The U.S. Chamber of Commerce - State of American Business Speech by Thomas J. Donohue
The U.S. Chamber of Commerce
January 11, 2005
AS PREPARED FOR DELIVERY
Thank you very much, David (Rapp), and good morning ladies and gentlemen. I'm pleased that so many of you could join us for this Outlook 2005 conference, cosponsored by the National Chamber Foundation and CQ Weekly.
I'd especially like to welcome the Chamber's Chairman of the Board and also Senior Partner of Edward Jones, Mr. John Bachmann. John is doing an outstanding job carrying the business message across the country and around the world, as well as shaping and guiding our agenda in these critical times. Welcome, John.
Looking around the room, I also see many friends and colleagues from companies, chambers, associations and other organizations. Let me congratulate you all on a job well done in 2004.
Together, we demonstrated what a united and mobilized business community could achieve.
We made a significant difference in the recent elections, returning a pro-business government to office with larger numbers than before.
We moved the ball forward on important policy priorities – such as legal reform, pension reform, tax relief, transportation funding, workplace rules, and trade agreements. And, we stopped a lot of bad ideas too — for example, nearly 200 state and federal measures designed to close American markets and punish companies who choose to outsource.
So thank you for your hard work and your teamwork – and let's keep a good thing going in 2005.
State of American Business Report
Of course we are here this morning to look forward, not back. Each of you should have at your place a copy of the Chamber's annual State of American Business report.
Inside, you will find our policy priorities for 2005, our economic outlook, and our assessment of the political and legislative environment.
Since these topics are laid out in detail, I'm not going to recite them all this morning. What I'd rather do is share a few broader reflections on the challenges facing our economy, and then respond to any questions and comments you may have.
A Strong and Resilient Economy
Despite the election-year storyline peddled by the naysayers throughout 2004, the American economy is strong. It is resilient. It is creating record employment and rising incomes. And we believe it will continue on that course throughout 2005.
Furthermore, as documented in a recent editorial in the Wall Street Journal, our economy is easily outperforming most of our international competitors.
According to the Journal, whereas the Euro zone grew by 1.8 percent in 2004, the American economy grew 4.4 percent.
Our jobless rate stands at 5.4 percent. In France it's 9.5 percent and in Germany, 10 percent. We have a higher rate of participation in the workforce and a significantly lower rate of long-term unemployment.
As many of you know, I meet and talk to hundreds of CEOs every year. I can tell you that the mood among corporate executives has brightened in recent months as well.
They remain concerned about oil prices, about the way new corporate governance rules are being implemented, about lawsuits and health care costs, and about the possibility of another terrorist attack. But overall, American business is feeling pretty good about the near-term outlook for business.
No Cause for Complacency
Yet there is no cause for complacency. We should not allow recent successes to blind us to the challenges ahead.
First, we have a political and legislative challenge.
From November 2nd onward, we have warned the business community not to depend too much on our election victories. We still face a divided electorate and a divided Congress – not just between the two parties, but also within the parties.
The Senate could still fall victim to filibusters. The Congressional calendar will be filled with confirmations of new cabinet members and perhaps Supreme Court Justices.
For these reasons, business should not expect any "free passes" in moving our legislation and our agenda. We must be prepared to earn every victory the hard way – by mobilizing grassroots support, organizing coalitions, and passing bills with votes from both sides of the aisle.
To create needed momentum, the Chamber has urged the administration and congressional leaders to adopt a strategy that achieves some early successes on measures that almost made it to the finish line last year.
The class action bill, bankruptcy reform, energy legislation and the TEA-21 transportation bill are just a few examples.
On class action and other legal reforms, we were very pleased by the President's strong support voiced in a series of events last week.
You will recall that last year, the House passed the Class Action Fairness Act, and we lined up at least 62 Senators in support of the bill before partisan maneuvering got in the way. We are very optimistic this year – although we have learned never to "count the chickens" until the ink actually dries on a Presidential signature.
That's certainly when it comes to an energy bill. We came extremely close last year, with legislation passing both Houses and moving through a conference committee.
With higher oil prices and more turmoil around the world, it is more obvious than ever that we need a comprehensive plan to produce more domestic energy – and that includes ANWR. Getting this job done, and soon, will be a major Chamber priority in 2005.
America's Competitiveness Challenge
Now, as you read the State of American Business report, I hope you see a common thread running through all of the Chamber's proposals – whether they are immediate priorities or longer-term policy ideas.
The common thread is that this nation must take strong action across-the-board to create a more competitive economy and secure our global leadership in the 21st century.
America's competitive position in the world is being challenged like never before.
The rapidly developing economies of China, India, and East Asia are becoming major players in technology, business services, and other cutting edge industries.
These countries are consuming more of the world's resources, attracting and accumulating more of its capital, and producing more engineers and scientists 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.
In many respects, our nation has failed to answer this growing competition. Instead, we are driving companies, capital, and jobs out of our country with excessive legal, regulatory, tax, health and energy costs.
Furthermore, our society is aging, our educational system is falling short, and we face serious shortages of workers – all of which our current immigration and visa rules fail to address.
Four Ways to Make America Competitive
How can we create a more competitive American economy – one that continues to lead the world in growth, innovation and opportunity?
The Chamber has looked at this question carefully and offers the following four-part answer.
First, we must remove those barriers and impediments that make it too expensive to create and keep good jobs in the United States.
This is why, in 2005, you will see the Chamber and the Institute for Legal Reform fight even more aggressively to stop lawsuit abuse.
In addition to the class action bill, we're going to push very hard to finish the job on asbestos, medical liability and bankruptcy reform.
We're going to build on last year's success in Mississippi and seek important legal reforms in other problem states and jurisdictions – beginning with West Virginia and Madison County, Illinois.
ILR and our law firm, the National Chamber Litigation Center, will be aggressive courtroom advocates, working to reduce punitive damage awards and weed out frivolous securities litigation.
Corporate Governance and Accounting Rules
For many companies, a more recent development now rivals lawsuit abuse as the biggest impediment to business – and it is the way new corporate governance and accounting rules are being implemented and enforced.
The Chamber supports strong measures to protect investors, as well as vigilant oversight to root out all fraud.
However, we oppose regulators who have exceeded their authority and reached well beyond what Sarbanes-Oxley has intended.
And, we are deeply troubled by the actions of some prosecutors and attorneys general who seem bent on criminalizing honest mistakes and legitimate accounting differences.
By forcing some companies and individuals into settlements without the due process protections guaranteed in the Constitution, these powerful officials have inexcusably trampled on their rights.
Furthermore, outside groups with special interest agendas—such as trial lawyers, labor unions, public pension funds and rating agencies —are exploiting concerns about corporate governance to win concessions and advance their interests.
The Chamber has already begun a major initiative to challenge these groups and their excesses on all fronts.
We will soon release an independent study on the future of the accounting profession. Remember, that without a strong accounting profession, our enterprise system as we know it cannot function.
We will work to reform the SEC's current enforcement practices. And, we have challenged its mutual fund governance rule in court to prove that the commission exceeded its authority.
Through research, public education, and a comprehensive report to be issued this spring, the Chamber will shine a light on the unreasonable costs associated with Section 404 of Sarbanes-Oxley. We will also demonstrate how regulatory over-reach is driving domestic and foreign companies away from our capital markets.
Please understand that this Chamber initiative is not about whether there should be strong laws to protect investors and punish the guilty. Of course there should be. It is about ensuring that our capital markets can continue to attract the world's best companies and ideas, and whether our enterprise system continues to encourage risk-taking, business growth and job creation.
It's also about something more fundamental – whether we uphold the constitutional rights and protections that are guaranteed to all – and that is supposed to include companies, executives, accountants, corporate attorneys and board members. How can we expect to attract the best and the brightest to the business world without protecting these fundamental rights?
The second way we'll create a competitive American economy is by ensuring a fair and open playing field in the global marketplace.
In 2005, the Chamber will work to pass new trade agreements, renew presidential Trade Promotion Authority, encourage China to fully implement its WTO obligations, and persuade the European Union to revise policies that have slowed their economic growth to a trickle. All of these steps will help reduce the trade deficit.
We will continue to lead the fight against measures to restrict outsourcing by closing our markets. Our substantial surplus in services trade proves that overall, global sourcing can be a winner for the United States.
The Chamber will also advance an unprecedented initiative to fight a worldwide crime wave that has reached epidemic proportions.
I'm talking about intellectual property theft, counterfeiting, and piracy. These are crimes that cost American companies an estimated $250 billion per year, jeopardize the health and safety of consumers, and even have links to terrorist activities.
The Chamber initiative will focus on education, on disrupting the use of the legitimate supply chain to peddle fake or stolen goods, and on countries where the problem is particularly acute. We have already begun in-country programs in China and Brazil and will soon move to India, Russia and Korea.
The third way to compete and lead is to bring our 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.
Businesses and their employees have been hit with five consecutive years of double-digit price increases for health care.
We need to make tax cuts, such as the elimination of the death tax, permanent. Congress should pass market-based health care reforms like Association Health Plans and the expansion of Health Savings Accounts and Flexible Spending Accounts.
Many private pension plans, as well as Social Security, are in serious financial trouble. We need pension reforms covering defined benefit, defined contribution, hybrid and multiemployer plans.
And we strongly agree with President Bush that modernizing Social Security must not be pushed off to future Congresses, administrations and generations.
Interest groups and politicians are already drawing lines in the sand before the President has even made a specific proposal — and that's unfortunate for our country.
None of the major options under discussion would affect the benefits of Americans 50 and over. As for allowing younger workers to invest a small portion of their tax payments in personal investment accounts, common sense says we should do it. Politics says we should not. Which course shall we choose?
This is going to be a critical debate and a watershed decision for our aging society.
Fourth and finally, we can secure our nation's competitiveness and leadership in the 21st century by rediscovering those unique American strengths that made us a global leader in the first place.
We must unlock the potential of the world's most talented people with outstanding schools and opportunities for lifelong learning.
We have a long way to go in this regard. Just the other day, for example, the Governor of California reported that 30 percent of the students in his state don't even graduate from high school. How is our nation going to compete with results like that?
Our leadership in science and engineering is slipping, in large part because we aren't training enough experts in these critical fields. According to the National Science Foundation, 30 years ago we ranked 3rd in the world in the proportion of college students majoring in science and engineering. Today we rank 17th.
We must also reaffirm America's legacy as an open, welcoming, and diverse society through immigration reform and balanced homeland security policies.
Like any sovereign nation, we have the right to protect our borders. But let's stop the finger-pointing at "those people." With the exception of Native Americans, "those people" are you and me.
Our country was built on the dreams and daring of entrepreneurs, many of them immigrants, women, and minority Americans – and with the aging of our society, we need more of them participating in our economy, not less. We must support a thriving small business sector to create new jobs and innovations, and to open avenues of opportunity and independence for all of our people.
Ladies and gentlemen, again I encourage you to read our report, which contains many additional ideas that I haven't had time to mention this morning.
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. We must build on today's strong economy with policies and initiatives to help our businesses and workers succeed in an increasingly competitive world.
At the Chamber, we are reaching for the big goals. We aren't resting on our laurels. And we stand ready to work 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.
Thank you very much.