I had the privilege last week to moderate a roundtable of businesspeople hosted by Arizona Rep. Ben Quayle and House Majority Whip Kevin McCarthy of California. It offered a look at the challenges businesses in Arizona and around the country are facing in this economy and provided welcome insight into how Congress is (or is not) responding to business’ needs from two rising congressional stars.
The freshman Quayle’s economic platform is the Reagan model: fewer regulations, lower tax rates and increased free trade. As for Congressman McCarthy, he’s only in his third term but he now occupies the number three spot in the U.S. House of Representatives. A former small businessman himself, there was an immediate connection with the audience. Definitely a lawmaker to keep your eye on for good things in the future, Rep. McCarthy is part of a leadership team in the U.S. House that serves as a firewall against job-destroying ideas like banning secret ballots in union elections.
The focus of the roundtable was to get a sense of what action would be most helpful on the federal side to get capital off the sidelines and for innovators to start taking risks again.
There was a general sense that the economy is better than most what the headlines might say and that we’re poised for growth, albeit slowly.
But what dominated the 70-minute discussion was the probably universal sense that the federal regulatory machine is a major impediment to job creation. Whether it’s Dodd-Frank’s effect on the financial services industry, regulations concerning exported products, the Internet, health care products – you name it – everyone around that table had a story about a dumb or at least outdated regulation.
Some regulations are keeping lifesaving medications from the market. Others are limiting what high technology companies can sell abroad. Some new regulations are hindering our transportation system.
We have reached the point where there was even a discussion of how in certain areas the European regulatory system is more reasonable. Europe!
On top of the red tape burden our employers are facing, there was also a sense that our federal tax code is impossibly complex and needs to be scrapped.
The regulatory burden and complexities of our over 72,000-page tax code are making it virtually impossible for businesses to have certainty on compliance and are clearly making it more difficult to hire new workers.
There were some constructive suggestions on solutions.
The federal corporate tax rate is way too high. We have the second highest rate in the world. Yes, there are many credits and provisions that lower the overall rate, but a healthier state of affairs would be a more streamlined tax code with a far lower rate.
On the regulatory front, the congressmen discussed the REINS Act, Regulations From the Executive in Need of Scrutiny , (H.R. 10), which would require the Congress to approve any regulation that would cost the economy $100 million or more. There are over 100 regulations of this magnitude under consideration at this time. There soon should be House consideration of the Regulatory Accountability Act, H.R. 3010, which require a stronger cost-benefit analysis for proposed regulations and in most cases would require the least costly option to be implemented.
While it will be extremely helpful for the Congress not to add to the existing burden and to require additional action for regulations in the pipeline, it is clear to me that there also needs to be a mechanism to revisit existing rules and make sure older ones are updated to reflect the century we are in.
Another idea would be to create a system whereby if something were already approved for use by a major European regulatory agency, there would be a favorable presumption and expedited process in the United States to allow a product to market. And maybe we need to have a federal effort to make sure that our top corporate tax rate is no higher than the OECD average.
As Rep. McCarthy said in his comments last week, the U.S. has assets at its disposal that should rightly make us the envy of the world. But while the U.S. economy is moving forward, our tax and regulatory environment are not keeping pace with our international competitors.
Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce & Industry