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CNBC Squawk Box: BRT President Engler Highlights Tax Reform, Trade

Nov 5, 2015

Business Roundtable President John Engler appeared on CNBC's Squawk Box this morning, interviewed by Michelle Carusa-Cabrera on the major economic issues concerning U.S. business leaders. "Slow economy ... underperforming against trend," Engler said. How to address it? Tax reform is the place to start.

But can it get done?

"Everybody, everybody says no way," Engler said.  "No possibility. I hold out that the economic reasons to do this are so compelling that we shouldn’t wait." And new House Speaker Paul Ryan and Ways and Means Committee Chairman Kevin Brady (R-TX) are committed reformers.

As for trade, the text of the Trans-Pacific Partnership was released today, which will help the debate over the agreement. (BRT news release.)

The transcript follows the embedded video below.

Michelle Carusa-Cabrera: What’s the biggest issue as we go into the election when it comes to the, in terms of the viewpoint of the Business Roundtable?

John Engler: Well, slow economy. Underperforming against trend. One point five percent GDP growth last quarter. Tax reform is at the top of the list. You had Rob Portman on yesterday talking about inversions and what needed to be done. We’ve got to get competitive there. When you’ve got a 12.5 percent Irish corporate rate, 15 percent in Canada, it’ll be 18 percent in Britain, our 35 percent rate is standing out. That needs to be fixed. The new Chairman Kevin Brady of the Ways and Means Committee, the new Speaker Paul Ryan – they understand this. So I actually think there might be an opportunity to get something done even before the election.

Carusa-Cabrera: Can it get done under this leadership?

Engler: Everybody, everybody says no way. No possibility. I hold out that the economic reasons to do this are so compelling that we shouldn’t wait. 

Carusa-Cabrera: What is so amazing, and I think what frustrates the American people so much, is that actually on both sides, you constantly hear, we need tax reform and yet it doesn’t get done even though supposedly everyone agrees on it.

Engler: Well, I think you’ve got a weak Treasury Department at this point. And as a result, there hasn’t been. In ‘86, when this was last done, before we had the Internet, that’s the last time we did tax reform in this country, you had Jim Baker at Treasury, you had people like Rostenkowski, Packwood, real leadership trying to bring this together. Ryan actually, I think, is going to be in a better position to help advance the cause of tax reform as Speaker of the House than he was as Chairman of the Ways and Means Committee. Paul has talked about this. He understands it better than anybody in Congress. Kevin Brady’s first statement after being chosen by the House last night was: tax reform.

Carusa-Cabrera: Big issue you face is that, you’ve got on one side of the aisle there’s this idea of morality that what do businesses owe. You’ve heard it: how dare you suggest, look at all of the things the United States has done for you, you should be so happy to pay those taxes and stay here. How do you push back against that attitude?

Engler: Well, we try to remind them that there are a lot of pensioners that work for unions. There are a lot of school teachers in pension funds. There are a lot of average Americans who’ve got 401Ks. They’ve invested, they’re the real owners, and under our system, these owners are entitled to a good return on their investment, and to date, their own government is really locking them into subpar returns compared to what they could have if we got competitive. And this is about job creation. Everybody wrings hands over income inequality. Well, that’s slow growth that’s driving that, and I would say poor education and workforce is another piece of that, where we’ve got 5 million jobs today that are open, where people don’t have skills aligned to meet those needs. That’s why I’m actually in New York today, to talk about workforce issues. But, the tax thing is, if we want headquarters of companies – and I do – in the U.S., because I think that’s good for investment here, that’s good for job creation here, then we’ve got to get competitive. And so, tax is probably, you throw in regulation, a whole bunch of other things, but the tax question is right at the top of the list.

Carusa-Cabrera: On the other side of the aisle, trade, TPP.

Engler: Trade and TPP – the text is out today. I think that’s going to be helpful. I mean there’s literally hundreds of taxes that get cut. It’s a tough environment. You’ve got people like Bernie Sanders and Hillary Clinton, the Democratic Party, Donald Trump in the Republican primary, all trashing this. They’ve not seen the text yet. But they’ve jumped in with their opinions. I saw an ad from Trump today where he’s saying, “I’ll negotiate a great trade deal.” I don’t know what he means by that, but I do know that we only have less than 5 percent of the world’s population living here, so we better figure out how we’re going to sell goods and products made in America elsewhere in the world.

Carusa-Cabrera: We should underline, that’s significant to see the text, right? Because there has been all this complaints that this is negotiated in secret, nobody knows what’s in it. There’s been leaks the day it was announced. There were leaks in different countries about what was going on in the – for example, in the biotech sector, etc. – so this will be big news for some industries.

Engler: We think that there’s going to be some pleasant surprises and some affirmation that some of the early indicators. We know the ag sector is pretty happy.

Carusa-Cabrera: Because?

Engler: There’s some real markets getting opened up and some barriers coming down. It appears there’s a pretty good reaction to the tech community, that’s a bunch of votes right there – the tech community. You’ve got people in the Democratic caucus saying, “I’m a tech supporter,” well here’s their opportunity to prove it. Got to step up on this trade deal. I think for financial services, some big benefits as well. That’s important for New York, a money center. So there’s some good things, and I think there’s some great manufacturing advantages. We’ll have to – it’ll get picked apart. Pharma will be an interesting one to look at.

Carusa-Cabrera: Yeah, sure.

Engler: They got some gains – they didn’t get everything they wanted.

 

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