The Entrepreneurial View #469
Some Worthy Ideas in the State of the Union
by Raymond J. Keating
News items that attracted big interest this week on the political front were Senator John McCain's win in the Florida Republican primary, former New York City Mayor Rudy Giuliani dropping his bid for the GOP nomination, and former Senator John Edwards exiting the race to be the Democrats' nominee.
That's understandable. The November 2008 election is just around the corner. People are anxious to see who the two main party candidates will be, and what are their respective policy agendas.
But it also is worth noting that the current President of the United States, George W. Bush, had some things to say in his last State of the Union address on January 28.
There naturally was a good deal of talk about Iraq and the war on terrorists. The economy was, of course, a major focus and there are four areas where the President was right on the mark with respect to issues that concern entrepreneurs.
First, on the tax front, he said the following:
"We have other work to do on taxes. Unless Congress acts, most of the tax relief we've delivered over the past seven years will be taken away. Some in Washington argue that letting tax relief expire is not a tax increase. Try explaining that to 116 million American taxpayers who would see their taxes rise by an average of $1,800. Others have said they would personally be happy to pay higher taxes. I welcome their enthusiasm. I'm pleased to report that the IRS accepts both checks and money orders. (Laughter and applause.) Most Americans think their taxes are high enough. With all the other pressures on their finances, American families should not have to worry about their federal government taking a bigger bite out of their paychecks. There's only one way to eliminate this uncertainty: Make the tax relief permanent. (Applause.) And members of Congress should know: If any bill raises taxes reaches my desk, I will veto it."
In fact, the U.S. economy does face a looming, massive tax increase at the end of 2010. Congress needs to make the 2001/2003 tax relief measures permanent, and the sooner the better. Getting it done now would provide a much-needed boost in certainty and confidence for the economy.
Second, on health care, the President's emphasis was in the right direction:
"To build a future of quality health care, we must trust patients and doctors to make medical decisions and empower them with better information and better options. We share a common goal: making health care more affordable and accessible for all Americans. (Applause.) The best way to achieve that goal is by expanding consumer choice, not government control. (Applause.) So I have proposed ending the bias in the tax code against those who do not get their health insurance through their employer. This one reform would put private coverage within reach for millions, and I call on the Congress to pass it this year. (Applause.) The Congress must also expand health savings accounts, create Association Health Plans for small businesses, promote health information technology, and confront the epidemic of junk medical lawsuits. (Applause.) With all these steps, we will help ensure that decisions about your medical care are made in the privacy of your doctor's office -- not in the halls of Congress."
Government interference in the health care marketplace - through taxes, regulations, mandates and increased spending - only serves to drive costs higher for businesses and consumers. Again, the President's focus on expanding consumer choice is absolutely correct.
Regarding free trade, the President declared:
"On trade, we must trust American workers to compete with anyone in the world and empower them by opening up new markets overseas. Today, our economic growth increasingly depends on our ability to sell American goods and crops and services all over the world. So we're working to break down barriers to trade and investment wherever we can. We're working for a successful Doha Round of trade talks, and we must complete a good agreement this year. At the same time, we're pursuing opportunities to open up new markets by passing free trade agreements. I thank the Congress for approving a good agreement with Peru. And now I ask you to approve agreements with Colombia and Panama and South Korea. (Applause.) Many products from these nations now enter America duty-free, yet many of our products face steep tariffs in their markets. These agreements will level the playing field. They will give us better access to nearly 100 million customers. They will support good jobs for the finest workers in the world: those whose products say ‘Made in the USA.'"
In fact, international trade is increasingly important to the U.S. economy. For example, while total trade (exports plus imports) accounted for 9.5 percent of GDP in 1960, it increased to 29 percent in 2007.
And finally, the President addressed immigration:
"The other pressing challenge is immigration. America needs to secure our borders... Yet we also need to acknowledge that we will never fully secure our border until we create a lawful way for foreign workers to come here and support our economy. (Applause.) This will take pressure off the border and allow law enforcement to concentrate on those who mean us harm. We must also find a sensible and humane way to deal with people here illegally. Illegal immigration is complicated, but it can be resolved. And it must be resolved in a way that upholds both our laws and our highest ideals."
When it comes to immigration, the President was correct to emphasize both securing our borders, and opening legal avenues for immigrants who contribute so much to our economy. Immigration reform must be comprehensive - that is, securing our borders to keep out the bad guys, expanding legal avenues for those seeking to contribute to our economy and society, and offering a path to citizenship to undocumented individuals who have stayed out of trouble and worked hard, while avoiding the costly temptation to make businesses the immigration police.
In the end, the President got it largely right on taxes, health care, trade and immigration. And all of these issues matter to small businesses, entrepreneurs, investors and our economy. If Congress were serious about getting the economy back on track, following President Bush's lead on these four issues would make a real difference. At the very least, let's hope that the candidates hoping to become the next President of the United States heed the current U.S. President on these important matters.
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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
