As we officially enter an election year, the national conversation rightly focuses on the state of our union and, just as importantly, our economy. We closed 2015 with some positive momentum toward boosting economic growth and confidence when Congress and the administration found common ground and enacted three major bills — Trade Promotion Authority, the Highway and Transportation Funding Act of 2015 and the PATH Act of 2015.
Martin H. Simon | CNBC
Doug Oberhelman, chairman and CEO of Caterpillar, chairman of the Business Roundtable
But then 2016 began with unsettling economic and political events around the world, enough to remind U.S. policy makers to stay focused on policies that will bring stronger, sustained economic growth. Economic strength has underpinned America's world leadership for the past 70 years, and remains the necessary foundation for our future. So, let's resolve we will not be satisfied with subpar growth in this New Year.
Six years into an economic recovery, we're still bumping along at an unsatisfactory 2 percent average annual growth rate. It's no wonder, since we have the highest combined corporate tax rate in the developed world, an antiquated international tax system, shortsighted protectionist fervor and a regulatory onslaught. The unemployment rate may be 5 percent, but the workforce participation rate is at a 35-year low.
The members of Business Roundtable, whose companies generate more than $7 trillion in annual revenues and employ nearly 16 million workers, are resolved to help America achieve its greatest economic potential. We urge President Obama and Congressional leaders to spend 2016 focusing on crucial policies – the Trans-Pacific Partnership trade agreement, tax reform and smarter regulations – that can drive growth and opportunity to match Americans' dreams and ambitions.
First, we can create jobs here at home and strengthen our economy through trade agreements that open up markets for U.S. companies. Ninety-six percent of the world's population lives outside the United States. Those are consumers and businesses that want to buy American products and services; limiting their choices only limits our growth.
Passing Trade Promotion Authority was only a first step. The next is for Congress and the administration to quickly address the remaining issues and enact the Trans-Pacific Partnership (TPP). The TPP will eliminate or reduce about 18,000 foreign tariffs on American-made products and allow U.S. companies to sell more U.S. goods and services to 500 million people in Asia-Pacific markets, while also protecting workers, consumers and the environment. We only need to look at other successful U.S. trade agreements to see what growth TPP could bring. For example, trade with our free trade agreement (FTA) partner countries supports more than 17 million American jobs, and 47 percent of U.S. exports go to these FTA partners, according to studies by the U.S. Chamber of Commerce and the Business Roundtable.
Next, let's create more jobs with pro-growth tax reform. Our current business tax system makes U.S. companies less competitive in global markets and U.S. workers pay the price through lower wages and fewer job opportunities. Our uncompetitive tax system also drives businesses out of the United States. A 2013 study by economist Laura Tyson found that switching to a territorial tax system would incentivize U.S. multinational companies to repatriate $1 trillion in foreign earnings, boosting U.S. GDP by at least $208 billion and creating at least 1.46 million additional jobs. Democrats and Republicans both agree that our country needs a modern tax system. Let's get it done.
Yes, it's an election year. But 30 years ago, in an election year, President Ronald Reagan and a Democratic-controlled Congress worked together to enact tax reforms that ushered in two decades of remarkable economic performance, what President Reagan called "The American Miracle."
Finally, it is past time for Congress and the administration to ease the burden of regulations that stifle innovation and growth. The Code of Federal Regulations has grown from 22,877 pages in 1960 to 175,268 at the end of 2014; and the fall 2015 Unified Agenda of Federal Regulatory and Deregulatory Actions contains thousands of regulatory plans from 30 different federal agencies. You can envision an economy suffocating under a web of red tape as large and small businesses face another year of new requirements. Let's target real problems with common-sense regulations that protect worker safety and health, and the environment, and still allow innovation and investment to flourish.
Our economy and our workforce need the vitality and certainty that will come from these three smart policy choices – the Trans-Pacific Partnership, permanent tax reform and a more rational approach to regulation. When there is vitality, the American worker sees opportunity at every turn. When there is certainty, companies are more likely to invest in the new technologies, manufacturing and products that create jobs and support local communities.
The federal government has unique power through law and regulation to create – or destroy – economic confidence and private sector job creation. This year, government leaders can choose policies that will help America achieve its greatest economic potential, or instead settle for economic mediocrity. For the state of our union, and our economy, let's choose to reach our greatest potential.
Commentary by Doug Oberhelman, chairman and CEO of Caterpillar and the new chairman of the Business Roundtable, an association of chief executive officers leading U.S. companies. For more on the Business Roundtable's growth agenda, visit www.businessroundtable.org/growth.
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