In a forecast more optimistic than most, U.S. Chamber of Commerce President and CEO Tom Donohue predicts that the U.S. economy will expand by 3.2 percent this year and that companies will create between 2.4 million and 2.6 million net new jobs by the end of the year.
But he warned that the recovery is fragile and uneven and any one of a number of factors could change our economic prospects overnight.
Donohue also added that he is not too sure we are going to get there if gasoline and energy prices, for example, keep rising.
Oil and gasoline prices are rising rapidly and could reignite inflation, Donohue said at his annual state of American business address Jan. 11 in Washington. Major states are insolvent and will be looking to raise taxes on consumers and business. Housing and construction are still very weak, and a new wave of home foreclosures could drive down real-estate values and household wealth.
Still, Donohue said that even with all those things looming over the economy, excessive regulations still pose the greatest threat to the creation of jobs which he said still lags behind where it needs to be.
We must create 1.2 million jobs a year just to absorb the new entrants into our workforce, Donohue said. On our current course, it would take years to get back to where we were before the recession and the financial crisis hit 20 months ago. That's not good enough. Therefore, the Chamber's top priority will be to turn an economic recovery into a jobs recovery.
But in order to do that, Donohue said, we must rein in excessive regulations and reform the regulatory process, especially since there has been what he called an unprecedented explosion of new regulatory activity in recent years.
For example, he said the new health-care law creates 159 new agencies, commissions, panels and other bodies. The Dodd-Frank financial reform law contains 259 mandated rule-makings, 188 suggested rule-makings, 63 reports and 59 studies.
And, in addition to its massive effort to attempt to regulate greenhouse gases, Donohue said the Environmental Protection Agency currently has 342 rule-makings in various stages of development 30 of which are deemed economically significant, with a cost to the economy of $100 million or more from each of them.
We cannot allow this nation to move from a government of the people to a government of the regulators, Donohue said. And that is where it has been headed under the Republican party and the Democrat party alike.
Donohue said he was encouraged by the recent appointments of William Daley as White House chief of staff and Gene Sperling as top economic adviser. I think the White House is ready to move on trade and regulatory issues to get people back to work, he said.
Donohue also said the U.S. must reduce runaway spending deficits and the debt.
The national debt already exceeds $14 trillion and is on track to nearly double over the next decade, Donohue said. To control deficits, we must first put unemployed Americans back to work so they can be paying taxes instead of collecting benefits.
But Congress and the administration must also move swiftly to reduce spending, he said. The Chamber will support strong proposals [to do that] even if we don't like all the details. We will also make the case for entitlement reform because any plan that fails to tackle these runaway programs is doomed to fail because the great preponderance of our spending is in entitlements.
Entitlement spending and interest on the national debt account for more than 60 percent of spending by the federal government, Donohue said.
We believe we ought to begin now to find ways to reduce spending, Donohue said. We are not going to get anything seriously done until we start to tackle the issues of entitlement and interest on the debt.
The Chamber also called for a reduction in the corporate income tax and an expansion of free trade agreements.
There are 283 free trade agreements in force around the globe, but the United States has just 11 covering 17 countries, Donohue said. If we fail to implement our pending free-trade agreements, while the European Union and Canada move ahead with theirs, they will take the business we'd like to have.
Donohue said he plans to advance the idea of eliminating all tariffs on goods in the $600 billion trading relationship between the U.S. and Europe when he attends the World Economic Forum in Davos, Switzerland, in late April. We think that would increase transatlantic trade by more than $100 billion in the next few years [and] jump-start global trade negotiations and set the stage for similar agreements with other partners.
He also said the U.S. needs to reduce its corporate tax, which is the second highest worldwide after Japan, which is in the process of reducing its tax. In addition, Canada is cutting its corporate income tax in half.
The reality is that right now, we are being knocked out of the game with taxes that discourage investment and make us less competitive worldwide, Donohue said.