Growth, Reform, and Freedom Can Revive American Prosperity

By Thomas Donohue

Remarks by Thomas J. Donohue, President and CEO, U.S. Chamber of Commerce

Manhattan Institute New York City, New York

February 22, 2013

Introduction

Thank you very much and good afternoon everyone. I am delighted to be here.

I want to thank Lawrence for that kind introduction and for the invitation to be with you today. No single person has done more to keep the Manhattan Institute at the center of the public debate than Lawrence.

The fact-based analyses and market-oriented solutions offered by the Institute are needed now more than ever. This is especially true as our policymakers and “official Washington” neglect some fundamental realities.

You’ve probably heard the old quip that a gaffe in Washington is when someone accidentally tells the truth. Well, there is a pronounced shortage of truth telling in Washington these days.

It’s one thing to differ over philosophy, direction, and approach. That’s democracy. But the routine neglect of basic facts and fundamental realities is something we are seeing with more frequency in our politics and in our governance. And it should concern us all.

That’s why the Manhattan Institute and other organizations like yours are so important. You have a philosophical rudder, but your research and conclusions are grounded in the facts. They stand up to the tests of reason and sound argument. Keep doing what you are doing and do more of it—please!

Policymaking in Washington could sure use a strong dose of reality right now. Let me give you some examples. The first reality is that we can’t do much of anything without economic growth—and you can’t create growth and jobs without the private sector.

Here’s another reality—demography is destiny. That’s one you’ve heard before, right? Well, there are plenty of folks in Washington who are acting like they have never heard it before—stubbornly refusing to acknowledge any changes in entitlements to reflect longer life expectancies, more retirees, and a shortage of native-born Americans to run our economy.

There’s another reality most people know is true but want to wish away. And it’s that there is no such thing as a national economy anymore. At least not like we once knew it. We are part of a global economy and a very competitive one. Our policies must reflect this reality.

And, any rational analysis of the facts and our history will tell us that of all the things we believe make America special, the one that really stands out and explains our success and our leadership is the value we place on economic freedom—the right to take a risk and be rewarded for one’s success. The right to take a risk and fail—and get up off the floor to try again. The dream of standing on your own two feet, seizing opportunity and building self sufficiency through hard work and personal responsibility.

It’s all part of America’s secret sauce and something we must preserve for future generations. So why would we ever want to move—by design or accident—to a system where we turn over more and more of our freedom and our responsibility to the government? We can find a way to help the truly disadvantaged without squandering America’s greatest gift and our greatest strength—our personal liberty and our self-reliance.

So at the Chamber our agenda is fashioned around these realities. We call it the “American Jobs and Growth Agenda.” But it’s more than that … it’s an agenda that focuses on our nation’s global competitiveness and our need to be fiscally responsible.

It’s an agenda that understands just how vital our economic and other freedoms are to our success and prosperity.

Permit me to tell you a little more about it.

Growth

Let’s talk about growth. Growth won’t solve all of our problems, but we can’t solve any them without it.

Too many policymakers in Washington fail to understand the power of growth or where it comes from. Economic growth is the force that provides opportunity for the young, security for the old, and allows diverse families and communities to pursue their idea of the American Dream.

And what a powerful force it can be. For example, if the economy grew at a 4% rate instead of the meager 2% we have now, we could create 10 million additional jobs during the next decade.  We could return the economy to full employment through growth alone, with no rise in government spending.

With 4% growth, the government would collect more than $3 trillion in additional revenue over the coming decade and we’d see a 30% reduction in the 10-year budget deficit. Exports would boom, household income would increase, 3 million people would rise out of poverty, and charitable giving would skyrocket by about $200 billion.

Here’s another reality—without growth you can’t get the jobs. So why isn’t growth job No.1 in Washington? The president has made jobs and growth an intermittent priority, when it should really be the only priority.

Many members of Congress truly believe jobs and growth are the byproducts of government spending. If that were true, we’d be living in paradise.

Growth comes from a robust private sector that is allowed to take legitimate risks, that has the freedom to innovate, and that gets rewarded—not punished—for success.

At the Chamber, our overriding priority for 2013 remains stronger private sector growth that will put Americans back to work, raise living standards, and position us to compete and win around the world.

The big question is how do we get there?

First, we must attract global talent. We won’t have sustained growth and jobs without attracting the best and the brightest. This is one area where Washington appears to be finally accepting the reality that: 1) we can’t deport 11 million undocumented workers because our economy would collapse without them and it would tear apart families, and 2) doing so would betray our history as a nation of immigrants.

The fact is our immigration system is broken. It’s not serving the interests of our economy, our businesses, or our society. We can’t sustain important programs for the elderly and the needy without a stronger economy and a broader tax base.

The Chamber has been advocating for immigration reform for years … and this year might be our best chance for progress. We believe immigration reform must have these four inter-related components:

It must secure our borders—we’ve made progress and we need to keep at it.

It must include thoughtfully designed employment-based visa programs that would allow businesses to use immigrant labor when U.S. employees are not available.

Immigration reform must include a workable, reliable national employee verification system.

And finally, it must provide a path out of the shadows for the 11 million undocumented workers who are living in the United States today.

To succeed in a competitive global economy, America must remain an open and welcoming society.

Second, we must responsibly develop our extraordinary natural resources. We have more oil, gas, and coal than any other country, and we are now the largest single natural gas producer in the world.

By swiftly and safely developing more American energy, we can drive stronger economic growth and generate government revenue that can help us tackle our fiscal problems. We can boost manufacturing and exports and sustain a stable supply of domestic energy that will reduce our reliance on foreign sources. And we can put a hell of a lot of people to work—over the next 20 years, energy can create millions of new jobs, all across this country.

In his speech two weeks ago, the president also hailed the benefits of American energy, including oil and gas. But what he didn’t say is that these sectors have thrived in spite of the federal government—not because of it. The surge in unconventional oil and gas, for example, was made possible by private sector innovations and industry-driven technological advancements. Development of shale resources has largely taken place on private lands.

If the government wants to help, and not hurt, it can start by opening up new land to safe, responsible exploration. The government should create a predictable and fair regulatory environment and stop subjecting energy projects to endless and duplicative reviews.

Federal roadblocks have stymied vital projects like the Keystone XL Pipeline, which must be built.

The federal government shouldn’t pick the winners and losers—when it does, we get Solyndra. When we let the market forces work, we get a shale boom.

We can take full advantage of our great energy opportunity—from all sources, from nuclear to renewable—if the private and public sectors work together.

Third, it’s high time for greater global engagement. This is pretty simple. We need to sell more stuff to the 95% of the world’s customers who live outside of the United States.

In his State of the Union speech, President Obama called for swift completion of the Trans-Pacific Partnership—and he announced that the United States was ready to begin negotiations with Europe on a U.S-EU Trade and Investment Partnership agreement. We couldn’t agree more. Let’s hurry up and patch American businesses into the world’s fast-growing, most dynamic markets.

And, by-the-way, TPP isn’t just about Asia—it encompasses some of the most promising economies in Latin America as well.

We also need to get moving on that deal with Europe. The U.S. and E.U. High Level Working Group on Jobs and Growth just released its final report, calling for negotiation of a comprehensive bilateral trade, investment, and regulatory cooperation agreement. An ambitious and comprehensive transatlantic agreement would be huge on both sides of the pond, driving jobs and growth at a time our economies badly need it.

We should pursue new free trade agreements with emerging economies around the world.

It’s also important that we welcome global investment—foreign capital directly or indirectly sustain 21 million U.S. jobs.

Next, we must remove regulatory barriers and stem the tide of the huge regulatory tsunami that the current administration is planning for the next four years. Our economy has thrived when the hand of government has been relatively light, giving entrepreneurs the freedom to innovate and businesses the confidence to invest and expand.

The flood of new regulations coming down the pipeline is staggering. The new rules and mandates in the health care law could drive costs through the roof. They could suppress hiring and investment. The Dodd-Frank financial reform law mandates 447 new rules—and regulators have only finalized a third of them. On the environmental front, major EPA rules imposed over the last decade cost more than $23 billion and its new ozone regulation could cost up to $90 billion.

All told, the federal government issues about 4,000 regulations every year. Is all of that really necessary?

We need to restore common sense and balance to our system. We need to streamline the permitting process. We need to bring more accountability to our system and restore Congressional oversight of the agencies.  We need to make sure the costs don’t outweigh the benefits, and that rules are based on sound science, good data, and demonstrated need.

And when the government oversteps its bounds and tramples the rights of businesses or individuals, we’ll use the justice system to make it right. The Chamber will not hesitate to sue—and we’ve got a pretty good track record of victories.

And finally, fiscal responsibility. On this topic, the realities are the most obvious and the inaction the most inexcusable.

The realities are this: Government spending levels are unsustainable. Discretionary, defense, and especially entitlement spending will have to be curbed.

We need more revenue, but raising taxes can’t come close to bridging the gap. The richest fifth of Americans already pay nearly 70% percent of federal taxes. The richest 10% pay 55%, according to the CBO. You could confiscate 100% of the earnings of couples making more than $1 million a year and still not come anywhere close to solving our deficit problem.

Those who claim higher taxes can eliminate the deficit—or that entitlement programs do not add to our debt—either don’t understand arithmetic, are disingenuous, or are living in a fantasy land.

And most importantly, our growing debt burden will crush the next generation of Americans if we do nothing.

On this issue, the first deficit we have to address is the leadership deficit. We need to close the gap between rhetoric and reality. Put simply, we’ve promised far more than we can deliver. And because of choices many of our leaders have made—as well as our changing demographics—our fiscal situation is unstable and unpredictable.

The bottom line is that we can’t solve the crisis without serious spending restraint, and that requires us to address unsustainable entitlements. To keep those vital programs solvent for future generations, they must be revised to meet the needs of today’s population and to match the reality of our changing demographics.

We’re not talking about cuts in absolute terms—but we must slow the rate of increase by phasing in reasonable adjustments over a number of years.

We also need comprehensive tax reform. Our current tax system is antiquated, complicated, and uncompetitive—it’s holding us back. But we need the right kind of tax reform—the kind that accelerates growth and job creation, and generates more revenues for government at every level. We must lower both the corporate and individual tax rates and shift to a territorial tax system.

Conclusion

Now, is this the most thrilling agenda you’ve ever heard? Does it lend itself to sensational, entertainment-driven media coverage? Of course not. But it is real. It is based on facts. It faces up to the challenges we face.

We need a greater recognition and respect for the facts in this country. We can have our different philosophies and approaches, but we won’t get very far if we all hold different versions of reality. As the late Sen. Daniel Patrick Moynihan once said, “Everyone is entitled to his own opinion, but not his own facts.”

We must deal with reality, or reality will surely deal with us. It will win out every time.

The best way to do so is by embracing our founding principles. As Abraham Lincoln once wrote, these principles are “applicable to all men and all times” and serve as “a rebuke and a stumbling block to the very harbingers of reappearing tyranny and oppression.”

To preserve liberty and our economic freedoms, we must defend our principles, not change them.

We must defend against an ever-growing and all-powerful federal government that promotes dependency, erodes personal responsibility, and rules the people, instead of the people ruling government.

We must defend against the yoke of government regulation that strangles entrepreneurship, innovation, and initiative—the engines of growth and the fundamental building blocks of earned success.

We must defend against the idea that America should retreat within its own borders and forfeit our leadership role in the world—because there can be no liberty or prosperity without peace and security.

But more than that, we need to go on offense. We need to be vocal and aggressive advocates for the free enterprise system … for global American leadership … for the timeless principles of our founding fathers … and for market-based solutions rooted in reality that will help reignite this economy and put us back on the path to prosperity.

The stark reality of the leadership deficit in Washington is the one reality we cannot afford to ignore. In fact, it is a call to leadership—a leadership unafraid to point out the realities and offer sensible, workable solutions that may involve short-term pain for long-term gain.

We need a national conversation over the tough choices that need to be made. Doing so requires us to tell people things they don’t want to hear. Many of our leaders in Washington won’t do it, so we must.

This is our call to leadership, and one the Chamber willingly answers with an agenda for growth, reform, and freedom.

So let me conclude where I began, by underscoring the need for common dialogue in this country drawing from the same view of reality and the same set of facts—and then we can fight like hell.

Arguments are one thing. Even gridlock can be okay on occasion because it can keep a lot of bad stuff from happening.

We must be bound together by reason and facts and, again, your leadership is vital in this regard.

So thank you again for inviting me, for your kind attention, and for all that you do to ensure that Americans get the facts and real solutions to our challenges.

Mr. Donohue is President and CEO of the U.S. Chamber of Commerce

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