Bill George Go To
discoveryour
truenorth.org

Bill George

Harvard Business School Professor, former Medtronic CEO

Category: Economic Crisis

What the President Should Say on Jobs and the Economy

Tonight President Obama addresses the nation at a joint session of Congress about his plans to expand job growth. Here’s what he should say:

My Fellow Americans:

Our country is facing a jobs crisis of major proportions, the greatest since the 1930s. This nation’s strength is based on its strong economy and the global corporations that dominated their industries and fueled growth throughout the world. But now that strength is waning, as other nations, from China, India, Singapore, and Brazil to Germany and Switzerland, threaten to outstrip us in competitiveness.

In the 1990s our economy produced 23 million jobs and three consecutive years of budget surpluses. The combination of the Bush tax cuts and spending to finance two wars and entitlement plans created an enormous debt burden that future generations will be forced to carry. The historic downgrade of the U.S. debt rating from AAA to AA+ by Standard and Poor’s is a warning we cannot ignore.

The excesses of the past decade have imperiled our fiscal stability and left 25 million Americans – 16.2% of the workforce – unable to find full-time jobs.  As a result, the United States has its smallest full-time workforce – less than 55 percent – and hundreds of thousands are dropping out each month.

When I came into office, I inherited a broken economy. Our banks, insurance companies and automobile makers were on the brink of bankruptcy. We took aggressive steps to stop the bleeding, and prevented the world from depression. I launched a $893 billion stimulus package but it had limited impact on the structural jobs crisis.

A robust recovery must start with jobs growth. Recent figures confirm that jobs are not growing, and there is no indication they will return without aggressive actions on our part. Yet we continue to get pulled off course by partisan showdowns over the budget and debt ceiling.

We need to stop making it difficult to grow businesses and hire workers in America. In response to excesses of the past, we overregulated our industries. With domestic growth approaching zero and the challenging regulatory, tax and political climate, companies are investing instead in rapidly growing emerging markets in Asia, Latin America and Middle East.

As a result, the jobs crisis is more severe than ever. The U.S. has sunk further into debt, and the country has reached the limits of its borrowing capacity. Our political stalemate has paralyzed our ability to take decisive action.

Therefore, I will use the powers entrusted in me as your President to take the actions required to put Americans back to work and restore domestic growth. All these steps must be taken without increasing the budget deficit.

Here is my plan:

  • Restore fiscal stability by implementing the proposals of the Simpson-Bowles Commission to bring revenues and expenditures in line and reduce deficits by $4 trillion.
  • With the recent debt downgrade, the government cannot subsidize federal jobs; therefore, I am appointing John Bryon, my Secretary of Commerce nominee and a former CEO, as Jobs Czar to work closely with American employers, large and small alike, to stimulate domestic investment and create 10 million jobs over the next decade.
  • To create a positive climate for business investment like that of the 1980s and 1990s under Republican presidents Ronald Reagan and George H. W. Bush and Democrat Bill Clinton, I am ordering all federal agencies to reduce or suspend unnecessary regulations and focus instead on expanding private sector jobs in the energy, transportation, health care, information technology, and financial service industries, as well as small businesses.
  • To prepare unemployed Americans for 21st century jobs, I will reprogram existing funds to invest in retraining and vocational/technical education.  
  • To make America more attractive for investment, I propose reducing the corporate rate to 20 percent, while eliminating complex deductions and credits.
  • For the remainder of my term, I will suspend taxes on repatriated foreign profits for corporations that reinvest their portion of the $1 trillion in cash trapped overseas in manufacturing, research, and job creation.
  • I will expand the number of H1-B visas, travel visas and green cards to make America an attractive place for immigrants to visit, work and start companies.
  • To expand exports, I will implement a free trade policy by moving ahead with free trade agreements with South Korea, Columbia and Panama, while working with nations of this hemisphere to turn NAFTA into the Americas Free Trade Agreement.

 

As your President, I am prepared to put my re-election on the line to put Americans back to work, reignite economic growth, and restore America’s competitiveness. While my plan will not please the extremes of either political party, I ask all Americans to join me in this commitment by putting their country ahead of partisan politics.

Leadership Kudos and Gaffes: Schultz leading globally and domestically, Boehner’s leadership relying on chaos

Leadership Kudos this week go to Howard Schultz, founder and CEO of Starbucks,for his courageous restoration of Starbucks to a pioneering coffee house, nowexpanding around the world under Schultz’s leadership. When Schultz returned as CEOin early 2008, most observers were predicting that the Starbucks mystique was waning and its growth was doomed. Schultz jumped in and addressed the problems head on, even closing all stores for a day to get his employees retrained on customer focus. Since then, Starbucks’ revenues have grown in double digits, earnings have tripled, andfrom its low point in the fall of 2008, Starbucks stock has quintupled. Who says founders can’t successfully go back home?

Leadership Gaffes go to House Speaker John Boehner for explaining Republicans hard line on the debt ceiling on talk radio, “A lot of them believe enough chaos would make opponents yield.” He and his fellow Republicans were certainly successful in causing chaos and contributing to the historic downgrade of the U.S. credit rating from AAA to AA+. But the deeper issue here is that Boehner sees everything as a win-lose contest between parties and isn’t focused on the country’s pressing problems: jobs, growth, and deficit reduction. With 25 million Americans unable to find full-time jobs, don’t we have enough chaos?

The CEO Playbook for this Crisis

CEOs of multinational corporations are in a stronger position than three years ago.  Balance sheets are strong, and productivity has increased.  This crisis presents an opportunity to go on the offensive for CEOs who are in a position of strength.  Here’s the playbook I’d run:

  1. Reassure everyone that your company is in great shape.  CEOs needs to maximize their visibility to ensure employees, supplier, customers, and community that their strategy is intact.  Write an email, go on TV, post a series of Tweets, and show up to let the troops know that the company’s strategy makes sense — particularly in this tumultuous economy.  
  2. Buy your stock back.  Your stock is likely cheaper than it has been all year.  Buying back your stock puts excess cash on the balance sheet to work, it shows the market how you really feel about your growth prospects, and it oftentimes provides a floor for your stock.  
  3. Expand in emerging markets.  There is growth abroad — and not just in China.  The current financial panic will likely accelerate the rise of new markets.  Every CEO should be doing a quarterly global review of marketshare and growth.  Now is the time to double down on bets that are playing out well in Asia, Latin America, and the Middle East.  
  4. Initiate cost savings and productivity improvements.  The best CEOs are always looking for efficiency increases alongside revenue growth.  Even if that means trimming up employment in the US, companies must be lean and agile to sail through roiling seas.  Growth isn’t coming to the USA anytime soon, so CEOs must have an appropriate cost structure.
  5. Do cash acquisitions.  This is an opportunity to put cash to work.  As competitors’ stock prices decline, look for opportunities to acquires businesses or assets in cash.  Inflation seems almost certain in mid-term.  Your cash may be the most valuable in this window that it’s ever been.

This is a great time to get out from behind the desk, get into the market — both telling your story and seeking new opportunities.  Great leaders and great companies find opportunity in times of crisis.  

Debt-Ceiling Agreement: No Cause for Celebration

This week’s agreement to increase the U.S. debt ceiling is no cause for celebration.

Regardless of what the spin doctors tell us, there are no winners here. The political landscape is covered with the blood of all the politicians who were losers in this “no win” battle. Among the losers are:

  • The President, who lost the leadership on U.S. deficits last December when he ignored the thoughtful recommendations of the bipartisan Bowles-Simpson Commission, leaving deficit reduction up to the politicians in Congress.
  • The Republican Party, which let itself be dominated by Tea Party extremists, ignoring the wishes of the majority of Americans, walking away from a sound agreement and demonstrating its willingness to let the country sink for political gain.
  • The Democratic Party, which has rigidified into the party of more spending and higher taxes while ignoring the country’s mounting deficits. It even undermined its President as he attempted to negotiate an agreement with House Speaker John Boehner.
  • The United States, which has lost credibility in the eyes of the world as a constructive democracy and sound fiscal system which other countries can look to for leadership of the global economy.

The last minute agreement to avoid an historic default did not solve anything. It merely postponed the disagreements and set up yet another committee to resolve these complex issues.

“Gridlock” has become the new order of U.S. politics. Politics as the art of compromise has been abandoned by the current group of politicians who are willing to jettison the country’s best interests in order to gain short-term political advantage.

This is the third time since the November elections that the country has been traumatized by political deadlock:

  • In a single weekend last December, shortly after the Bowles-Simpson Commission proposed a bi-partisan $4 trillion deficit reduction plan, the President and Congressional leadership went in the opposite direction.  They lowered taxes and increased government spending by a combined $4 trillion, intensifying  the problems that lay ahead. 
  • In April, unable to agree on a budget for this fiscal year, the politicians once again took the country to the brink of shutting down the government. The midnight agreement involved more compromises that kept the country running on an empty tank.
  • For the past month the country has been paralyzed by the artificially-created debt ceiling duel. While mounting deficits are a growing concern, the politicians on both sides of the aisle were far less concerned about reducing them than they were in gaining political advantage through an historic game of “chicken.”

The biggest loser in all this is the United States and its citizens. Why? Because we are losing confidence in our elected leaders to put the interests of the country ahead of their political ideology and to reach sound agreements that enable the country to grow and produce jobs while putting the country on a sound fiscal footing.

Meanwhile, this debt ceiling tug of war distracted our leaders from the real issue: the sagging U.S. economy and jobs crisis. The U.S. continues to slip into a “no growth, no jobs” malaise, as recent GDP growth figures prove and twenty-six million Americans (16.2% of the work force) are unable to find full-time jobs. Until people get back to work and the economy starts growing, we will just continue to fight over a shrinking pie, as deficits continue to mount. The only solution to this dilemma is to get the private sector growing once again in the U.S.

However, the CEOs of companies, both large and small, that I have talked to in recent weeks are completely fed up by the political struggles in Washington.  They are turned off and tuned out. They want to have no part of the debate, unless they feel that they have to weigh in to protect their best interests.

These CEOs are pragmatists, not political idealists. In the absence of domestic growth opportunities, they are looking overseas where great growth potential exists. Meanwhile, they are shedding U.S. jobs in favor of productivity gains, which are substantial. Privately, they don’t believe that the President or either party in Congress is committed to building the private sector and removing the myriad barriers that are preventing growth in the U.S.

How can this dilemma be resolved? By presidential leadership, in which President Obama puts himself and his re-election on the line by taking a series of actions to restore private sector jobs and growth while cutting the deficits. President Obama is an extremely smart, savvy leader who knows what to do. Now he must take the political risk to do it because the risks to the country of inaction are far greater.

Obama’s Choice on Jobs: Politics or Policy

President Obama held his second meeting with his new Jobs and Competitiveness Council earlier this month at an electronics plant in North Carolina. With job growth stagnant and the nation’s underemployment stuck at 16 percent — that’s 25 million Americans — the meeting represented an ideal opportunity for the president to develop a list of sound ideas he could put into action.

It didn’t happen. Instead, the meeting turned into a campaign “photo op” in a swing state Mr. Obama carried in 2008. The A-list of leaders who run General Electric, American Express, DuPont, Facebook, Xerox and Procter & Gamble was impressive. The ideas coming from the meeting were not. The group produced only a tepid list of quick-fix ideas rather than fundamental solutions to put jobs on a solid growth trajectory.

Instead of boarding Air Force One for Florida fund-raisers after the meeting, Mr. Obama should have boarded Amtrak for South Carolina. Boeing’s chief executive, W. James McNerney Jr., who heads up the president’s Exports Council, would have gladly given him a tour of Boeing’s new aircraft factory that will manufacture its the flagship 787 Dreamliner. Boeing has billions of dollars in aircraft orders for export and has spent $1 billion in constructing the plant and hired the first 1,000 workers. Thousands have applied for the remaining 5,000 jobs.

But there is a problem: Mr. Obama’s National Labor Relations Board has sued Boeing to stop production for locating in a right-to-work union state. The issues are being contended in a Seattle court, where Boeing has recently hired an additional 2,000 unionized employees. Years of appeals lie ahead.

While in South Carolina, the president could have also stopped by BMW’s and Mercedes’s highly successful automobile plants. The irony here is obvious: German companies are permitted to produce in a right-to-work state, but not American companies.

These two situations typify why the nation’s jobless rate is stuck at a perilously high level, one that will threaten Mr. Obama’s 2012 re-election bid. Neither photo opportunities nor empty pronouncements can shroud the ugliness of the present economic malaise or the magnitude of the crisis this country now faces.

Two years ago, I wrote that the president is like the Roman god Janus, with two heads facing in opposite directions, as Mr. Obama the politician pulls against Mr. Obama the leader. Since 2009, Mr. Obama the politician has prevailed, but time is running out for Mr. Obama the leader to implement policies that restore America’s economic competitiveness.

First-hand reports from chief executives who have met with the president indicate that he listens hard and seems to understand the deeper problems, but fails to take action. Or stated more clearly, he takes only politically expedient actions.

These leaders are pragmatists. With the American economy growing at less than 2 percent and emerging markets at 10 percent, they are focusing on overseas sales — and jobs are following. If you were a chief executive with responsibility for tens of thousands of employees, would you do anything different?

In addition to stagnant domestic growth, these chief executives cite several limitations that keep them from investing at home: political gridlock in Washington, the unpredictable regulatory environment, excessive corporate tax rates and uncertainty over health care and financial regulation.

To get the American economy growing again, a multifaceted plan is required to address these issues:

1. Resolve the budget gridlock with a solid deficit reduction plan rather than letting the debt ceiling imperil the nation’s solvency.

2. Reduce regulations that suffocate jobs. Why let politicians block the remarkable shale gas discoveries that would reduce pollution and help balance the nation’s energy supplies? Why is the Food and Drug Administration holding up so many life-saving drugs and devices? According to California Healthcare Institute, clearances for devices are down 43 percent and approval times have lengthened by 75 percent.

3. Lower basic rates to make corporate tax rates competitive with other nations, while eliminating corporate deductions to yield a more equitable tax system. To incentivize companies to bring back the $1 trillion trapped overseas, reduce repatriation tax rates to 15 percent from 35 percent, if the money is invested in physical assets in the United States.

4. Clarify lingering uncertainty created by the health care and financial services laws. The buck now rests, or stagnates, in the regulatory agencies. Meanwhile, small businesses cannot get loans and will not hire workers without knowing the cost of their health care. Furthermore, Medicare is on course toward bankruptcy. The McKinsey Quarterly reports that 30 percent of employers will plan to stop offering employer-sponsored insurance in the years after 2014. The Obama administration must reach agreement on practical rules to enable these vital sectors to move forward.

Instead of addressing these problems with policies that would solve them but might cause some political pain, President Obama continues to put politics over policy. The nation continues to suffer.

 


Originially posted in the New York Times Dealbook on June 27, 2011

 

President Obama’ Challenge to Business: “It’s Time to Invest in America”

Last August I wrote a column for the New York Times urging President Obama to make concrete moves to “invest in America.” On Monday the President went to the U.S. Chamber of Commerce – his nemesis the past two years – offering to partner with business to get the U.S. economy rolling, saying,  “Now is the time to invest in America.” He urged business leaders to work with his administration to “out-innovate, out-educate, and out-build our competitors.” The President said he would go “anywhere, anytime to help American business.”

Cynics might say that these are just words from an eloquent President. Actually, the business community hasn’t heard anything close to these words in the last two years; instead, it has been blamed for America’s ills of income disparities, corporate greed, and excessive profits.

In the past six weeks, the President has not only changed his tune, but is backing up his music with concrete actions. For example,

  • Negotiating the Recovery Act that continues the Bush tax cuts for two years;
  • Providing100% depreciation on capital investments in 2011;
  • Making R&D tax credits larger and permanent;
  • Breaking down regulatory barriers by eliminating onerous regulations;
  • Expanding exports and free trade via agreements with India, China and South Korea, and negotiating treaties with Columbia and Panama;
  • Upgrading transportation and IT infrastructures;
  • Encouraging American innovation by expanding investment in basic research;
  • Investing in training skilled workers by increasing math and science education;
  • Freezing domestic government spending;
  • Proposing to reduce corporate income taxes and eliminate loopholes.

In addition, the President has made dramatic changes in the people advising him to include more “business-friendly” faces, such as:

  • Businessman Bill Daley as chief of staff and Gene Sperling as chief economic advisor;
  • GE’s Jeff Immelt to head President’s Council on Jobs and Competitiveness
  • Steve Case, founder of AOL to head Start-Up America, designed to use public-private partnerships to stimulate new company formation;
  • Boeing’s Jim McNerney and Xerox’ Ursula Burns to co-chair export council.

These aren’t just words. They are concrete actions. Of course, we need to see results from them, but they are clearly a move in the right direction. Taken as a whole, they represent a very impressive package.

Some people are asking, “Is this just good politics, or has the President changed his beliefs about business?” I prefer to believe the President is growing in his appreciation for the private sector and its capacity to create jobs and build create successful businesses that pay taxes. He may even recognize that he was led astray by his former advisors who urged him to increase federal spending to stimulate growth and jobs. Learning that it didn’t work, the President has not only changed advisors but turned to the business community to invest to make American businesses stronger on a global scale and to create sustainable jobs.

Echoing the famous words of President John F. Kennedy’s inaugural address, the President  challenged business leaders, “Winning the future is not just about what the government can do to help you succeed. It’s about what you can do to help America succeed.”

I agree with this notion. President Obama has symbolically offered business an olive branch by going to the Chamber to make his appeal. It’s time for business to meet him (at least) halfway by investing in America to create innovative products and services, highly efficient manufacturing facilities, energy and efficiency savings, and sustainable jobs. It will be difficult for American companies to establish themselves as global leaders unless they have healthy markets here at home into which to sell.

Even if it took a “shellacking” in the mid-term elections to serve as a wake-up call, President Obama clearly understands that America needs to invest at home in order to compete with China, India and all the other rising nations to create world-class companies and to win the competitive race for jobs and investment.

Enlightened leaders will seize this opportunity as a “win-win” solution to facing global challenges. The time is now for American business to invest in America to make this country more competitive on a global scale. 

The Obama 2.0 Series

I have written on the importance of investing in America as a way to rebuild the economy and create jobs, not only replace the ones that we have lost.  It is time for Obama 2.0.  Below I’ve pulled together my series on the emergence of Obama 2.0 as the President. 

 


Time to Invest in America

 

In talking with dozens of chief executives, I hear pragmatic managers focused on building their businesses and earning fair returns for shareholders, yet extremely concerned about government policy. Here are the real reasons they are not investing in America:

  1. They expect no real domestic growth for the foreseeable future. In contrast, they foresee emerging markets sustaining double-digit growth. As a chief executive at a large consumer products company told me: “Half our revenues already come from Asia; within 10 years it will be 70 percent. Naturally, we are shifting more operations there.”
  2. To compete with local companies, global companies are investing overseas in factories and sales and marketing personnel. Foreign governments like China and Singapore make investments very attractive. One chief executive noted that he chose China for his $62 million factory because local subsidies reduced his investment to only $13 million.
  3. Companies are also moving infrastructure support from the United States to lower-cost areas in Asia. Unable to obtain visas for its Indian employees, a major computer software company moved most of its software operations to India, where well-educated employees enjoy higher standards of living at one-quarter of the cost.
  4. Without domestic growth, there is no need for additional employees. Instead, companies are achieving productivity gains by running lean. Mounting costs of doing business and increased benefit costs have created so much uncertainty that chief executives are reluctant to hire, especially small business owners.
  5. Chief executives feel they have access in Washington, but limited influence. Without any business people in the Obama administration, there are no advocates for sound business policies. A successful commercial banker described how open the president appeared to his concerns, yet the next day — without any consultation — the administration announced a new $50 billion bank tax.

Ask yourself: if you were faced with these conditions, would you be investing in America and hiring more people? Unless the climate in Washington changes dramatically, this no-growth, no-jobs environment will continue indefinitely.


 

It’s Time for Obama 2.0

In Obama 1.0, the president stabilized the economy with government spending that minimized job losses and personal bankruptcies. But the economy has stagnated as these policies have been ineffective in stimulating private sector growth, jobs and innovation. Relying on monetary policies and deficits to drive consumer spending is not working, because the economy is experiencing fundamental structural changes that are impervious to these macroeconomic approaches. That’s why there are 26 million people — 16.5 percent of the workforce — who would like to be working full time but are not.

Now is the time to introduce Obama 2.0 by initiating pro-growth economic policies that will invigorate job growth. This means investing in America to unlock the $2 trillion currently in corporate coffers and to stimulate private-sector hiring. Mr. Obama also needs to make fundamental changes in relationships with the business community, overcoming the distrust that has developed on both sides.

The president’s Labor Day proposals were encouraging. He offered a 100 percent deduction for capital investment until the end of 2011, an increase in research and development tax credits that would make them permanent, and an additional $50 billion in infrastructure spending. All three initiatives suggest Mr. Obama is finally moving away from trying to cure the economy’s ills with deficit-fueled government spending and beginning to enact policies that foster private-sector investment and job creation.

 


What He Should Say at the State of the Union

 

Health and Wellness The health reform act granted access to 25 million more Americans, but offers no concrete way to pay for their health care. The president should declare a “national health and wellness campaign” and charge Americans with taking responsibility for their health. Incentives need to be reversed to reward people for staying healthy and holding medical systems responsible for keeping people healthy.

Education The United States is rapidly deteriorating into a two-tier education system, which can only lead to greater unemployment and political rifts. Education Secretary Arne Duncan’s “race to the top” is on the right track, but we need to educate people for 21st century jobs.

Infrastructure The antiquated infrastructure in the United States will take huge investments to bring it up to world-class standards. Are we prepared to raise the bar to the levels of Europe, Japan and even China?

Jobs With 27 million Americans looking for full-time jobs, America cannot have a vibrant economy until people get back to work. This requires investments in retraining and vocational/technical education.

Manufacturing and Exports The manufacturing sector and exports are suddenly showing signs of life, led by the resurgence of the Big Three domestic automobile makers. President Obama’s new Jobs and Competitiveness Council, led by Jeffrey R. Immelt of General Electric, is an important first step. New tax incentives will spur investments in automated, high-tech manufacturing and increase exports.

Innovation Entrepreneurship and innovation are America’s competitive advantages. We need to stimulate investments in research and development, inventions, breakthrough ideas and venture capital.

New companies and small businesses New jobs come from start-ups and small businesses. We need to ease regulations to let companies build their businesses and expand hiring.

If the president begins such an “Invest in America” program and asks Americans to make sacrifices to bring this country back to global leadership, he can set off an American renewal.

What the President Should Say Tomorrow Night

Tomorrow night the President addresses the nation.  He’s made great strides to rebuild relationships with business leaders over the last four months, but now it is time to reconnect with the American people.  He must address the big issues facing our country:  

  • Health care reform 

  • Education 

  • Infrastructure 

  • Jobs 

  • Manufacturing and Exports 

  • Innovation 

  • New companies and small businesses 

I continue the conversation on what the President should say on the New York Times DealBook.

Politics Trumps Sound Fiscal Policy (Again)

Yesterday’s “compromise” between Republicans and the President proves an old adage: political giveaways always trump sound fiscal policy. Or stated another way, it’s easier to agree to increase the deficit $4 trillion over the next ten years than it is to reduce it that amount.

What a difference a weekend can make. Just last Friday the 18-member Deficit Reduction Commission, appointed by President Obama and led by former Republican Senator Alan Simpson and former Clinton chief of staff Erskine Bowles, voted 11-7 to pass a package of deficit reduction items totaling $4 trillion over the next decade. That would have helped the United States get out of the financial ditch we’re in right now and back on the road to fiscal responsibility.  Unfortunately, the seven “nay” votes, six of which came from politicians, keeps the majority from forcing a vote on this package in Congress. Now it goes to the White House for “review.”

One would have hoped this moderate set of fiscal policy initiatives, backed by a bipartisan majority, would have given the President the courage to recommend adoption by Congress. Quite the contrary. Republican leaders, who historically represented the party of balanced budgets and fiscal stability, instead negotiated with the President increase the ten-year deficit by $4 trillion by extending the Bush-era tax cuts. Granted, this is a “temporary” extension for two years, but who believes in the heat of the 2012 Presidential elections that sixty senators and a majority in the House will vote to kill further extensions. Don’t bet your Medicare on it!

For the mathematically inclined, that’s an increase of $8 trillion in the deficit in just three days. As they say, not bad for a weekend of work.

There is no doubt that today’s American voters favor unlimited tax cuts and unlimited government spending for their retirement and their health care. Instant gratification rules over long-term plans.

The consequence? This generation will pass on an impossible financial situation to the next two generations, which inevitably means their standard of living will decline. Just paying interest on our national debt will absorb the bulk of taxes Americans pay.

To their credit, Bowles and Simpson along with their fellow commissioners tackled the deficit head on.  Esteemed for their independence, they took on a task that nobody in Washington will touch: telling the truth to the American people.  They recommended raising the Social Security age, reducing the number of federal workers, dramatically cutting defense spending, eliminating many tax deductions, and reforming both personal and corporate income tax rates. All sound ideas, mostly containing some short-term pain for long-term gain.

Congress is broken.  An incumbency bias, an increasingly polarized media, and hyper-partisan political parties are destroying the last shreds of civility – and replacing it with an angry, ineffective politics that fans the flames of anger and hostility throughout the country. Thus, our political leaders are contributing to the tendency of Americans to think they are entitled to instant gratification and can blame someone else for their troubles.

Starting in January, the U.S. government will officially have split government. The President and the new Congress face problems of extraordinary magnitude.  Senate Budget Committee Chairman Kent Conrad affirms that the United States borrows 40 cents of every dollar it spends, and the federal budget deficit equaled 8.9% of Gross Domestic Product for the fiscal year ending September 30. 

There is much talk of the problem, but little serious dialogue about how Republicans and Democrats might work together to solve it. Instead, both sides sound like they prefer “gridlock” for the next two years. If President Obama is re-elected in 2012 and the Republicans take the majority in the Senate, gridlock could last for six years.

This country can ill afford gridlock and economic malaise while the deficits continue to grow. Meanwhile, other nations like China, India, Germany, Brazil, Singapore, and even the United Kingdom are moving ahead rapidly to become more competitive in world markets.

In the end, a nation’s strength comes more from its economic strength than its military might. On that score at least, we are steadily losing the battle for global competitiveness as our standard of living is forced to decline.

The real problem is elected leaders looking for short-term solutions – quick fixes, if you will – to long-term, intractable problems. Our problems of fiscal stability, job creation, economic strength, and education can only be solved with long-term solutions that require unified action. 

Politicians who place narrow self-interests ahead of the long-term best interests of the nation imperil our future. It is time for our elected leaders, Democrats and Republicans alike, to treat the American people like adults and tell us the truth about the near-term sacrifices we must make if the country is to regain its economic might and national pride. 

Let’s get on with solving long-term problems with long-term solutions. It is the only way to catapult the U.S. back into global leadership.

Reflections on WSJ CEO Council 2010

Monday’s Wall Street Journal covers the complete highlights of last week WSJ CEO Council in Washington. Here I would like to share some of my own reflections.

I participated as a subject expert on the “Restoring Confidence in Business” task force, one of five CEO task forces to develop the recommendations highlighted in today’s paper. The others included 1) health care, 2) global finance, 3) energy and the environment, and 4) creating sustainable jobs.

Throughout the two-day event we heard from significant members of the Obama administration, including Secretaries Gates (Defense), Geithner (Treasury), and Duncan (Education), White House economists Summers and Goolsbee, and Republican and Democratic House and Senate leaders.

The most impressive speaker and most sensible was New York Mayor Mike Bloomberg. He has as keen an understanding of what it will take to get the country and New York moving ahead as anyone I’ve heard. Too bad he’s not running for President in 2012!  As he pointed out, a fiscally-conservative, socially-liberal candidate does not have much chance of getting either party’s nomination. Nor could an independent ever hope to garner the majority of electoral votes required to avoid resolution by the House of Representatives.

As for other speakers, Bob Gates and Arne Duncan both made very strong impressions. Gates’ departure as Defense Secretary in 2012 will leave a void that will be hard to fill. He has guided DOD skillfully through two administrations and two wars, and was quite clear that he is planning to reduce unnecessary costs to bring budget levels down.

Sounding more like a free marketer than a typical education leader, Duncan is making significant progress in reforming the nation’s K-12 education systems. His “Race to the Top” is committed to focusing on rewarding the best teachers and getting rid of those who aren’t cutting it, and using federal funds to do so. He’s supporting school closures and their replacement with public charter schools.

At the other end of the spectrum were the politicians and economists. The only one of this group that made any sense to me was Republican Eric Cantor, the new House Majority Leader. More typical was Austan Goolsbee, chairman of the White House Council of Economic Advisors, who seemed to be clueless about what steps were required to get the economy growing and create private sector jobs. It was even more discouraging to listen to Rep. Kevin McCarthy, the new Republican Whip, who promised to block every spending bill, reduce the Fed’s charter, and generally serve as an obstructionist, without having anything positive to offer. After listening to Goolsbee and McCarthy, I made a mental note not to come back to Washington for anything remotely political during the next two years.

In sharp contrast, the nineteen proposals developed by the one hundred CEOs in attendance were logical, sensible, and hopeful. If only someone in Washington was listening! When it came time to vote on the final recommendations, I found it difficult not to support all nineteen of them as vastly superior to what we were hearing from the politicians.

The business community is blessed with a remarkable group of new corporate CEOs. As a group, they are pragmatic rather than ideological, slightly to the right of center, and willing to put the long-term interests of the country ahead of their short-term self interests.  They have learned the lessons from their predecessors’ failures, especially in chasing short-term stock price gains.

They seem committed to using their leadership roles and their company missions to create exceptional products and services for their customers, sustainable, well-paying jobs for their employees, and value for their shareholders. They keenly understand the important role that their companies play in building a growing economy and healthy communities, while preserving the societal ecosystems that have enabled capitalism to flourish for the past century. They too are extremely frustrated that no one in the White House or Congress seems to understand what it will take to get U.S. private-sector economy back to creating jobs and growing.

Bill’s Bottom Line: In spite of polls showing the American public lacks trust in its leaders, this new group of CEOs are worthy of trust and support for their ideas.


Additional Wall Street Journal Articles and Video Clips from the Meeting