After Stimulus Steps Needed to Lead Us Out of
"After Stimulus: Steps Needed to Lead Us Out of Crisis And Back on the Path to Prosperity" Address by: THOMAS J. DONOHUE President and CEO, U.S. Chamber of Commerce The Detroit Economic Club Detroit, Michigan February 12, 2009 As prepared for delivery. Introduction We meet today at a difficult time for our country. Everybody knows the economy is not doing well. We are in a deep recession. Credit markets are still largely frozen. Companies and consumers who are lucky enough to have cash are sitting on it. No one is sure where the bottom is. No one understands these hardships better than the people of Michigan. But I am not here to tell you what you already know. I'm here to talk about solutions. There is no doubt in my mind that our nation can emerge from this crisis stronger than before—if we keep our cool, act swiftly but thoughtfully, focus on solutions that really work, and not get distracted by political rhetoric that sounds good and feels good, but won't create a single American job. Pass a Good Stimulus Package Now, the first step is to pass an effective stimulus package. Ever since the election, the Chamber promised to work with the Obama team to develop and then pass a stimulus bill that would apply a defibrillator to our economy and shock it back to life … a bill that was timely, targeted, and temporary … a bill whose most important objective would be to create and save American jobs. Unfortunately, that's not what the House of Representatives delivered. Its bill contained massive amounts of wasteful spending … infrastructure projects that would come on line too slowly … an insufficient level of tax cuts … and billions of transfer payments, rather than incentives to create new business and jobs. House leaders prevented anyone other than themselves—including, apparently, the president—from shaping the bill. As a result, it was a prescription for bigger government, more debt, and ballooning deficits as far as the eye can see. The Chamber worked hard to win improvements in the Senate version. It's better—it contains more tax cuts and curtails some of the wasteful spending, but we would have liked to have seen more improvements. So where do we stand today? The House and Senate have ironed out their differences. We had encouraged them to get the junk out and put the job-creating stimulus back in. And we encouraged them to make sure that a major part of this legislation is much- needed investment in our nation's crumbling infrastructure. Experts have identified hundreds of "shovel-ready" projects that could be under contract within 180 days of passage of the bill. This money would be an important down payment on meeting some of our most immediate infrastructure needs, put thousands of people back to work, and help jump-start the economy. The bottom line is that at the end of the day, we're going to support the legislation. Why? Because with the markets functioning so poorly, the government is the only game in town capable of jump-starting the economy. No one made the case for stimulus better than Abraham Lincoln. He once compared a stalled economy to a steam engine. At the engine's dead point, Lincoln said, even a single turn is extremely difficult. But jolt it back to life, and it quickly regains momentum. To do nothing is unacceptable. It would send a message to markets around the world that the United States is incapable of acting in the face of a crisis, further destabilizing a fragile global economy. Clearly, the U.S. Chamber is supporting extraordinary measures to meet the unprecedented challenges facing our economy. In fact, our positions have raised the eyebrows of more than one of our members. But let me be clear: Once the economy improves, we will be just as vigorous in working to return government to its traditional role and putting the nation back on a path of fiscal responsibility. Reviving Critical Industries But a stimulus bill is only the beginning. From the outset, we also said there would be no recovery in America until we revived key industries. And, there would be no recovery until we restored confidence and credit to our economy. So when the auto companies asked the government for some breathing room to simply survive, we strongly supported them. What was the alternative? Let them collapse? The U.S. auto industry represents 4% of GDP and 1 in 10 American jobs. It sustains a vast network of suppliers. These suppliers not only support millions of jobs, but they also possess unique capabilities to design and manufacture defense components essential to national security. To have done nothing would have been irresponsible. It would have potentially put millions of people out of work and pushed the economy further into recession. So the companies got their breathing room. They've worked hard to meet the required deadlines—however, it's clear this may prove difficult. It is also clear they will need to develop a comprehensive agreement with the unions. And, of course, no car czar has been appointed yet. In the last analysis, strong steps must be taken. A primary reason we were inclined to support further help for the auto industry was because of discussions of consolidation and mergers between several companies. All options must be on the table—from potential mergers to reorganization through our bankruptcy laws—otherwise, we may never get to a successful resolution. What we cannot do is establish a repeated pattern of endless bailouts. The public won't buy it. I am personally concerned by the repeated attacks on the managers who are working so hard to turn their companies around. It was not their fault that the market for cars in America has dropped from 16 million to 10 million in one year. Little is to be gained by punitive actions regarding corporate meetings and transportation, which are essential to running global companies. Pointing fingers to score political points on irrelevant things is a distraction we can't afford. The U.S. Chamber believes strongly in the long-term viability of an integrated U.S. auto industry, which includes many global companies employing U.S. workers and paying U.S. taxes. And we recognize the critical role the industry plays in our economy and national security. We are going to do everything we can to help the U.S. industry get through this difficult period. Housing There are other vital industries that need help, such as housing.We strongly supported a provision in the stimulus bill that would provide a housing credit to first-time home buyers. We are pushing to streamline regulations and permitting so that construction projects funded by the stimulus bill are not delayed by bureaucracy. We also support reasonable efforts to help responsible mortgage-holders stay in their homes. TARP II Now, what about restoring liquidity, confidence, and credit? The critical reaction to Secretary Geithner's proposals to revive financial markets earlier this week proves that a lot of people think they know how to solve these problems—until they are asked to come up with a plan! The U.S. Chamber supported the Bush administration's TARP program. It wasn't perfect, but it helped restore some measure of stability to an economy that was facing a systemic collapse. Some credit is flowing. The Wall Street Journal reported earlier this week that a growing number of big companies are taking advantage of the thawing credit markets to raise large sums of money at low interest rates. We see glimmers of activity in the IPO market. There are a few encouraging signs, but we know more steps must be taken. This administration needs a plan to finish the job. No plan is going to be perfect—there is too much ambiguity. We can't price toxic assets, or even identify everywhere they exist. We don't know how much worse the housing market will get. We don't know what effect historically low interest rates will have. There are hundreds of "X factors." In other words, we are in unchartered waters. That's why it's essential that we leave the plan to the experts, not to politicians. I've been disgusted at how elected officials, regulators, and others have demagogued this issue. Sure, it's great sport to attack CEO salaries, so-called corporate boondoggles, outrageous bonuses … but this rhetoric won't create a single job or put a single American back to work. In fact, we've already seen unintended consequences from the proposal for compensation restrictions at companies receiving TARP funds, with foreign companies hiring away top talent from U.S. banks at alarming rates. And let me make mention here of another critical industry in America—one that the politicians seem all too ready to throw out the window in order to score these political points. I'm talking about travel and tourism. We've seen and heard a lot of chest thumping against the idea that businesspeople should travel to meetings and conventions—especially if they come from industries participating in federal rescue programs. Think about it: Meetings and events are essential to motivating sales forces, rewarding high performers, and attracting top talent. Meetings and events are responsible for 15% of all travel in America, create more than $100 billion in spending annually, generate millions of American jobs, and provide $40 billion in tax revenue. The travel and tourism industry is made up of a lot of small mom-and-pop operations and low-income earners who don't have the resources to combat a prolonged recession. We should be thinking of ways to help this industry, not undermine it. Ladies and gentlemen, too many people on Capitol Hill are talking about the wrong issues at the wrong time. It's all about politics, not serious solutions to serious problems. At this critical moment, we need the best and brightest we have in government, business, and the regulatory agencies to fix what went wrong and restore our capital markets to full vitality. The Chamber believes the most important thing is to make sure that the markets are adequately protected from systemic risks. Eliminating "dead zones" where regulatory authority is unclear or nonexistent is essential. In addition, we must orient the rules governing the financial markets toward the 21st century. Current regulations, which were written at a time closer to the Civil War than to today, are duplicative, overlapping, and contradictory. Clarity and simplicity must be our guideposts. Regulators and investors alike would benefit from increased transparency. Markets always work better when participants have the most complete information possible. We must also ensure the viability and quality of independent auditing, and protect the auditing profession from class action lawsuits that could put them out of business. Likewise, we must seek strong consumer protections while ensuring that they deliver real value, not merely regulation for its own sake. The Chamber's Center for Capital Markets Competitiveness is a leading voice for strong capital markets governed by modern, reasonable regulations. But we will also remind government leaders that free enterprise entails some risks. It always has and it always will. No amount of regulation and oversight can anticipate every future problem or protect every investor from every loss—nor should it. We must strike the right balance between sound regulation and responsible risk. And we can get there if we stop focusing on political sideshows and start doing the heavy lifting of market reform. Remaining Globally Engaged Let's keep in mind that getting our economy back on track is not only about what we do, but what we decide not to do. One thing we cannot afford to do is to retreat from the world and cede our role as a global economic leader and the world's largest exporter of goods and services. Economic slowdowns have always bred isolationism and protectionism, and always with devastating results. Since the dawn of man, societies have built walls to protect and isolate themselves from military incursions and economic competition. The Great Wall of China broke ground in the 5th century B.C. In modern times, we are familiar with the Berlin Wall and the economic devastation it wrought on East Germany and its people. In 1930, America sharply raised tariffs, which helped turn a severe recession into the Great Depression. In today's globally integrated economy, a nation cannot be an island unto itself. Unfortunately, we see growing signs of isolationism everywhere, including the United States. In the United States, the Chamber is pushing back forcefully against isolationism. If our goal is to create good-paying jobs at home by selling American-made goods and services overseas—where 95% of the world's consumers live—then protectionism and isolationism don't make any sense. As we wonder about isolationist threats, we need to look in the mirror. The most effective way we can fight isolationism is not by complaining about what our trading partners are doing—it's by living up to our own commitments. That's why the Chamber helped convince Congress to revise Buy American provisions in the stimulus bill to ensure they did not violate our global trade promises. I know that many in Michigan think that Buy American works. However, a recent study concluded that for every 1,000 jobs such a policy would save in the steel industry, we would lose over 65,000 jobs across a number of other sectors. That's not a good deal for Michigan or our country. We not only need to reject isolationism, but we must further embrace free and fair trade. Successful completion of the Doha Round would represent a giant stimulus package for the world. Approving agreements we've already negotiated with Colombia, Korea, and Panama would be great job-creating stimulus for America. Let's get them done! Now is the time. Another thing we must not do is further hobble struggling businesses with more frivolous lawsuits, unnecessary regulations, and higher taxes. Those would further delay economic recovery. Being Positive What has deeply disturbed me during this recession is how it has tested Americans' confidence in our economy, our companies, our government, and our future. It may be hard to believe, but we really can talk ourselves into an even worse economy. We have two choices. We can keep telling each other how bad things are. Or we can get right down to the business of reviving this economy, restoring growth and job creation, and putting Americans back to work. Many of our citizens are asking if America is still a "can-do" country. They see important challenges left unmet … major projects tied up in endless delays … petty bickering instead of problem-solving … years and years and years of talk and hardly any action. But let's not lose sight of America's tremendous strengths. The World Economic Forum recently ranked the United States as the world's most competitive economy. In terms of doing business, we are number 1 in domestic market size, the availability of venture capital, and research collaboration between universities and industry. We remain dominant in many industries of the future like nanotechnology, biotechnology, and dozens of smaller high-tech fields. We have the finest universities in the world. And we remain one of the most open and flexible societies in the world. We absorb more immigrants, ideas, goods, and services than any other country. None of these fundamental strengths have disappeared simply because we are in a recession at the moment. Confidence is key to recovery, so let's be confident. Conclusion America will always be a success if we retain our capacity for risk and our desire to improve all aspects of our lives. In the wake of the current financial crisis, there are plenty of commentators who are saying that capitalism is dead, that Wall Street is over, that markets don't work, and that government must now regulate every aspect of our economy. I say, "Bunk!" Given the freedom to innovate, build, adapt, and grow, there is no limit to what Americans can accomplish. Free markets and capitalism are the greatest means of wealth creation known to man. We should be embracing them, not running from them. Ladies and gentlemen, these are tough times. Americans are hurting. We have big challenges before us. But these challenges aren't quite as big as the will, determination, and ingenuity of the American people. We can get through this, and we can be even stronger than before. How? Let me sum up my discussion today. First, by enacting the best possible stimulus package. The alternative of doing nothing is unacceptable. Second, by implementing effective plans to revitalize great industries like autos and housing—and not by shooting ourselves in the foot by making it some kind of sin to travel to a meeting, conference, or convention or make a profit or achieve wealth. Third, by fixing the financial system and the regulations that govern that system so that credit and confidence start flowing to every corner of the nation. And not letting ourselves get distracted by diversionary political issues. Fourth, by rejecting isolationism and extending our trading and investment relationship across the globe. Doing so will create American jobs. And fifth, by remembering who we are. We are Americans—a can-do people. If we cower in fear, if we retreat inside a bunker, if we sit on our hands and keep sitting on our cash, then recovery and prosperity will be a long, long time coming. We have to start doing again and face the future with confidence. Nobody ever got rich betting against the United States of America. Thank you for the opportunity to be here today. I look forward to continuing this dialogue at the Detroit Economic Club's National Summit in June.