Business Roundtable is an association of chief executive officers of leading U.S. companies working to promote a thriving economy and expanded opportunity for all Americans through sound public policy.
Remarks as Prepared for Delivery by Business Roundtable President John Engler at the Michigan CEO Summit sponsored by the Business Leaders of Michigan.
Thank you Jim [Nicholson] and thank you, Business Leaders for Michigan.
It’s always a pleasure to return to Michigan and talk about competitiveness and what it takes to produce sustained economic growth and employment … to use the title of today’s CEO summit, to “play to win.”
I’ve been traveling recently to keep these issues at the forefront. It’s my Great Lakes tour this week: Chicago yesterday, Detroit today and Toronto tomorrow.
Michelle and I are enjoying more flexible schedules then in years past now that the girls are away at college. We were pleased that one of them – Hannah – decided to come home for school. Now when she chose the University of Michigan, I did said, “That’s great, but you’re not going to get me to wear the maize and blue.”
Speaking of education, our CEOs have made adoption of the Common Core State Standards a policy priority.
They recognize – as does everyone in this room – that high-quality, internationally benchmarked standards in math, English language and eventually science are essential if we are going to compete in a global economy. Other countries have been overtaking the performance of our students, the future employees – and taxpayers – of our nation.
Michigan Business Leaders have proved to be a strong voice for continuing with the Common Core in this state. Your efforts paid off when the Legislature reaffirmed the standards this month. Congratulations.
You have assembled a great schedule today that raises important questions about how Michigan stacks up not only in the U.S. but in the global economy, and what we must do to advance to the next stage of competitiveness. It would be helpful if elected officials in Washington asked themselves sometime the same questions for our nation. I’m not sure the answers would be as positive as I think they are in Michigan.
Not surprisingly, there’s a major focus today on the impact of the right leadership. Michigan truly has some able leaders in both business and elective politics.
Governor Snyder’s team and key legislators are making notable progress in creating a more welcoming business environment. Many challenges remain, but Michigan is tackling them. Michigan is taking action.
Regrettably, as I suggested a moment ago, that’s not the case in Washington.
Instead of enacting policies that will restore vibrant economic growth, that will prompt business to hire more people, we see government shutdowns and threats to default on federal obligations. They cause real economic harm.
Larry Fink, CEO of BlackRock and a BRT member, spoke with business leaders during the recent impasse in Washington. Here’s what he found, and I quote:
“CEOs told me they are holding off on hiring and putting off needed investments in factories and equipment. Global investors are reassessing their holdings of U.S. bonds.
“This is the kind of anxiety that can and will hamper growth and drive up borrowing costs if our leaders don’t address it.”
Unfortunately, we’ll soon face another deadline, December 13 for the budget and January 15 for the debt ceiling.
The short-term mentality of D.C. wreaks havoc on companies’ attempts to plan for the long-term.
There is an entirely rational set of policies that Congress should pass and President Obama should sign into law that would put the nation on much stronger competitive footing in the global economy.
In fact, the President’s Council on Jobs and Competitiveness – chaired by General Electric CEO Jeff Immelt – submitted about 90 recommendations to the President in 2012, smart recommendations such as streamlining regulation, improving education, and reforming the corporate tax code. Has there been any action on them? Perhaps a few, on the margins.
This year, Business Roundtable released “It’s Time to Act for America’s Future: 2013 CEO Growth Agenda,” our own detailed policy recommendations to jumpstart growth and job creation.
More vibrant economic growth is vital: This is so important because the United States remains stuck with a growth rate about half of what might be normal coming out the kind of deep recession we encountered in 2008 and 2009.
GDP growth of 4 percent instead of the current 2 percent growth would go a long way in fixing the problems our country faces.
Imagine how much easier the deficit conversation would be in Washington. The OMB says that even a 1 percent increase in GDP would mean $3.5 trillion in deficit reduction over the next 10 years.
So what does the BRT’s growth agenda look like? It embraces many of the policies you’re discussing today, policies that could help your companies, your employees and your communities prosper. It covers such areas as trade, energy, regulations, education, immigration and taxes.
Tax reform is especially timely. As I mentioned, a conference committee has until Dec. 13 to write a budget, and although such a tight deadline makes a “grand bargain” difficult to achieve, Congress can at least move forward, creating a framework for comprehensive reform.
Representative Dave Camp has been a champion on this issue, working closely with Senator Max Baucus of Montana to explain the importance of tax reform to economic growth.
The case for modernizing our system corporate taxation is powerful.
The United States today has the highest business tax rate of any OECD country, making it difficult to compete in global markets.
A recent Wall Street Journal editorial cited the work of Drew Lyon at PwC that demonstrated that the U.S. effective corporate tax rate is also very high – 35 percent.
Meanwhile, the list of countries that have lowered their own top rates for competitive purposes just keeps getting longer and longer: Canada… Britain… the Scandinavian countries… Japan. Portugal just announced plans to lower its corporate rate to spark economic growth.
The United States is also the only G-8 country to use a “worldwide” tax system, which collects U.S. taxes on the earnings of U.S. foreign subsidiaries. Most other OECD countries employ a more modern international tax system, where a company's sales in foreign markets are taxed at the rate of that local market – the same rate borne by other competitors.
America – and the world – would be well-served by the United States adopting a system that encourages a more rational investment pattern by U.S. companies. Let them bring money home, invest it here, and drive global economic growth.
Trade is another area where America has just not made enough progress. We’re getting beat to the punch.
Just last week, Canadian Prime Minister Stephen Harper was in Brussels to announce a free-trade agreement with the European Union.
I called for a U.S.-EU agreement more than five years ago when I was at the National Association of Manufacturers.
Negotiations started just this July on the deal, known as the Transatlantic Trade and Investment Partnership. We’re making progress, but too slowly.
Ultimately, a U.S.-EU agreement should also include Canada and Mexico.
Canada and Mexico have also joined in another important trade negotiation that’s under way – the Trans-Pacific Partnership, or TPP.
The 11 other TPP countries represent critical markets for U.S. goods and services exports. They account for a combined population of 482 million people and represent roughly 15 percent of global trade.
In 2011, our exports to these countries supported an estimated 14.9 million American jobs.
The TPP agreement will address the types of issues that the United States has pursued in past free trade agreements, such as market access for goods and services, the protection of intellectual property, strong investment protections including investor-state dispute settlement, and government procurement.
Again, with respect to Canada and Mexico, I see real potential for the country and Michigan in a more integrated North American market.
Energy development should lead the way.
Here in the United States, the technological advances in hydrofracturing and horizontal drilling have had an enormously positive impact on the U.S. economy.
The United States recently surpassed Russia as the Number One oil and gas producing nation in the world.
New shale gas resources in states like Pennsylvania and Texas have brought stability to once volatile natural gas prices.
One example: Thanks to the natural gas boom, Dow Chemical has $4 billion in expansion plans along the Gulf Coast, including an ethylene production plant for startup in 2017 and a new propylene production facility at Dow’s Texas operations.
AS CEO Andrew Liveris has said, affordable natural gas “makes America a low-cost jurisdiction for any energy-intensive manufacturing of the value-add kind.”
We can build on this progress, bringing Canada and Mexico into a closer partnership.
The next, immediate step in that integration is U.S. approval of the Keystone XL pipeline to bring Alberta oil south to U.S refineries.
Earlier this month, Business Roundtable, the U.S. Chamber of Commerce and National Association of Manufacturers wrote a letter to President Obama urging approval of the project. One-hundred-sixty-five business leaders joined in signing.
We said: “We are at an inflection point in our economic recovery. Whether economic growth will remain modest or pick up speed will depend on maintaining investor confidence and strengthening America's competitiveness. The decision on Keystone XL will affect both."
TransCanada has vowed to make certain Keystone is the safest pipeline built to date in North America. In fact, the project has already gone through the most exhaustive environmental review for a cross-border pipeline project in the history of the United States.
Allowing politics or anti-growth activism to derail the project would not only deprive us of jobs and growth, it would also signal to the rest of the world that the United States is not that serious about energy.
CEOs with Canadian and Mexican companies met with their U.S. counterparts last year at the Business Roundtable in Washington, and I recently spoke in Mexico City at the North American Forum. In both cases, officials and business leaders agreed strongly that greater energy cooperation was key element for growth.
The Mexican government is taking aggressive steps to liberalize his country’s oil market by permitting outside investment in Pemex.
Canada, meanwhile, continues to develop its abundant resources with an eye toward global exports of oil and liquefied natural gas. Canada’s federal government has also made clean energy a policy priority.
Likewise, the United States should not impose artificial limits on domestic energy, making use of the full array of our resources, including oil, gas, coal, nuclear, wind, solar, renewables and energy efficiency.
I guess what I’m asking for is “energetic leadership.”
Another area where North America’s countries can work together is immigration and border security.
Immigration reform in the U.S. would promote a more modern and effective employee verification system, diminishing the role of illegal workers in the U.S. economy.
At Business Roundtable we traditionally focus on the high-skilled workers who attend our universities, earning degrees in math, science and engineering. It is counterproductive to have them study here, gain valuable knowledge, and then send them back home to contribute to a competitor’s economy.
Yet we also need more rational, top-to-bottom reforms that address the demands of all sectors of the economy – the service sector, agriculture and business generally.
A system that puts illegal immigrants on a path toward a legal status could even provide a boost for our entitlement programs as young people begin paying into the system.
I’ll close on entitlements.
Our leaders must face up to the long-term fiscal problems our nation faces, the consequences of overspending and the long-term demographic realities that will undermine the Medicare, Medicaid Social Security.
The Congressional Budget Office reports that over the next 10 years, discretionary spending will rise $202 billion, or about 17 percent.
But mandatory spending – entitlements – will grow by $1.6 trillion: 79 percent!
Business Roundtable has put together a set of recommendations that would modernize Social Security and Medicare, ideas you are familiar with: Means-testing, a more accurate measure of inflation – the chained CPI – and a gradual increase of the age at which one can draw benefits.
Unless we modernize the programs, entitlements will consume the majority of the U.S. budget, limiting our ability to act on other critical issues – like investing in infrastructure or R&D. With demographic trends being what they are, we also put the programs at risk as even as an increasingly older population relies on them.
The sooner we act, the easier it is to solve these problems.
Members of Congress and the President know these realities, but when the campaign season starts entitlements become too tempting as bludgeons against political opponents. That has to stop.
I believe that the United States is well-equipped to lead the world in an economic revival, but for that to happen, Congress must meet, work and compromise.
In Washington, “playing to win” should mean bipartisan cooperation, action and leadership.