The Business Roundtable: Viewpoints on US Economic Policy from America’s Leading Business Association

Governor John Engler is president of the Business Roundtable (BRT), an association of chief executive officers of leading US corporations with a combined workforce of nearly 16 million employees and more than $7 trillion in annual revenues. Engler joined BRT from the National Association of Manufacturers, where he served for six years as president and CEO. Previously, he served three terms as Governor of the State of Michigan, prior to which he served for 20 years in the Michigan Legislature, including seven years as state Senate majority leader. He holds a BS from Michigan State University and a JD from the Thomas M. Cooley Law School.

From your interactions with the Business BRT board, what is your opinion on the BRT economic sentiment for the next year? How significant is Federal Reserve tapering to that sentiment? 

While the sentiment does share some dependence on current Federal Reserve policies, the confidence that the business leadership of America has on the direction of the country is a much more powerful forward indicator. Our surveys showed an incremental uptick on capital expenditures from our companies this year, but this metric is still languishing from where we would like to see it. We are going to be in a low interest rate environment for some time, so there still is an opportunity to see a dramatic increase of investment in America. Certainly, the US economy has moved at a very slow pace in sharp contrast of what we would have expected coming out of the depths of the Great Recession.

Outside of budget talks and Federal Reserve policy, do you see other significant reasons for tepid economic growth? 

We do. The US tax code is probably the single greatest inhibitor to economic growth in this country. I have had discussions with leading tax officials at major companies in the United States who explain that they would prefer any other developed country’s tax code over the US tax code due to its complexity. There are additional economic benefits unrealized today because US tax laws don’t facilitate an easy return of capital from foreign earnings being brought back to the US. This is an area that Congress and the President should be directing much more attention to.

Additionally, there is a lack of predictability among business leaders about the direction of the government. In a recent example of this, the final Volker Rule has just now been presented after two years since the passage of the Dodd-Frank (Wall Street Reform and Consumer Protection) Act. The new rule has significant implications into how derivatives and hedging activities will be handled within the US. There are still ongoing debates surrounding many aspects of Dodd-Frank. If the challenges and disagreements in these debates are not worked out and regulations are unclear or overreaching, we could see years of litigation ahead. This will further delay the final settlement of Dodd-Frank requirements, which will preserve a climate of uncertainty that inhibits economic growth.

Another example of regulatory inhibitors to growth is the evolution of the Environmental Protection Agency (EPA). Their pipeline is clogged with new and very expensive regulations. It used to be rare to see regulations out of the EPA that cost into the billions of dollars. Now, we hardly see one that doesn’t have billions of dollars of economic cost attached to it. Whether it is the restructuring being imposed on the coal industry or the way in which emissions restrictions are evolving, the EPA is creating heavy burdens on many significant US industries.

Finally, I think that it would be helpful for the US to have a national growth agenda. The US needs to highlight and promote policies that will spur business investment that would be required for companies to remain competitive for the future. Currently, we lack a clear, cohesive plan to achieve this.

How realistic is it for the US to attain a lower corporate tax rate and less complexity in the US tax structure? 

Well, it certainly is doable. The Business Roundtable is closely monitoring the bipartisan work on this issue being done by Chairman Camp of the Ways and Means Committee and Chairman Baucus of the Senate Finance Committee. Chairman Camp recently introduced a plan that the BRT views as a significant step forward towards comprehensive tax reform. However, Chairman Baucus also recently introduced a plan, which we felt was unhelpful to the debate and presented a number of ideas that make the US less globally competitive. We realize that he is trying to thread the needle in the Senate where the Senate leadership, in particular Senator Reid, has been quite hostile to revenue neutral tax reform. Overall, we believe that everyone understands that economically, the current tax code doesn’t allow us to compete effectively across the globe and we are ready to support continued progress on this issue.

Author’s Note: Since this interview was conducted, Senator Baucus has resigned to become Ambassador to China.

Before joining the BRT, you were head of the National Association of Manufacturers. What is your opinion on the recent resurgence of manufacturing in the US? Could you provide some insight into the role that domestic energy production has in this discussion? 

The single most significant factor in US manufacturing’s resurgence has been the boom in oil and gas recovery from tight shale formations through fracking. This newfound energy abundance is lowering costs for energy intensive industries in the US. Simultaneously, labor costs are rising globally and companies are finding greater value in closer supply chains, higher domestic worker productivity, and stronger intellectual property rights. However, the United States, Canada, and Mexico should strive further than domestic energy distribution and approve and expand energy export opportunities. The BRT believes that the US can maintain a competitive advantage with domestic energy costs while also promoting exports. This holds huge US employment and investment potential. The US can also support its energy advantages by approving the construction of the Keystone Pipeline and directing regulatory oversight for oil and gas systems to the state level.

Can you highlight your view on international trade negotiations such as the Trans Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP)? 

There are huge economic benefits to having US companies engaged in global trade, as it increases economic activity and investment through trade opportunities. The evidence is overwhelming that globally engaged companies have wage scales that are significantly higher than companies that are not. To find support for such negotiations, look no further than the North American Free Trade Agreement (NAFTA). NAFTA has proven to be very positive for the US economy.

Regrettably, Senator Reid has been clear that, despite trade negotiation support being requested by President Obama in this year’s State of the Union address, it is not his priority. The President’s staff has been calling business organizations, including the BRT, to reassure us that this is still the President’s priority, and that they are going to work on the measure. However, the Majority Leader of the Senate made the president’s job much more difficult. My hope is that an agreement could be reached on TPP and that we could make further progress with TTIP negotiations in 2014.

Recently, the Congressional Budget Office (CBO) released a report that the Affordable Care Act (ACA) was, in their estimation, going to result in the equivalent of two million fewer US workers. What are the true issues with the ACA?

Transparency does not exist currently in the US healthcare system. Positive changes to healthcare would be transformative if consumers could have greater access to information on both price and quality to drive their care. The reality is that greater information access would lead to smarter purchasing behavior and more careful use of the healthcare dollar. It is hard to argue that in a nation that spends $2.8 trillion on healthcare is not spending enough on healthcare. The problem is that we are spending it in the wrong places. The most significant issues with the ACA, however, are the rapid burdens of cost and compliance that are being pushed onto employers. The BRT is advocating for implementation to pursue the least burdensome approach for employers. This report is undoubtedly very concerning.

Your governorship in Michigan involved 32 tax cuts equating to $32 billion in money saved for taxpayers. However, you did raise taxes in targeted areas. Can you highlight justification for those tax increases?

Making a budget is about setting priorities. Those priorities involve balancing revenues and expenditures. While I was Governor, we raised sales taxes in Michigan in order to reduce property taxes. The net result of that was a more stable revenue source for Michigan public schools that paid off significantly. We raised gas taxes in order to increase investment in road and bridge maintenance and raised taxes on cigarettes to both raise revenues and deter smoking because of its significant societal and health costs. I have not been one to sign anti-tax pledges because I think that if you are chief executive you should have the ability to be discerning. We were committed to raise revenues if necessary and these were areas that we felt that an increase in revenues was appropriate.

The BRT is working on influencing a large array of issues to increase US competitiveness globally. If you could influence one federal government decision this year, what would it be? 

I would put a moratorium on all new regulations for two years and direct an across-the-board review of all regulations and agencies. After the review, we could then consolidate as well as remove outdated and expensive mandates that are hurting US competitiveness. This doesn’t give companies a license to cut corners. This is simply allowing the private sector some time to adjust to the rapid increase in regulatory oversight that the country has experienced in the last few years as well as give the federal government an opportunity to review and improve the existing regulatory environment.

Feature Photo: cc/(Songquan Deng)