CEOs Say Government Inaction Has Hurt Jobs and Growth
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The Fiscal Times
May 21, 2014

The CEOs of some of the largest companies in the U.S. are aggravated with a Congress that is “not dealing with the things that really do matter,” says John Engler, president of the Business Roundtable.

Engler, whose group represents the CEOs of dozens of major U.S. companies, said that from reform of a broken immigration system to repairing and replacing failing infrastructure to an overhaul of the tax code, the lack of movement in Washington is preventing faster economic growth across the country.

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In an interview with The Fiscal Times, Engler, a three-time Governor of Michigan, said that a failure to move forward on comprehensive immigration reform – a goal supported by large majorities of both parties – has been a particular annoyance.

Business leaders tell him of the “frustration of just seeing this issue be on the list along with other issues they think are important to growth,” he said.

“Part of an innovation economy we want to have is directly related to the talent and the entrepreneurial zeal that we have across the nation, and there is ample evidence that some of the new citizens that come in from other parts of the world become some of our best entrepreneurs,” he said.

“There is an ability for the nation to aid significantly its innovation agenda by use of talent from outside its borders,” he continued. “We ought to be competing as vigorously as any nation in the world for that talent.”

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A bipartisan immigration bill has passed the Senate, but has stalled in the House. It is generally believed that the Senate bill would pass the House if it were brought up for a vote, but under pressure from the most conservative wing of the GOP, House Speaker John Boehner (R-OH) has declined to bring the bill to the floor.

“We certainly encouraged the Senate to pass that legislation, Engler said. But the business community has accepted the fact that House Republicans are not likely to take up the Senate bill as written. “They’ve made it pretty clear that they are going to move in a different direction,” Engler said.

He said that the Business Roundtable members were pleased that Minority Leader Nancy Pelosi indicated that Democrats would work with House Republicans on immigration reform, despite the GOP’s refusal to consider the bipartisan Senate bill. “We were actually encouraged when Leader Pelosi indicated that they would actually work in that process, too, even though that isn’t their preference,” Engler said. “We just want to see it resolved, because there is an urgent need for the United States to recognize and compete globally for the best talent.”

Engler said CEOs have also been dismayed by the failure of Washington to address the increasingly desperate state of infrastructure in the U.S., citing the impending bankruptcy of the Highway Trust Fund as a particular example.

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“The failure to fix the highway transportation fund is beginning to have an impact on states in terms of their long-term planning for road and bridge construction and repair,” he said. “There is a lot of uncertainty caused by inaction in Congress and that undercuts growth.”

The problem goes beyond roads and bridges, though. “Right now, we’ve got two problems. We’re not maintaining what we did build in years past and we’re sure not upgrading and building anew for what we’ll need for the future,” Engler said.

Not all of the business community’s frustration is focused on Congress, though. Engler said that when it comes to the Highway Trust Fund, the most obvious solution is an increase in the gasoline tax – a proposal he believes ought to come from the White House. Engler noted that as Governor of Michigan, he spearheaded a gas tax increase himself.

“The chief executive has got to put it on the line and go out there and sell it, and you’re not seeing that kind of effort,” he said. “We’ve had this administration say they are absolutely not supporting a gas tax increase, much to the frustration of groups both in business and labor.”

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He conceded that finding support for such an increase in Congress would be tough, but that it might be possible to find offsetting changes in policy that would hold consumers harmless. For instance, he suggested, the biofuels mandate could be made less onerous, decreasing the cost of gas at the same time the tax was raised.

“That’s the kind of creativity we’d like to see coming from Congress and the type of leadership you’d hope an administration might be engaging in,” he said.

And if all else fails, Congress can pass the buck.

“Frankly, if Congress is so apprehensive about voting for higher fuel taxes or even making that kind of a trade-off, they could then say, ‘Here it is, but states, in order to draw this down you have to raise the money to match these funds.’ So the responsibility would belong entirely to the states then, in effect voting to raise the federal tax.

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“If that’s the artifice that’s necessary to get the right policy, even that probably ought to be considered if we can’t just straight up do the right thing,” he said.

Beyond the issue of roads and bridges, he said, the business community believes Washington has missed a major opportunity to fund other infrastructure projects at the extremely low interest rates of recent years.

“Rates this low, we’re not always going to have that. This has been a great lament of mine and the CEOs,” he said. “We’ve squandered a pretty great period here where we could have been getting a lot of this work done. Of course, that all had potential spin-off benefits in terms of jobs. These are the kinds of jobs where you can actually hire someone and train them and they’re going to have a nice career.”

Engler said that with “creative financing” and repayments spread out over a longer-than-usual period, infrastructure projects could have had real benefit for the economy.

He said that he agreed with former President Bill Clinton, who said last week that the federal government ought to have a capital budget in place for managing infrastructure spending.

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“That’s something any governor would agree with,” he said. “This is a huge problem for the country. We don’t have a methodical way of doing big-ticket projects and financing them over time. One of the reasons they always ended up badly is that when they try to do them they try to finance them on the basis of annual appropriations and budget bills that never get passed.”

Finally, Engler expressed some optimism that tax reform – or at least business tax reform – is an achievable goal for this Congress. The current tax code is decades old, and has left the United States with the highest corporate tax rate of major industrialized countries. The U.S. also follows the outdated practice of taxing corporations on global income rather than “territorial” income. The result is that some companies are looking to move their headquarters overseas, and others are hoarding cash in offshore affiliates in an effort to avoid taxes.

“I absolutely believe that business tax reform is attainable,” he said. “Done right, not only do we do business tax reform and give ourselves a code that is far more competitive, we end the whole problem of revenue being trapped offshore, we get the us back in the game of competing to be the location of choice for headquarters, and at the same time we probably have some money left over to provide for as much as a 10-year fix on transportation funding.

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A longtime reporter on the intersection of the federal government and the private sector, Rob Garver is National Correspondent, based in Washington, D.C. He has written for ProPublica, The New York Times and other publications.