John Engler Detroit Economic Club Luncheon Address | Business Roundtable


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Thank you, Joe [Welch].

Joe is an active member of Business Roundtable. Joe, I especially appreciated your participation last month in the Roundtable’s North American CEO Forum. We had U.S. CEOs meet with their counterparts from Mexico and Canada.

We talked about energy, trade issues, and how North America is poised to benefit as we deepen cooperation among our nations.

I always enjoy coming to the Detroit Economic Club. For some reason, you can be pretty sure if I’m here, there’s an election not too far away.

I think Beth [Chappell] plans it that way.

My last speech before you was just about four years ago -- October 13, 2008.

Well, some things have changed since then.

Four years ago, I spoke as President and CEO of the National Association of Manufacturers. Today, I’m here in my capacity as President of Business Roundtable.

Four years ago, the Detroit Lions were on their way to an 0-16 season. Last year, they made the playoffs! This year, well…. there’s still hope.

In 2008, I was congratulating the Detroit Shock for winning the WNBA championship. This year….there’s no championship; in fact, no Shock. They’re in Tulsa.

Four years ago, Jennifer Granholm was in Lansing. This year, no Jennifer. She’s in Berkeley.

Sadly, one thing hasn’t changed. The challenges I outlined four years ago are still the challenges the nation faces today -- challenges we have to meet that have to be met if we are to win the global economic competition.

Four years ago, I argued that America needs a better, smarter tax policy; a national energy strategy; better results from our schools; a relentless commitment to economic growth; and support for leadership that gets things done.

Washington has failed to deliver.

GDP growth is mired below 2 percent – a level too low to support sustained hiring… a level too low to restore hope to those who have left the workforce.

Today, a record number of Americans are on food stamps.

Unemployment topped 8 percent for 44 straight months – until a slight drop in September.

People in Michigan understand all too well the human costs represented by these numbers. I imagine everybody in this audience today has either a family member or somebody they know who’s been hurt in this economy.

Washington’s failure to work together to address our economic problems -- or even do the routine business of government -- has created uncertainty and chilled business investment and hiring.

Andrew Liveris of Dow Chemical recently put it this way: “The government is failing us as a whole. This is self-inflicted uncertainty.”

Roundtable CEOs say the debt crisis in Europe, the slowdown in China, and the uncertainty surrounding the fiscal cliff … that is, the expiring tax provisions and spending cuts due to sequestration...are causing chaos.

At the Roundtable, each quarter we survey our CEOs, and three weeks ago, we released the latest results.

The survey showed the third largest drop in 10 years in CEO expectations for hiring, capital investment and sales.

Those results reflect the uncertainties these leaders feel about the future.

Just take our tax code: More than 60 provisions expired last year. If Congress doesn’t act, more than 40 will expire at the end of this year.

These are not minor questions.

We’re talking individual tax rates, dividend tax rates, capital gains tax rates, R&D tax credits, alternative minimum tax provisions, and so many others it’s impossible to mention them all.

The bottom line: We really don’t have a tax code in this country today.

It’s no wonder there’s uncertainty. It’s no wonder businesses are reluctant to invest, even when they have cash on their balance sheets.

Now, I wouldn’t come here if I didn’t think these problems could be solved, or if I didn’t think there wasn’t a way out of these economic doldrums. I’ve always been an optimist.

You had an optimist here last month when Dick Dauch spoke. I’ve been reading his new book, “American Drive.” Now the forward is great, since I wrote it, and the book itself is well worth it.

Dick is the quintessential American businessman. His success at American Axle represents an example of the leadership, strategic direction and action plan needed in Washington.

Dick was a turnaround guy, and I’m pretty certain that’s what Washington requires. Dick wasn’t afraid to take a risk, and he sure wasn’t afraid to lead.

One of the chapters in the book is entitled, “Restructure, resize and recover.”

That sounds like a pretty good formula for the U.S. government.

Another reality that Dick embraced is the fact that we’re in a global economy, and you either compete or die.

Almost weekly I have an opportunity to remind leaders in Washington that 95 percent of the world’s consumers …. our future customers ….live outside the United States.

We can’t remain aloof in our offices and factories and hope to reach these billions of customers. We need to do the research, make the investments, and go sell the products if we’re going to be successful.

The competition is fierce. And the competition is relentless.

I would argue that companies of every size – small, medium, large -- or very large – have a stake in winning this global competition.

At the Business Roundtable, we’ve been documenting the value of global operations in terms of the jobs created here in the United States.

I think Michiganians have a good awareness of how globally engaged companies can drive jobs and growth here at home.

Michigan names, like Ford, Dow, Kellogg’s, Amway and Whirlpool are also well-known global names.

Twenty-three million Americans are directly employed by U.S. companies with foreign operations.

Another 40 million Americans work in these companies’ supply chains, or otherwise benefit from their business activity.

The global sales of America’s companies are a GOOD thing. And telling that story, and defending that activity, shouldn’t be all that difficult.

It’s no surprise that most members of Congress understand how states compete against each other for investment, manufacturing plants, research operations and the jobs that accompany them.

It is disappointing that some members of Congress do not understand that today countries compete against each other just as aggressively.

The most successful countries are cooperating with business and putting policies in place to win jobs and investment.

There’s no reason America can’t win.

In March, we released the Business Roundtable’s policy recommendation to get America back in the game, to restore our competitive edge.

We titled it, “Taking Action for America: A CEO Plan for Jobs and Economic Growth.”

It was a good plan in March, it’s still a good plan today.

Our plan called for fundamental corporate tax reform, streamlining permitting and curbing regulations, more energy development, expanding trade and improving education.

Last Friday, in The Wall Street Journal, I wrote about corporate tax reform and argued that the U.S. has fallen far behind the rest of the world. This is an urgent priority for 2013.

Our country is at a crossroads, and the Business Roundtable is aligned with those who think job creation and economic growth ought to be at the top of the list of priorities in Washington.

When in one in five American men wake up every morning and don’t have a job to go to, our elected officials need to stop talking and start acting.

This year, they’ve got one more chance. Congress will reconvene after the November elections for what’s known as the lame-duck session.

If Washington is going to get any important legislation across the goal line, they will need the equivalent of a two-minute offense.

Twenty-two months are already gone in this session of Congress. By the time the lame-duck session convenes, half of the 23rd month will be gone.

Assuming they break to watch the Lions-Texans game on Thanksgiving, and assuming they want to be adjourned by Christmas, it’s pretty clear there aren’t Congressional shopping days left.

So can Congress do in a few weeks what it failed to do in two years?

I don’t know.

We looked all the way back to the 1930s to see how lame-duck sessions have worked out. The results, in a word, are dismal.

So what would be a success? I’d hope three things could be done:

  • A short-term fix on the expiring tax rates I’ve talked about.
  • Backing away from sequestration, which even Defense Secretary Panetta has said would be devastating to the national security.
  • And, ideally, action on the debt ceiling.

If we can finish just these items, the real challenges will still be waiting.

They are the long-term threats to our nation’s fiscal and economic health: uncontrollable entitlement spending, an uncompetitive tax system, and unsustainable levels of debt fueled by trillion-dollar annual deficits.

I know that skeptics predict that the gridlock, partisan disputes and inaction that have dominated Washington for two years will be right back with us in 2013.

Despite those dire predictions, I’m still optimistic.

That crossroads I mentioned earlier requires us to act, and the pressure to act will be overwhelming next year. We simply have put off too much for long.

The Simpson-Bowles Commission made the case for action in 2010. While its debt-reduction recommendations were not enacted, they greatly increased the understanding of the problem.

Throughout this election year, Democratic and Republican Senators have been discussing strategies to enact a Simpson-Bowles-Plus plan.

Those talks have been encouraged by many CEOs, who have spoken out about the urgent need for immediate action.

I think the American people care about the future of their country, and they understand there’s going to have to be a compromise. Our present course is unsustainable and unfair to future generations.

No citizen who has watched events in countries around the world can seriously believe our nation can ignore its problems.

Greece or Spain show us the consequences of policies based on high taxes and high debt.

But, we don’t even have to leave our country to see the impact of high taxes and high debt.

Just look at California.

The military historian Victor Davis Hanson recently summarized the state of affairs there:

  • The nation’s largest budget deficit at $16 billion.
  • The second highest unemployment rate at 10.6 percent.
  • A pending vote to levy the nation’s highest income and sales taxes.
  • Home to one-third of the nation’s welfare recipients.
  • An exodus of 2,000-plus high-wage earners moving out -- every week.
  • And the highest gas prices in the country.

The California model of high taxes, growing debt, and ever-increasing regulation certainly doesn’t seem to be the answer to what ails America.

Better examples can be found around the country.

  • Indiana, where Governor Daniels is completing eight years of successful reform and innovation.
  • Texas, where private-sector job creation continues to make impressive gains.
  • North Dakota, where the use of hydrofracking technology has generated an economic boom, and has seen the state advertising for workers to move to North Dakota.

Even Michigan is back on track under Governor Snyder, reforming its tax system, improving education, and holding failing schools and cities accountable.

It’s clear to me that states that focus on growth and align their tax and regulatory policies, their education systems, and manage their budgets, are states that can compete. The same is true for nations, nations like Canada.

As I began my remarks, I mentioned the North American CEO Forum, where U.S. executives Canadian and Mexican executives talked about issues.

I found the Canadian story particularly interesting, since we can look across the river.

Canada’s experience proves the point that things can change for the better – that bipartisan leadership, the right policies and an action plan can make a great difference.

Back in the 1990s, Canada experienced what they called the “lost decade” … high unemployment, high taxes, deficits and slow growth.

Michigan proved to be a beneficiary at the time. Many of the Canadian companies came across the Blue Water Bridge, and the robust Canadian investment was one reason Michigan’s unemployment rate was below 4 percent.

But then the country began to cut its debt and lower its corporate tax rate to become more globally competitive. Before the recession, Canada brought their budget into balance.

The current government has continued the progress. The corporate tax rate is down to 15 percent, and they’re aggressively negotiating trade deals around the globe to expand Canadian exports.

As the Canadian economy improved, elected leaders across the political spectrum largely reached a national consensus on fiscal policy and government reform.

Watching Canada change reinforces my belief that the United States can change. Once we get past the fiscal cliff, we have tremendous opportunities.

In many ways, 2013 could assure our future for the first half of this century. Economic growth and prosperity can return and lift the spirits of our people.

It will take leadership…the right policies…and it will take action.

Ladies and gentlemen, thank you. I know there are questions, so Joe?

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