Third Annual CED Economic Summit: Restoring Fiscal Heath in the United States
On Tuesday, October 25th CED hosted its Third Annual Economic Summit that focused on restoring the nation's fiscal health amidst record debt levels and economic uncertainty. CED President Charles E.M. Kolb opened the event by urging attendees to sign on to CED's Six Standards for the Joint Select Committee, which has received support from top national business leaders and senior statesman including: Peter G. Peterson, former Commerce Secretary and Founder and Chairman of the Peter G. Peterson Foundation; David M. Cote, Chairman and CEO of Honeywell; Mohamed El-Erian, CEO and Co-CIO of PIMCO; Laurence D. Fink, Chairman and CEO of BlackRock; Frank Keating, President & CEO of the American Bankers Association; Michael B. McCallister, Chairman of the Board and CEO of Humana; Thomas J. Quinlan, CEO, President and Director of R.R. Donnelley & Sons; and Jerre Stead, Chairman & CEO of IHS.
David M. Cote, Chairman and CEO of Honeywell, delivered keynote remarks and introduced a bold, new "Competitiveness Agenda" to improve the nation's economic performance. Mr. Cote, one of two business leaders appointed to the Simpson/Bowles debt commission, has continuously promoted its reform recommendations in public forums to business leaders and Congress since their release last year.
In his remarks at the summit, Mr. Cote emphasized the urgent need for debt reduction, and more specifically, the need to simplify the tax code and reduce the prevalence of special tax deductions which cost the government $1.2 trillion a year. Mr. Cote warned that driving up the debt burden is "not the way a great nation behaves." We have two options, according to Mr. Cote, through thoughtful action in the near term or allowing the bond market to force policy changes, as in Greece.
Mr. Cote's "Competitiveness Agenda," is a new proposal directed at improving America's economic growth in a global economy that has changed dramatically over the past 20 years - which will, "move forward with or without us." He urged the political parties to work together in the spirit of seizing another "Sputnik moment."
Mr. Cote concluded by stating: "The choice is simple... and stark. Are we so focused on our entitlements that we've forgotten what made us great... hard work, math and science education, technical skills, a dynamic economy, a sense of purpose, relying on ourselves and not blaming others, taking personal ownership of our future and being able to individually act in our self interest while not forgetting our collective purpose."
Jonathan Alter, columnist for Bloomberg News convened a panel including: Byron G. Auguste, Director, Social Sector Office, McKinsey & Company; Mark N. Greene, Chief Executive Officer, FICO; Todd E. Petzel, Chief Investment Officer, Offit Capital Advisors LLC; Edouard Tetreau, Partner, Mediafin.
Mark N. Greene described his concern for the unemployed workers and the much larger group of workers not counted into the unemployment figures since they are long-term unemployed, this expands the national figure from hovering around 10% to 16-19% when other workers are added. The private sector faces daunting consumer pessimism. Byron Auguste helped to quantify the negative economic impact of the unemployed, in addition to consuming public funds through unemployment, the broader economy faces much larger losses in productivity. Mr. Auguste also raised the case for improvements in the public sector to reduce the achievement gap, which an earlier McKinsey report quantified at costing $1.3 trillion annually. Mr. Auguste encouraged reforms in education to boost graduation rates to keep pace with business demand for skilled workers, and expressed concern for the most vulnerable portion of the federal budget – non-mandatory, non-defense discretionary spending, which supports worker training programs and education spending. Mr. Petzel warned of the harm of interest rate repression to the broader economy. A 2% growth in interest rates over time could produce $350 billion worth of economic activity. He said the investment community would support meaningful, credible debt reduction, he also noted that, "jobs will follow." Mr. Tetreau suggested that the U.S. should consider a consumption tax, which many other European countries have, to help reduce the debt burden.
Charles Kolb closed the event noting that the 77 endorsers of the Six Standards clearly demonstrate that the business community will be playing a major role in the deficit reduction process. "The men and women who have endorsed these standards have pledged to support and defend the members of Congress who help devise and enact a comprehensive deficit reduction plan that goes way beyond what the law requires," he said. "Their endorsement is even more impressive when you realize that they have agreed that spending programs and tax provisions that primary benefit business should be included in the deficit reduction discussions."
Watch vidoes of the panel's remarks and discussion: