico and the Atlantic and Pacific coasts from the upcoming Five Year offshore plan will seriously undercut jobs and America's energy security.
There's no good or valid reason to send our money to other countries to pay for something we have plenty of right here at home. We can create jobs, reduce our trade and budget deficits, and increase our own security by prudently developing all forms of alternative, renewable, and traditional energy.
Global Supply Chain
In order to expand trade and move people, goods, information, and money throughout the country and around the world, we must focus new attention on America's global supply chain. We need to connect our entire economy in a seamless 21st century system of superior transportation, high speed information and communications technology, and modern seaports, airports and border crossings.
And so we have just engaged Jack Potter, the former Postmaster General of the United States, to lead an important new project for us. He will consult with the leading supply chain firms and experts worldwide and help us rally the business community around a plan to improve, maintain, secure, and advocate for a 21st century global supply chain and logistics system.
Restoring Educational Excellence
Rebuilding America's economic foundation is about more than the physical infrastructure. It is fundamentally about people--developing the talents of our children and workers, and ensuring that our country continues to lead the world in innovation.
In 2011, the Chamber will continue to mobilize our grassroots federation to the cause of improving educational and training opportunities for all Americans. This is more than an economic issue. How can any of us sit still when millions of American children are trapped in failing schools and a third of them don't even get a high school diploma? This is a moral outrage and a ticking social time bomb.
I commend President Obama for challenging some of the orthodoxy among his own political supporters. But we must move faster and more ambitiously on fundamental school reform or we will all pay a horrific price in the years ahead.
America's Debt Crisis
Business, like all Americans, must also do its part to help address another defining challenge of our times--the growth of government spending and entitlements, and with it, the explosion of government debt.
The national debt already exceeds $14 trillion and is on track to nearly double over the next decade. Our current fiscal path leads to only one destination--insolvency.
The conventional wisdom says that no effort to address deficits will be considered until after the 2012 elections. But we can't wait that long. At the very least, a serious down payment on bringing deficits and debt under control should be made this year.
To control deficits, we must first put unemployed Americans back to work so that they are paying taxes instead of collecting benefits. But Congress and the administration must also move swiftly to reduce spending. The Chamber will support strong proposals even if we don't like all the details.
We'll also make the case for entitlement reform because any plan that fails to tackle these runaway programs is doomed to fail. And, we're going to support efforts by Republican and Democratic governors to challenge public employee unions and their excessive payroll, health, and retirement demands which are causing states to accumulate massive and unsustainable debt.
Getting Things Done in a Divided Government
Ladies and gentlemen, let me end where I began--on a note of optimism about our economy. It is picking up steam. We'll see stronger job creation. And while the philosophical gap on some issues will be too wide to bridge, I believe our elected officials can find enough common ground--or at least some shared enlightened self-interest--to make progress on the priorities I have outlined today.
To help persuade them, the Chamber will keep our grassroots systems--including our voter education and issue advocacy programs--fully mobilized, funded, and fired up throughout 2011.
We'll continue to expand our free enterprise campaign and educate all Americans about the need for a proven economic system based on open markets, limited government, and the freedom to take a risk, work hard, and be rewarded for those efforts.
We will also significantly expand our efforts to support small businesses and do everything we can to ensure their success. At the same time, we will get small businesses more actively engaged in the Chamber's political, legislative, and advocacy efforts.
And while we're doing that, the Chamber will vigorously defend the rights of companies and the associations that represent them to lobby, to petition the government, and to fully participate in the political and policy debates that will shape the future of our country. We will not allow the business community to be intimidated and we will use every tool at our disposal to challenge those who try to silence our voice.
Our approach in Washington will be to call them as we see them. We'll continue to have our differences with the White House on some issues but we'll work together on other issues. We'll support the new House leadership on many occasions, and we'll work with Democratic legislators as well, but no one should expect the Chamber to march in lock step with anyone.
We have a clear mission and agenda of our own:
It's to continue to win important policy victories for our members and the American business community.
It's to support, protect, and advance the free enterprise system that made this country great.
And it's to help create good jobs and promising opportunities for all the people of our country so that they can achieve the American dream.
I want to thank you again for coming today. We look forward to working with all of you throughout this year and beyond to vigorously and proudly represent the one institution in our nation that really works, the one institution that can put our nation back to work--the American business community.
Thank you very much.