Earlier this month, the House of Representatives passed the 21st Century Cures Act in a rare bi-partisan effort. The bill is meant to speed the development of lifesaving treatments, but critics warn it may also allow ineffective or even harmful drugs onto the market.
President Obama has appealed to the nation’s business leaders for help in revitalizing the U.S. economy. In a speech to the U.S. Chamber of Commerce yesterday, he drew from John F. Kennedy’s famous call to action. President Obama said, “Ask yourselves what you can do to hire American workers, to support the American economy and to invest in this nation.” The president pledged to simplify the tax code and invest in infrastructure and technology. Some critics say the president was too conciliatory to business. Others argue that overly burdensome regulations must be lifted first. The White House and the U.S. business community.
- Dean Baker co-director of the Center for Economic and Policy Research and author of "Plunder & Blunder the Rise and Fall of the Bubble Economy."
- Jared Bernstein chief economist and economic policy adviser for Vice President Biden and executive director of the vice president's Middle Class Task Force.
- Bruce Josten executive vice president for government affairs, the U.S. Chamber of Commerce.
- Bill George professor of management practice at Harvard Business School and former CEO of Medtronic Inc.
- James Gattuso senior research fellow in regulatory policy at the Heritage Foundation.
- Elizabeth Williamson reporter, The Wall Street Journal.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. President Obama urged America's business leaders yesterday to hire more workers, saying they have a responsibility to America. The president said his administration would boost tax breaks for business investments and review federal regulations. Here in the studio to talk about jobs and the economy, Dean Baker of the Center for Economic and Policy Research, Elizabeth Williamson of The Wall Street Journal and James Gattuso of the Heritage Foundation. Joining us by phone for the hour from Minneapolis, Bill George. He is former CEO of Medtronic Inc. And before we begin that conversation, we're joined by Jared Bernstein. He's chief economist and economic policy adviser to Vice President Biden. Good morning to you, Jared. I haven't talk to you in a while.
MR. JARED BERNSTEINIt's great to hear your voice, Diane.
REHMThank you. Jared, why was it so important for the president to speak to the chamber yesterday?
BERNSTEINWell, I think the chamber represents American businesses who are -- as you mentioned in your introduction -- sitting on a lot of investment capital. And the president's agenda has been one that's been very complementary to business investment. He's been talking since the State of the Union -- and, by the way, not just talking, but introducing and implementing new initiatives that encourage American businesses to invest here in domestic industries, particularly in clean energy, in innovation, in research and development, that will create American employment jobs today, but lasting new industries for the future as well. So that's an agenda that's very resonant with the business community.
REHMAnd how well do you think he was received?
BERNSTEINHe was received very well. You know, this was, I think, cast by many as a kind of process between the administration and the business community that's been evolving over time. But, at least from where I sit, the goals of the administration in many -- in American business have been the same since the very beginning. The economy has gained some traction -- still a long way to go -- but businesses are profitable again. Now, what we need to see a lot more of is job growth.
BERNSTEINAnd that's going to happen when these businesses begin to invest, when their confidence increases and they take advantage of the expensing arrangement that the president managed to get in the recent tax plan, when they invest in research and development. Those kinds of innovations and investments are precisely what's needed to give this young expansion more traction, more jobs.
REHMAll right. And the president talked about investments in education, innovation and infrastructure. The question is, where is that money coming from?
BERNSTEINWell, when it comes to infrastructure, these are investments that have historically been nonpartisan, whether it's roads, whether it's bridges, water systems, communications, high-speed rail -- which, by the way, is where my boss, the vice president, is today up in Pennsylvania talking about new high-speed rail investments. Historically, throughout the history of this country -- whether it's that great Republican, Abe Lincoln, and the railroads or Democratic presidents, like Roosevelt -- infrastructure has been something we've agreed upon, and we have to pay for it. And we've always done so through raising the needed revenues. And the president will work with Congress to make sure that we do that again. And, frankly, we're not going to put it on the credit card. If we can't pay for it, we're not going to do it.
REHMAnd, as you know, here in the studio is Dean Baker of the Center for Economic and Policy Research. I have the feeling he may have a question for you. Dean Baker.
BERNSTEINThe truth in advertising, he's an old friend and a co-author. So...
REHMI understand that.
MR. DEAN BAKERThat's right. Well, Jared, I got to press you, you know, my co-author. Come on. We've had 87,000 job growth average over the last three months. I mean, this isn't even keeping pace with the rate of growth in the labor force. And in terms of infrastructure, I mean, that's great. We agree on this. But, practically, if the president's committing to a three-year freeze in domestic discretionary spending, where do you get the money from infrastructure? This is where the infrastructure budget comes from.
BERNSTEINYeah, well, first of all, just to -- this is -- actually makes your argument even stronger, I guess, is it's a five-year freeze, not a three-year freeze.
BAKERI'm sorry. I forgot.
BERNSTEINThe -- look, the point of the freeze is to look through the budget to do what -- by the way, I would have to argue that, you know, a lot of folks were kind of going around cavalierly talking about cuts of tens and hundreds of billions here and there -- have yet to do, have not done. To do the kind of freeze we're talking about, that you'll learn about when our budgets release next Monday, you actually go through the budget line by line. You try to figure out what's working and what isn't. And across the board, freeze doesn't mean everything gets cut. It means some things go up and some things go down.
BERNSTEINWe need to take down the things that aren't helping to promote job growth and list the things that are. And infrastructure has great potential in that regard. And, as I said to Diane, Dean, it's absolutely going to be something that we work with Congress to find the needed resources to fund. And, historically, we've done that. We'll do it again. I mean, do you, Dean, disbelieve that we will have another reauthorization of infrastructure in America?
BAKERYou -- I don't believe it'll be anywhere near up to the president's ambitions in the State of the Union speech.
REHMAll right. And I think Elizabeth Williamson of The Wall Street Journal has a question for you, Jared.
MS. ELIZABETH WILLIAMSONHey, Jared, what I noticed is remarkably absent from what you were just saying is the public-private partnership aspect of this that the president has spoken about. I mean, that was one of the reasons that the president was at the chamber yesterday, wasn't it, to try and appeal to business people to inject some of this money into infrastructure?
BERNSTEINActually, that's exactly where I started. I may not have used the words, public-private partnership, but I did begin by saying that we know that these businesses -- and the president stressed this -- are sitting on lots of capital. Now, maybe that made more sense for them when interest rates were particularly low. But as the economy is starting to percolate a little bit and interest rates are going up, the opportunity costs of holding those funds on the side gets higher, and the returns to potential investments get higher as well.
BERNSTEINSo the president, I think, was saying very clearly to the business community, get into the game. And, by the way, one of the things he said that I really liked in regards to your very good question is, you know, if there's something that's preventing you from getting in, if something's broken, let me know, and I'll try to fix it. And that's a kind of pragmatic hands-on work that this president is trying to do with the business community. And, again, as of yesterday's meeting, it felt quite resonant to me.
REHMAnd, Bill George is on the line with us from Minneapolis. He's a longtime leader in corporate America. He is now professor of management practice at Harvard Business School. Bill George, how would you assess what the president had to say?
MR. BILL GEORGEI think it's a very positive step, Diane. It's a series of, probably, 10 positive steps he's taken in the last six weeks. I can tell you, I've talked to about four or five dozen CEOs in the last few weeks, and they're taking a second look at this president. As recently as mid-November, they were angry. They were angry at the president. They thought he didn't understand business at all. And the moves he's making are very positive. I think he's finally getting it, that we can't just go changing economics to get there. We've got to actually stimulate jobs to investment in America. I wrote an article in New York Times last fall with exactly that title.
MR. BILL GEORGESo I'm very pleased in the move, Bill Daley and the other moves he's making -- Gene Sperling and the competitiveness council of ML, this new Startup America, this public-private partnership with Steve Case and the export council with Jim McNerney and Ursula Burns -- these are all very positive steps. And I don't think there's any going back right now. I think the president recognized he's got to come to the middle and work with business, not look at them as the enemy but work with them. And I think the business community is saying, he's reaching out a hand to us. We'll reach out a hand to him. And we can see if we can work together.
BERNSTEINDiane, can I make a quick comment?
REHMSure. Quick comment.
BERNSTEINQuick comment. You know, glad to hear Bill's viewpoint on that. I will say that there was a little bit of a swipe there in changing economics. I would ask Bill and others to remember that one of the reasons we are where we are today with an economy that has been growing for a year-and-a-half, adding over a million private sector jobs over the past 11 months, has to do very much -- and it's not just my view -- CBO private forecasters with the stimulus, with the Recovery Act package, widely agreed upon to be key to getting where we are today. Obviously, we need a lot more growth and a lot more jobs, and that's the agenda that the president and Bill have just referred to. But let's not forget how we got here.
REHMBut, James Gattuso of the Heritage Foundation, you are disappointed in the regulatory reform initiative.
MR. JAMES GATTUSORight. You know, the president made a good step forward in terms of symbolism, of reaching out to the business community. The first step to reform is recognizing that you have a problem, and he's had a problem that he's had a perceived war on business. And he made a bit light of it, trying to mend fences, talking about how he should have brought a fruitcake over when he moved into the neighborhood. But, you know, when you look at it, you need more than symbolism. Fruitcake economics is not enough. And there's a lack of policy substance here, and it looks specifically at the regulatory review that's been much touted and much talked about.
MR. JAMES GATTUSOThe closer you look at that, the less there is, really. In fact, the president did not actually ask agencies to come up with a list of regulations that need to be repealed and modified. What he did was ask them to come up with a preliminary plan in 180 days for how they might look at regulations in the future. And, in fact, that plan -- if you look at the (unintelligible) agencies to look at new regulations that might be needed as well. So it's really not much at all there.
BERNSTEINYou know, I find that to be extremely discordant with what this president has done since he's got here. I mean, this is a president who signed 17 tax cuts for small businesses since taking office, who has recently signed export deals with India and China with a free trade agreement with Korea, who mentioned just yesterday -- and, by the way, we're at the very beginning of that reg reform procedure -- who mentioned reg reform in terms of paperwork at the EPA, greenhouse gases, fuel economy, oil standards. I just think that it's very, very hard to make a substantive case that President Obama hasn't helped businesses...
REHMAll right. Jared Bernstein, I know you'll stay with us until 10:30. We'll take a short break here and be right back.
REHMAnd coming back now to our discussion of the president's speech yesterday to the U.S. Chamber of Commerce, we have an e-mail here from David in Raleigh, N.C., who says, "I realized the president has never run a business, but, surely, he has advisors who know how things work in the real world. Jobs are created based on demand for goods and/or services, not because a business happens to have a large amount of idle capital. I have very little faith in the administration's ability to help improve the economy when it doesn't understand Economics 101." Bill George, do you want to comment?
GEORGEWell, businesses have -- Diane, because the climate has been rocky the last two years, business has been making a lot of investments overseas. And, I think, the 100 percent depreciation, the R&D tax credits, are going to start bringing a lot of those investments back here. I'd like to see a repatriation tax holiday or reduction significantly for -- to bring back a lot of the overseas earnings, which account for about $1 trillion of the $2 trillion kept cash in corporate coffers. But, I think, we need to focus more on the supplies.
GEORGEI don't agree with Jared that the stimulus package really worked to stimulate jobs. I think it did not do that, and that was part of the problem. And I think we're now getting after that. But I think businesses will take up the president's call, particularly this export, getting after that and having many more exports. And, I think, the president's statement -- he'll go anywhere anytime to support export sales -- is a fantastic statement. So I'm very much a free trader and would like to see more go in this direction.
WILLIAMSONThat go anywhere, do anything was one of two applause lines that the president had yesterday at the Chamber, where businesses were quite silent in their reception of him, in large part. And, I think, one of the reasons was, this $2 trillion question is absolutely central. And the disagreement or misunderstanding between the business community and the president is also central. Businesses are saying that unless we have greater demand, we will not spend this money that we've been hoarding, which is the greatest total, by the way, since World War II. So they won't spend unless they feel that there is supply adequate to retain those people, to bring them on and to retain them.
WILLIAMSONWhat the president was trying to say yesterday was kind of reversing that chicken and egg question in saying, if you hire, there will be demand, and businesses tended to reject that. They felt that he was telling them that they had a "moral responsibility to hire," and that they ought to boost demand themselves by hiring. But they just feel like, in the real world, that doesn't work that way (unintelligible).
BAKERYeah, well, this is the Keynesian economics that the businesses are espousing, and they, apparently, don't know it. The whole point is demand leads growth, and, Jared, I think, is absolutely on the mark. There's been any number of studies by CBO, nonpartisan individuals, firms that all say that helped stimulate growth. But one thing people have to understand, A, profits are pretty much record-high. So it's hard for me to see what businesses have to complain about. The other thing is they have been investing. If you look at the growth in equipment and software investment from the fourth quarter of 2009 through the third quarter of last year, it is growing at almost a 20 percent annual rate. So this idea that they're not investing, they actually are. It's just we have a much bigger hole than anyone seems to realize.
REHMBill George, here's a question for you from Marian. She says, "Appearing before the very heart of Republican darkness -- the U.S. Chamber of Commerce -- the president had his work cut out for him. He was trying to make peace to get them to let go of some money they are holding in reserve on the sidelines of the economy. The Chamber has no intention of doing anything to make him look good. They'll be more than happy to give him lip service, but their goal is his defeat in 2012." How do you see it, Bill?
GEORGEI see that as a political argument, Diane. Look, most business people I know are pragmatists. They're going to make decisions based upon their long-term best interests. And if they can find investing in America is going to earn long-term profits for their shareholders and strengthen their position with customers, particularly American customers, they're going to do so. And I think that the Chamber is taking a second look. It was very hard against President Obama, but I think -- and I don't think the Chamber necessarily represents all the big businesses of America by any stretch of the imagination.
GEORGEI think you're going to see, from the business, the CEOs of major companies I've talked to, taking a second look and particularly (word?) investments in this country and knowing we've got to strengthen our home markets. You can't have a strong business strictly by doing everything overseas. And, frankly, there's nothing wrong with manufacturing overseas 'cause every time you add a job manufacturing overseas, you'll probably add two jobs back here. Look at Apple and the iPad. That certainly was true of Medtronic. The ratio was about 2:1, so we shouldn't be negative about that.
REHMBill George, former CEO of Medtronic Inc. Jared Bernstein, who had thought he could stay with us until 10:30, was called away. Now, I know that you, James Gattuso, want to enter into this conversation.
GATTUSORight. The basic problem, I think, is the president is seeing this as a political campaign, that you can cajole business into hiring more, that you can appeal to patriotism, you can claim moral responsibility, you can go anywhere, do anything in order to get business to invest and hire more people. But that's just not the way business works, nor it shouldn't be the way business works. Big business, of course, has options to go into other countries that are more competitive. And, frankly, small businesses have to be careful before they hire someone, that -- it's a proposition that makes sense in that their business will survive. I don't think you want businesses to act any other way.
GATTUSOThe president has to address the substance of what public policy is going and make substantive changes. You know, when you look at regulatory policy again, the administration says that they've had a balanced approach, defends their regulatory record. But you look at it -- it's far from balanced. There are 43 new major regulations that were adopted over the last year, a record in modern times. There are only three steps that were taken to deregulate, 43 to three. That's not balanced.
REHMElizabeth Williamson, what about the personnel changes the White House has made? Might they make a difference?
WILLIAMSONYes, absolutely. I think that sent a very strong signal to the business community, Diane, particularly the hiring of Bill Daley, who is seen as a friend of the business community and is seen as a strong centrist. He's on the board of Third Way, and in that position, he advocated for the Obama administration -- even before he was appointed, before the November elections -- to take a more centrist approach and to do a couple of the things that businesses were suggesting that were reasonable and would help to contribute to job growth.
WILLIAMSONI think the president has made some substantive moves. I mean, this is a president who, on the campaign trail, was saying that he would renegotiate NAFTA. And he has thrown his support behind the South Korea Free Trade Agreement. And, really, with the help of the Chamber, they've worked in concert -- really, in partnership -- across the country to try and build some support for this in the districts of lawmakers who are skeptical. They've built support from the labor unions, from the -- chiefly, from the United Auto Workers for this agreement. And they are forging ahead on this. I think that is a really substantive stance by the president. That's a total reversal. That is something that the business community has been asking for.
REHMDean Baker, House Republicans are certainly trying to roll back regulations. What proof is there that regulations are slowing down the economy?
BAKERWell, I actually see zero proof. I hear a lot of assertions about it. But when you go, okay, where's your evidence? I mean, one of the big ones, of course, the health care reform act, and we're told this has been this big impediment to small businesses. You go, well, A, most of it doesn't take effect till 2014. And, B, if you go, okay, well, if that were true, we should expect to see a big impact on the businesses most affected -- those right around 50. You really can't find that. You have to really beat up the data to find any evidence that regulations have been a big role in slowing the economy.
REHMWhat do you think, James Gattuso?
GATTUSOWell, I think that when you make something more expensive, you get less of it. And investment has been made more expensive by additional regulations. Hiring has been made more expensive. Operating a business or starting a business has been made more expensive. And it goes to small and large regulations. On the large side, you have climate change regulations coming through the pipe that will make energy more expensive and would destroy, I think, thousands if not millions of jobs in the long run.
GATTUSOYou have regulations to Internet. Perhaps the greatest success story we've had economically, as well as socially -- and the government is going to step in and deter that investment -- it's been coming in about $60 billion a year. It's going to stop. Even down to cribs, the Consumer Product Safety Commission that's regulating cribs. I think that that's something they might be in favor of, but they're doing it in such a way that every crib in America has to be replaced. That's hurting daycare centers. So it's not just big business.
WILLIAMSONThe regulatory environment is a favorite hobbyhorse of the business community, and they've been using this as a way of saying, this is the sort of regulatory uncertainty bugaboo. Next to demand, what they'll say is uncertainty is causing these businesses to hoard cash on their balance sheets. So, I think, the president is trying to force their hand here saying, okay, you name the regulation that's slowing -- that's stifling growth, that's slowing down your innovation, your ability to innovate, and we'll fix it. So, I think, he's trying to force them to put their money where their mouth is on this issue.
REHMWhat do you think, Dean Baker?
BAKERWell, again, you know -- getting back to James' point -- yes, it raises the cost. But the question is, how much? You know, we're -- you know, taking the case of energy, we've -- used to very volatile energy prices. It was just a couple of years ago -- I guess three years ago now -- energy was -- oil was $150 a barrel, and businesses did fine.
REHMAnd joining us now by phone from his office here in Washington, Bruce Josten. He's executive vice president for government affairs at the U.S. Chamber of Commerce. Good morning, sir. Thanks for joining us.
MR. BRUCE JOSTENGood morning, Diane. Pleasure to be with you today.
REHMTalk about how you, in the audience, felt about President Obama's appearance, yesterday, before the chamber.
JOSTENWell, I think it was smart for the president to make an appearance to the broader business community. I think, not unexpectedly, it was a bit of a reprisal, largely of his State of the Union speech and a little bit of his innovation agenda from a week ago. We're going to continue to try to find the areas where we can work together. And I'm sure there'll be other areas we will not be able to work together in terms of policy issues. But I think it was a smart move in the president's behalf to come over to the chamber and speak again to the wider business community.
REHMIt was interesting to read the headline at The Wall Street Journal today. "No Rush to Hire Even as Profits Soar." So the question becomes, why are businesses not doing more hiring, even though many of them are doing very well?
JOSTENI think the president himself did a good job acknowledging why. He recognizes that fundamentally hiring or capital investments and equipment or plants is driven by a supply and demand balance equation. And, right now, we have an imbalance. The president acknowledged that. He noted that, while we've had an economy -- largely three-quarters of which has been driven purely by consumers' consumption -- we have seen a pullback by consumers over two years. They've gone from a net national savings rate per household to a positive savings rate, which is altogether good.
JOSTENWe saw some recovery in terms of November, December purchases during the holidays. But as the president, again, acknowledged, it is a very, very slow recovery. And companies are not like governments. They have to sustain their operation. That means they must be able to pay their employees, their vendors, their suppliers and their bond holders. And, unlike governments, failing to do so quite simply means that business goes out of business, unlike the government. So we think the most patriotic thing companies can do right now is ensure that they stay in business, take steps to stay in business. Otherwise, everyone loses and more people are going to lose their jobs.
REHMSo the question becomes, how soon would you anticipate that U.S. businesses might actually begin hiring?
JOSTENWell, I think we have projected GDP growth this year to increase considerably from where it has been, probably in the 3.2 to 3 1/2 percent range. That will help address this unemployment number. We've only been averaging about 100,000 new jobs a month. That doesn't even absorb the 125,000-plus new entrants into the workforce, let alone get to the multiple, multiple millions who are unemployed, underemployed and have just stopped looking for work. So we are in for a long haul here because you're going to need to see job growth at the 335- to 350,000 a month range to really begin to chip into the unemployment number as well as absorb the new entrance.
JOSTENNow, companies are trying to adjust a little. There's been some sharp spikes in commodity prices which are increasing costs, and they're holding back a little bit. They want to have some better confidence and certainty that the slowness of this recovery -- will be gaining some traction, as I acknowledged -- is going to continue along that path. And once that confidence level for both the consuming public and the business public comes together, then you're going to begin to see greater levels of hiring. But, I think, you're going to see that evolve over the next quarter here this year.
REHMAnd you're listening to "The Diane Rehm Show." I think Dean Baker has a question.
BAKERYeah, just in terms of expecting demand coming from consumption, I mean, what I keep looking at is, you know, as you said, consumption -- the savings rate was at zero at the peak of the housing bubble. We've lost on the order of $6, $7, $8 trillion of housing wealth. The savings rate ordinarily had been around 8 percent. Currently, it's about 5 1/2. I expect it more likely to go up rather than down. And let's assume for the moment that's true. Where does the demand come from for businesses? What's going to prompt them to start hiring?
JOSTENI think Dean raises a key point. The other side of that coin is most Americans use their single largest investment -- in fact, their home -- and that's when they start to feel a little bit more comfortable in terms of spending. Unfortunately, in the past two years, many, many Americans across the country have seen a decline in their housing values. There were reports here in the last couple of weeks that we may be seeing one out of every 45 homeowners foreclose this year. So this whole thing -- we have to deleverage our way out of this debt.
JOSTENThe consuming public has to feel better. I think they're starting to feel better with the stock market rising, which is the other component that they always look at. But everybody kind of knows somebody that's lost their job still. Everybody is looking at the housing values not rising as they had in perpetuity. And people have a little bit of a lack of confidence, although we're seeing them express some confidence with their wallets and their credit cards as I mentioned.
JOSTENSo, hopefully, this will come together. But we're going to have to work at this for a number of years.
REHMAll right. Bill George, any questions?
GEORGEDiane -- you know, James, I think you're right about jobs. They're going to be slow in coming back. But, I think, the real reason we're finally getting into it now is that the structural changes. I don't think it's just forcing demand -- consumer-driven demand. We've pushed that too hard the last two years. We got it up too high. And I think we have to look much more at the investment side of the equation and getting business back to investing for the long term.
GEORGEThis is a long-term proposition, not a short-term one. And it's not just a question of (word?) the jobs or lagging indicated. That's what we were saying the last two years, and it didn't prove to be the case. I think we have to make those investments that will restore or strengthen in our companies here so that they can be great global corporations and can export and can create the innovations that are going to create new jobs.
GEORGEThat's where they're going to come from.
REHMSo what are you saying to the U.S. Chamber?
GEORGEI'm saying to the U.S. Chamber is the president gave you an olive branch. You better take it and work with him...
REHMWe're going to take just a short break here. Bruce Josten, can you stay on with us?
JOSTENI could stay for a couple more minutes. Yes.
REHMAll right. That's fine. We'll take a short break and come back with your calls, your comments and our guests.
REHMAnd Bruce Josten of the U.S. Chamber of Commerce is with us. He has to leave the phone at 10:45. So here's a question for you from Nancy in Kirkwood, Mo. She says, "If Americans have no jobs, they have no money to demand products and services. U.S. companies continue to outsource jobs for cheap labor. But if the workers back home have no income, there will be no consumption of goods and services." So you're back to the chicken and the egg, Bruce.
JOSTENWell, again, let's take, you know -- we extended the invitation to the president -- we have called for and saluted the president's call for now over a year to double the nation's exports. However, you are not going to double our exports unless the administration begins to engage in trade agreements beyond Korea with Colombia and Panama. There's a hundred global negotiations around the world with our trading partners. We're only negotiating one trade agreement. We've done studies on this. The administration has them. We look at risking losing another 400,000 jobs from doing nothing in this space.
JOSTENWe have got to move forward on trade because 95 percent of the world's population, very simply, lives someplace else. But we need more than a pep talk. We need to move forward. We agree with the president's call for the need to expand for infrastructure on -- across the board, but the reality is every proposal that we have put forth about how you pay for that, both the administration and the Congress have not cottoned up to. We agree with the president's race to the top. There's reports in the papers today that people with a high school-only education are the people who are looking at unemployment lines extending.
JOSTENWe agree with the president that we need to get our tax code into a competitive space. The rest of the world has reduced taxes for 10 years in tax cut competition, lowering the OECD countries, for example, from 33 1/2 to 27 1/2. We now are still at 35. So we're pleased that the president has mentioned those items. We agree with that. We agree that many regulations are absolutely necessary. The regulators in this town do about 4,000 a year. The business community's probably concerned with less than a hundred. We'd like to work with the administration to remove some of those burdens, particularly for small business. It can be done.
REHMAll right. The Republicans did argue that the extension of the Bush tax cuts for the wealthy would create jobs. So where are the jobs?
JOSTENWell, we're about barely a month-and-a-half away from that extension, providing some certainty for about a two-year period here before that debate will completely be relitigated. Nothing happens overnight. The president, again, yesterday acknowledged companies have learned from this recession where they needed a thousand workers in many cases, to quote him, "they can today do it with 100 or, in other cases, 10." That's not going to change because of enabling technologies, which are helping companies compete globally on global products, global pricing, both here at home and throughout the world. But, again, nothing happens instantaneously...
JOSTEN...whether it be in the central government or whether it be moving a $13-plus trillion economy.
REHMAll right. Elizabeth, you have a question.
WILLIAMSONDiane, this tax cut debate is so interesting because, on this very show a couple of months ago, we had this discussion about whether extending the Bush-era tax cuts would stimulate particularly small businesses to start hiring. And we're kind of finding that that was a canard. I mean, the small business community has been quite silent about, oh, thank God for this tax cut extension because we've been able to do so much more. I mean, these were S corporations that weren't really making -- they weren't -- this was not -- they were not reporting on an individual return. This was an argument that was being made. But I think that those are of some questionable value.
REHMDo you agree with that, James Gattuso?
GATTUSOWell, yeah, we refer to these as the Bush tax cuts. Really, what Congress did was decide not to let the taxes increase, so it was a status quo situation. I think things would have been a lot worse had we allowed the taxes to increase, especially at an economic time like this.
REHMDo you agree with that, Dean Baker?
BAKERIt's very hard to see. I mean, basically what you would have done is take away a little bit money from the wealthiest people in the country, $40, $50 billion a year. It's very hard to see that having a big impact on the economy.
REHMAll right. And one last question for you, Bruce. Here's an e-mail from Will in Rochester, N.Y. "Seems to me," he says, "your guest fails to recognize the anger many Americans feel about U.S. business interest. It's U.S. corporations who abandon the American worker by exporting jobs overseas, reducing pensions and benefits and by stagnant wages. And who caused this great recession? Not the American worker, but again, American business interest." How do you respond to that, Bruce?
JOSTENWell, I would respond in a number of ways. First off, you had a propulsion effect of trying to push homeownership in this country by multiple administrations, multiple Congresses that led to, essentially, a lot of low-cost money pushing people into homes that they couldn't afford, which led to the first ever decline in housing values this country has ever experienced when that bubble burst. So that's a combination of public sector government policy promotion and private sector companies taking advantage and moving into the space that, in fact, they were incentivized and encouraged to do by our federal government. So that's an entirely different issue.
JOSTENIn terms of outsourcing and the government studies, even the IRS studies and Department of Labor studies find nowhere near the level of outsourcing that the American public thinks is taking place. The reality is companies invest abroad and build plants abroad to sell abroad, just like you have insourcing in this country, where more than 5 1/2 million American workers are working for foreign manufacturers, from Siemens to Toyota to you-name-it company. So we have foreign direct investment flows coming in. We have foreign direct investment flows going out. It's part of a global balance of trade exchange that takes place broadly, and we have to stay in that kind of game. There's no question of that.
REHMAll right. Last question, Dean Baker.
BAKERYeah, I was going to ask in terms of, you know, talking about contracting -- the outsourcing. I mean, there's actually -- you can play some games here. Very often businesses contract out, so they haven't formally outsourced. They simply contracted with a manufacturer in China. So it really depends how you do this. We know we have a massive trade deficit that costs job. Imports cost jobs in the same way that exports create jobs. Otherwise, we should just import a pile of goods from Mexico, re-export them, and we'd have millions of people employed. And we know that's silly.
WILLIAMSONI think that this is sort of emphasizing the shaky territory that the president is on, on trade...
WILLIAMSON...that, you know, the export-import argument and the outsourcing argument is something that really propels the American public to be quite skeptical about trade agreements.
REHMElizabeth Williamson, a reporter for The Wall Street Journal. Bruce Josten, I want to thank you so much for joining us this morning. He is executive vice-president for government affairs at the U.S. Chamber of Commerce. Thanks again.
REHMAnd, now, we're going to open the phones, 800-433-8850. To Charlotte, N.C. Good morning, Ronnie.
RONNIEGood morning. You know, we keep hearing all about these regulations, and we need to relax regulations. And, you know, a lot of these regulations are designed to help protect us, you know, from some of the things that go on around the world and other places where they don't regulate. They don't care, really, about doing anything except for selling something. Last year, you had a similar show, and they were discussing problems with regulations. And a guy called in from the United States and made a comment that they needed to relax regulations because he was buying toys from China that had lead in the paint.
RONNIEAnd he said they needed to relax those regulations so he could make more sales over here. Now, what I'm getting around to is, what are you going to do -- I mean, does it matter whether or not it's everybody else's child that might have some sort of neurological problem from, you know, chewing on this paint?
REHMGood question. James Gattuso.
GATTUSOWell, you know, everyone talks about this as if it's a black-and-white issue. No one is talking about getting rid of all regulations. What we're talking about are regulations on the margin, which are very...
REHMI wouldn't call regulations on cribs on the margin. If...
REHM...you've got cribs in which child's heads can be caught or an arm caught...
GATTUSOWell, but -- but look at what the CPSC did in their crib, really -- they, of course -- the private sector, in fact, also stopped manufacturing the drop-side cribs when it began to be clear that they were unsafe. But the Consumer Product Safety Commission went farther and adopted a new standard, which meant that every crib in America must be replaced in, as I had said before, daycare centers in addition to individual families. Stores cannot sell a crib that was manufactured more than a year or so ago. That saves no lives. That does not increase safety. But it, in fact, in a way, could decrease safety by forcing people to use more unsafe cribs.
GEORGEI think Ronnie's making a good point. But, I think, we need sound regulations. I worked with the FDA for 10 years, the CEO -- 12 years -- the CEO of Medtronic to try to get them to operate in a sound manner to meet deadlines and to make good decisions, so people get products they needed to save their lives. But the last thing I'd ever want is to get rid of the FDA. We need sound regulations. We don't want defective products coming into this country and being put in people's bodies or children eating lead toys. We need to have those regulations, but the regulators need to respond.
GEORGERight now, there are 2,000 generic drugs being held -- applications for off-brand drugs being held up by the FDA just because they don't have enough staff to work on it. And I'm trying to get more staff, but they need to come to account and get that done. Those same drugs over the last decade saved a trillion dollars. So I think we need sound regulation in this country, and the regulators need to be held to performance standards just like businesses. It's got to be...
REHMSo, Elizabeth, let me ask you about the president's Regulatory Reform Initiative. How is that going to work? How broad is it going to be?
WILLIAMSONWell, I think, Diane, the issue here is not the regulations themselves, many of which we can all agree enhance public safety. That's not what's at issue here. It's the way they're written and the way they're implemented. On the Consumer Product Safety Commission's side, it's not so much the lead-based paint standard. It's the fact that no one can determine what exactly is a children's product. You know, what's the lead standard for a children's product? What's a children product? Is it a pen with Elmo on it? Or is it any kind of ballpoint pen that a child would chew on? That sort of thing.
WILLIAMSONSo I think what the president is proposing is that these rules be looked at for -- just in a pragmatic way. You know, what, actually, are they trying to achieve here? And how can they preserve that enhancement to public safety without stifling a small business that's struggling to comply with a regulation like that?
BAKERI'm just going to make a really quick point. (word?) made the point about inadequate staff at the FDA, and, at the same time, we're freezing budgets. You know, this came up at the Securities and Exchange Commission. They're being asked to do a lot more. We want good regulation, but that requires more people than bad regulation.
REHMDean Baker of the Center for Economic and Policy Research. He is co-author of "Plunder & Blunder: The Rise and Fall of the Bubble Economy." And you're listening to "The Diane Rehm Show." To North Richland Hills, Texas. Good morning, Susan.
SUSANGood morning. I agree with that last statement. I'm heavily invested in the stock market and have been for years. But I've been very concerned about it. For instance -- there's several reasons. I believe in free but fair trade. For instance, the Supreme Court decision -- I, as a stockholder, have no way of determining who the CEO of a company is going to throw money at, and that is very irritating. I think the big businesses the last few years -- really, for 30 years -- have become traitors to our country and to our people. One of the examples -- well, I'm reading "The Big Short," which is about the housing bubble and how that come about.
SUSANAnd it darn sure wasn't the poor people, and it wasn't -- it was the stock market, the big business that caused it. Another example is, I was at Disney this summer, and there was a funny attitude down there. And, come to find out, what has been going on down there is they are cutting the people's salaries and benefits. For what reason? Disney company. So the employees, even though they were all in character, you could feel that undercurrent.
REHMAll right. Thanks for your call, Susan. Any comment, Dean Baker?
BAKERYeah, well, these points are very good ones. I mean, you know, the post-war period when the economy did very well -- '45 to the early '70s, mid-'70s -- everyone shared in that. Workers' wages rose in step with overall growth. We've seen the reversal of that. So since, certainly, the 1980s, the economy has continued to grow. Most workers have seen little or nothing from that. And we're seeing, particularly in this downturn where worker's bargaining power is so limited, that companies are taking advantage of that. I didn't know the Disney case. That doesn't surprise me. I've heard of many other cases where you have profitable companies just saying, hey, we can cut your pay. We're going to do that.
GATTUSOI think we're getting back into the demonization of a business again. Basically, businesses don't survive, and they have no incentive to shrink. They want to grow. They make money. They want to grow and provide more services to people, not less. And you look at companies out there like Google, like Apple that just gave us the iPad, Target stores, which is saving people untold amounts in discounts. Down the line, there are companies that have come up with business ideas, technological ideas that have truly innovated and are contributing far more than any White House policy or any policy coming from Washington.
REHMBill George, I'm going to give you the last word. You still see companies holding on to big profits and not ready to hire. What would you say to them?
GEORGEI would say that, I think, it's a long-term proposition to invest. I don't think they should hire people they don't need. That's for sure. But I think the investment climate today -- it looks a lot better than it did over the last several -- last three years. And, I think, you're going to see steadily -- hiring come back with, as we addressed, the structural changes in the economy and bring -- and have good reasons to hire people, particularly in the high technology sector. That sector, right now, can't find the people it needs. So I think it's a whole package, Diane. It's going to be a five- or 10-year proposition to get our economy back to where it needs to be. But I'm encouraged by the president taking a genuine concern about this and addressing it from all aspects.
GEORGEAnd, I think, we need to work together.
REHMBill George, professor of management practice at the Harvard Business School, former CEO of Medtronic Inc., James Gattuso of the Heritage Foundation, Elizabeth Williamson of The Wall Street Journal, Dean Baker of the Center for Economic and Policy Research, and, earlier in the program, you heard from both Jared Bernstein and the vice president of the Chamber of Commerce. Thank you all. Thanks for listening. I'm Diane Rehm.
ANNOUNCER"The Diane Rehm Show" is produced by Sandra Pinkard, Nancy Robertson, Susan Nabors, Denise Couture and Monique Nazareth. The engineer is Tobey Schreiner. Dorie Anisman answers the phones. Visit drshow.org for audio archives, transcripts, podcasts and CD sales. Call 202-885-1200 for more information.
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