By Charles Schwab, Wall Street Journal, September 28
In his speech before a joint session of Congress on Sept. 8, President Obama said, "Ultimately, our recovery will be driven not by Washington, but by our businesses and our workers."
He is right. We can spark an economic recovery by unleashing the job-creating power of business, especially small entrepreneurial businesses, which fuel economic and job growth quickly and efficiently. Indeed, it is the only way to pull ourselves out of this economic funk.
But doing so will require a consistent voice about confidence in businesses-small, large and in between. We cannot spend our way out of this.
We cannot tax our way out of this. We cannot artificially stimulate our way out of this. We cannot regulate our way out of this. Shaming the successful or redistributing income won't get us out of this. We cannot fund our government coffers by following the "Buffett Rule," i.e., raising taxes on Americans earning more than $1 million a year.
What we can do-and absolutely must-is knock down all hurdles that create disincentives for investment in business.
Private enterprise works. I founded Charles Schwab in 1974, when America was confronting a crisis of confidence similar to today's. We had rapidly rising inflation and unemployment, economic growth grinding into negative territory, and paralyzed markets. The future looked pretty bleak.
Sound familiar?
Yet I had faith that our economy would recover. My vision was simple:
Investors deserve something better than the status quo. I launched the company with four employees, a personal loan on my home, and an audacious dream. I didn't know exactly how we were going to do it, nor could I foresee that over the decades we would end up building a business that serves over 10 million accounts. But we went for it.
What's the potential power of the entrepreneur's simple leap of faith? The success of a single business has a significant payoff for the economy.
Looking back over the 25 years since our company went public, Schwab has collectively generated $68 billion in revenue and $11 billion in earnings.
We've paid $28 billion in compensation and benefits, created more than
50,000 jobs, and paid more than $6 billion in aggregate taxes. In addition to the current value of our company, we've returned billions of dollars in the form of dividends and stock buybacks to shareholders, including unions, pension funds and mom-and-pop investors.
The wealth created for our shareholders-a great many of them average Schwab employees-has been used to reinvest in existing and new businesses and has funded a myriad of philanthropic activities. We've also spent billions buying services and products from other companies in a diverse set of industries, from technology to communications to real estate to professional services, thereby helping our suppliers create businesses and jobs.
That's the story of one company. There are thousands more like it, and a consistent supportive voice from Washington could enable thousands more ahead.
The simple fact is that every business in America was started by an entrepreneur, whether it is Ford Motor Co., Google or your local dry cleaner. Every single job that entrepreneur creates requires an investment.
And at its core, investing requires confidence that despite the risks, despite the hard work that will certainly ensue, the basic rules of the game are clear and stable. Today's uncertainty on these issues-stemming from a barrage of new complex regulations and legislation-is a roadblock to investment. We have to clear that uncertainty away.
As we did after 1974, our country can and will thrive again. But the leaders of both parties, Republicans and Democrats alike, must lend their voices to encourage and support private enterprise, both for what it can do to turn our economy around and for the spirit of opportunity it represents.
They need to review every piece of existing legislation and regulation with a clear eye to what impact it will have on business and growth. If something is a job killer, put a moratorium on it. Stop adding to the litany of new laws and regulations until we've had time to digest those in place and regain some certainty about the future. Proposed laws and regulations should be put to a simple test: What will this do to encourage businesses and entrepreneurs to invest? What will it do for jobs?
Mr. Schwab is founder and chairman of the Charles Schwab Corporation.
Read the full article here: http://on.wsj.com/rd0pVR
An Overlooked Way to Create Jobs
By C. Fred Bergsten, The New York Times, September 28, 2011-
Tags: International Trade,
By virtually ignoring trade, President Obama and Congressional Republicans are missing a major opportunity to create jobs. The United States runs an annual trade deficit of about $600 billion, or 4 percent of our entire economy. Eliminating that imbalance would create three million to four million jobs, according to Commerce Department estimates, at no cost to the budget.
It is clear that our economy can no longer rely on consumer borrowing, housing bubbles, government deficits and super-low interest rates. The United States must start selling much more to other countries, especially China and other emerging markets that are growing at 6 percent or more per year.
Mr. Obama has set a goal of doubling the nation’s exports over five years. But his administration has done little to achieve that goal, which is inadequate to begin with. For one thing, the focus should not be the level of exports but the overall deficit — the difference between what we import from abroad and what we sell overseas.
This will of course require us to get our house in order: balancing the budget over time; investing in education, infrastructure and scientific research; and making taxation and regulation more efficient. But there are three steps we can take that would pay off more quickly.
First, the United States must, in effect, weaken the dollar by 10 to 20 percent. This step alone would produce one million to three million jobs. It’s been done before: In 1971, President Richard M. Nixon ended the dollar’s convertibility in gold, and in 1985, Treasury Secretary James A. Baker III reached an agreement with foreign countries to devalue the dollar relative to the yen and the Deutsche mark.
The bulk of our current misalignment is vis-à-vis the Chinese currency, the renminbi, and a small group of other Asian currencies. Partly in response to pressure from the United States and other countries, China has let its currency rise modestly over the past year, but it continues to intervene in foreign exchange markets, purchasing one billion to two billion United States dollars every day to prevent the value of the renminbi from rising more quickly.
The artificially low value of the renminbi — it is 20 to 30 percent less than what it should be — amounts to a subsidy on Chinese exports and a tariff on imports from the United States and other countries. The United States should take China to the World Trade Organization in Geneva for engaging in illegal competitive currency devaluation, and retaliate if China does not cease this protectionist policy. Many members of Congress have urged such action, but Mr. Obama, like President George W. Bush before him, has been too timid to take this step.
Along with pressuring the Chinese, Congress and Mr. Obama should reduce the budget deficit, the Federal Reserve should continue to pursue an expansionary monetary policy and politicians should drop the “strong dollar” rhetoric of the past. An overvalued dollar only exacerbates the trade imbalance.
Second, the United States must negotiate a reduction in foreign regulations, monopoly practices and other barriers to the export of American services. Work done by American architects, engineers, lawyers and accountants for foreign customers is an export, just like Boeing planes and Caterpillar tractors. We run a $750 billion trade deficit in goods but a $150 billion trade surplus in services.
Services make up 80 percent of our economy, and we have a huge opportunity to serve emerging markets like Brazil, China and India. We could expand services exports by at least $200 billion a year by completing a free-trade agreement with South Korea; pursuing a trade agreement known as the Trans-Pacific Partnership; and reviving the Doha round of global trade talks, with a focus on services. The administration has not pursued these steps with enough vigor.
Third, we must get serious about defending the intellectual property rights of our companies against theft by foreign companies and governments. A recent study by the International Trade Commission suggested that Chinese companies alone, with support or at least acquiescence from their government, are stealing $50 billion to $100 billion in United States products each year. The global total is probably at least twice as large.
The theft of intellectual property cuts across such highly competitive products as Microsoft Windows, Apple iPads, groundbreaking pharmaceuticals and award-winning films. Negotiations have failed to achieve significant progress. We must take many more intellectual property cases to the W.T.O. and credibly threaten unilateral retaliation if the foreign piracy continues.
These steps are no doubt aggressive. They would require taking tough initiatives with some of our main trading partners, especially China, and giving trade a more prominent, even central, role in our overall foreign policy. To be sure, some American corporations will fret that these actions would needlessly antagonize the Chinese and threaten a trade war. Some economists worry that a weaker dollar would invite inflation and endanger the dollar’s status as the dominant global currency. I believe these fears are overblown. The real threat to the world trading system is, in fact, the protectionist policies, including undervalued currencies, of other countries and the vast trade imbalances that result.
Not every country can expand its economy through exports, because one nation’s smaller deficit is another’s smaller surplus. But the United States has a unique claim now to pursue such a strategy, because it has run large deficits for most of the last three decades, become the largest debtor country and accommodated other countries’ desire for export-led prosperity. If we want to avoid bankruptcy and raise growth, we have got to attack the trade deficit.
C. Fred Bergsten, an assistant Treasury secretary from 1977 to 1981, is director of the Peterson Institute for International Economics.