Obama’s New Business-Government Partnership

Travis Sullivan, director of policy and strategic planning for the U.S. Department of Commerce, outlined the government’s playbook for helping American businesses to grow, innovate and compete at Chief Executive Magazine’s CEO2Gov Summit. Here are excerpts from his remarks.

September 15 2010 by ChiefExecutive.net


Just a year ago, I was seeing the world through the private sector prism. I was working in business strategy and marketing at the Boeing Company in Seattle. While not a CEO by any means, the job did give me a glimpse into the type of challenges that leaders like all of you confront every day. And it has strongly influenced my view of economic policymaking, including the important question of the appropriate government role in the economy.

At the Commerce Department, and throughout the Administration, we have no illusions that government can or should be the engine of job creation in America. That’s what all of you do. America has always looked to the private sector to develop the innovations and breakthrough technologies that we depend on for economic growth. And that’s not going to change. Not only does this Administration, including the president, believe deeply in the importance of the private sector in driving this economy, but policies premised on any other belief will simply not be successful in putting Americans back to work.

So today I want to talk a little bit about the policies being pursued by the Obama administration and how they will empower companies like yours to innovate, to create and to ultimately hire new people. As we emerge from this recession, we need to chart a new path. The playbook for growth over the last decade is simply not available. That was a playbook that relied on bubbles, debt and financial speculation. And it was a playbook where middle-class families saw their wages flatline for a decade while the cost of tuition and healthcare went through the roof.

Instead, we must build a new, stronger foundation for growth and prosperity. And it must be built with investments in skills and education that we need to compete, with investments in 21st century infrastructure and with investments in research and technology, like clean energy, that can lead to new jobs, new exports and new industries. That is exactly what the President has done and it is what he will continue to do. And it will be good for American business.

I recognize many in the business community do not share this sentiment. So let’s address what’s the proverbial 800-pound gorilla that may be in this room.

There’s a profound skepticism in the business community about some of the policies the Administration is pursuing. In frank terms, there is a view that this Administration is not pro-business. And I understand where that concern comes from. Many of you are running businesses in an absolutely unforgiving environment. You’re trying to meet payroll, trying to find credit to buy new equipment. And all the while having to compete every day with companies abroad, many of whom pay workers one-tenth of what you do and also receive government subsidies and protected market incentives. About the last thing you want to hear about is the government coming in to make you jump through even more hoops. But I cannot say this emphatically enough—this is not what this Administration is about.

This Administration not only wants, but also depends on our private sector succeeding both at home and abroad. Making life tougher for American business isn’t going to put people back to work. And if a policy isn’t going to put more people back to work now or in the future then it’s not an avenue we want to pursue.

You’ve got a business to run and you’d like to run it without having to deal with unnecessary red tape. We get it. But just as it is foolish to look for government for all of our answers, it is equally foolish to imagine that government has no productive role to play. Because the reality is that any government, regardless of its ideological disposition, must shape the framework in which businesses operate.

Think for a moment about the federal government building the interstate highway system, which for over half a century sped the movement of goods across this country and delivered immeasurable economic benefits. You’d be hard-pressed to find anyone today who doesn’t think that is a good investment. But back in the 1930s, when President Franklin Roosevelt first proposed building it, one of his prominent opponents said, “It would be a major step toward state socialism under which the federal government would take over private industry and the U.S. would become a totalitarian nation.” Sound familiar?

I mention this not to score political points, but to illustrate that to deny government’s important role, a complementary role, in growing this economy is to deny American history. To cite another example, look at basic research. We have seen the Internet come of age in Silicon Valley. But it first came to life in the labs of the Defense Department. The folks at Tempur-pedic have given us mattresses that make us feel like we’re sleeping on a cloud. That technology was created first by NASA.

President Obama understands that funding this type of basic government and university research that might be too risky or expensive in the private sector is vital to our economic future. And that is why he has called for doubling budgets of research agencies such as the National Science Foundation. And it’s why his 2011 budget, while freezing domestic discretionary spending overall, increases funding for civilian R&D by $3.7 billion, or nearly 6 percent.

The President’s commitment to R&D illustrates his broader approach to setting this country up for long-term economic growth. This Administration is trying to rebuild the physical and regulatory infrastructure that businesses need to thrive. And you can see that thread running through every single one of the President’s domestic priorities.

And yet, we’ve arrived at this point in our political discourse where government action of any kind, even to address real and pressing problems, is derided as imminent socialism or something worse. And this might be a convenient line of attack for political campaigns, but for too long it has prevented this nation from addressing deep structural issues that make our businesses and economies less competitive. But despite the political games and backlash, President Obama is committed to fixing these problems.

Consider the recently passed healthcare law. Along with extending access to health insurance to the millions who don’t have it and providing more security to those that do, this law will help reduce the backbreaking healthcare costs for some businesses large and small, to draw up coverage, reduce wages, sacrifice profitability or undermine their competitiveness in global markets. The cost-savings in this law are real. They will grow over time and they will make U.S. businesses more competitive.

You don’t have to take my word for it. The Congressional Budget Office, which is the non-partisan neutral accountant for the federal government, has estimated that the various reforms in this law, whether it be moving to a system where we pay doctors for their value and not the volume of their care or the tough new performance measures for hospitals, will reduce overall healthcare premiums by more than $200 billion over the next three decades.

And the system-wide reforms measures, like the $40 billion in tax credits that will be available to almost four million small businesses over the next decade, will help lower the cost of employee health coverage. What you have all together is a law that is unquestionably pro-business and pro-jobs.

The same goes for our efforts in the financial sector. If we get a solid financial reform bill, similar to what was already passed in the House and Senate, we can finally end the pernicious concept of too big to fail, where massive financial firms take irresponsible bets predicated on a distortionary assumption that U.S. taxpayers will bail them out if they ever get into trouble. In the last few years, I think part of our financial sector strayed from what must be their most crucial role in this economy.

Wall Street’s real value is an ability to take money from savers and allocate it to the most rational places that businesses and innovators can develop new technologies and create new jobs. When Wall Street ceases to effectively play this role, when their primary business becomes speculating on their own book and, in the process, risking the health of the broader economy, then it is time to consider new ways to ensure this role is fulfilled.

We need to ensure that small and medium-sized business owners across the country do not have to worry that their access to credit will be jeopardized by casino gambling on Wall Street. Gambling can still happen, and there’s nothing in this law that would stop it. But it needs to happen transparently and without taxpayers holding the bag.

Now there’s energy. As the President recently said, for decades we’ve been talking about how our dependence on foreign oil threatens the economy, yet our will to act rises and falls on the price of a barrel of oil. The crisis in the Gulf is yet one more reminder that there are real and severe costs to our oil addiction.

As a country, we need to face up to a simple mathematical reality. We consume more than 20 percent of the world’s oil but have less than 2 percent of the world’s oil reserves. And unless we make fundamental shift in our energy policy, we will continue to send billions of dollars every month to countries for fuel. And our economy will continue to be jeopardized by the volatility in oil and gas prices.

The President has already made unprecedented investments in clean energy and efficiency. There is $80 billion in the Recovery Act alone, which is designed to double our renewable energy capacity in three years. And for the first time in three decades, we’ve greenlighted the construction of new nuclear power projects. And the President continues to support a careful plan of offshore oil production as part of our overall energy strategy. But the only way the transition to clean energy will succeed is if the private sector is fully invested in this future, if capital comes off the sidelines and the ingenuity of our entrepreneurs is unleashed. And the only way to do that is by finally putting a price on carbon. That is why the President will be aggressively pushing, in the months ahead, for comprehensive energy legislation. It will send a surefire market signal to every inventor and investor in America, that clean energy can be a profitable business investment.

So healthcare, energy, financial reform. The progress that we make on these issues will have a huge impact on the ability of American businesses to grow, innovate and compete. And being from the Commerce Department, that is my No. 1 concern and it is the No. 1 concern of Secretary Locke. The Commerce Department works on issues as diverse as patents and trademarks, international trade, the census and the protection of our oceans and atmospheres. And it can be pretty difficult to put all of those things into one neat box.

But for all of our different duties, the primary purpose of the Department of Commerce can accurately be described as the following: we exist to make every American business more innovative at home and more competitive abroad so they can create jobs and grow this economy. We are the one federal agency singularly equipped to help businesses at every point in their lifecycle, from the birth of the idea to starting a business with that idea to finding markets once that idea has been transformed into a product or a service.

We are helping to build the critical infrastructure that companies need to compete in the global economy. For example, Commerce is leading the Administration’s $7.2 billion effort to expand high-speed, broadband Internet across the country. Commerce’s statistical research labs provide the basic data and technical standards to enable companies to develop new products and identify new markets.

One of our research agencies is creating the standards that private companies will need to develop a national smart electric grid and health IT software that will enable us to share medical records. Commerce provides direct services to businesses to protect their intellectual property, to make their production and manufacturing processes more efficient and to help them export more around the world. And the export part of our portfolio has become even more important of late with the announcement of President Obama’s National Export Initiative; which aims to double American exports over the next five years and support more than two million jobs here at home.

The NEI represents the first time the U.S. will have a government-wide export promotion strategy with focused attention from the President and his cabinet. The NEI will be primarily focused on improving government trade promotion in all of its forms, expanding export credit to businesses, especially small and medium-sized firms and increasing the government’s focus on knocking down barriers that prevent U. S. companies from getting free and open access to foreign markets. And we will be putting a special focus on reaching out to small and medium-sized businesses. Because they are the ones that often need the most help by identifying prospects in foreign countries and navigating local rules and regulations.

In this unbelievably competitive economy, businesses need every bit of help they can get. I know from having worked at the Commerce Department over the last year that we can be a real value add. I hope that to the extent that we can help your businesses, you will use whatever we have to offer. It will be a challenge getting this economy roaring again.

The challenges will be made even tougher by the fact that other countries are racing for the lead in the same types of high-growth industries like clean energy and biotechnology that we’re focusing on. The bottom line is over the last decade America has allowed its once unassailable position as the most competitive economy in the world to be threatened. We may still be the world leader in key metrics of economic success like levels of entrepreneurship, R&D investments and IT infrastructure. But a widely cited report last year concluded that no industrial economy has done less than the United States to improve its competitive position over the last decade.

So it’s time. It’s time for us to reinvest and refocus on the fundamentals that have always made this country great. Research, innovation and a culture of entrepreneurship that values and rewards risk-taking and discovery. That’s what this Administration is focused upon. It is pro-business and I’m confident it’s a direction we are taking that will empower businesses across America.

Q&A Segment

As a small business owner, coming from the trenches, it’s great to hear about healthcare, regulatory reform. But my biggest concern payroll and competing with my competitors. What specifically is the Administration doing to address those challenges?

Travis Sullivan: The big answer is cash flow, right? So what is this Administration doing to help drive cash flow for your business? There are two forms of that. One is, obviously, revenue, which is part and parcel of the economic recovery. That is the primary concern of this Administration is stimulating this economy back into actions. We’re in a position where the world’s biggest market, the U. S. market, is back to a place where it’s roaring again and provides customers a disposable income that will support the sort of revenue that you need.

A second approach is access to capital. This Administration is sympathetic to the challenges that particularly small and medium-sized enterprises are finding to getting access to capital. The financial crisis had a huge hit on the entire economy, globally as well as domestically. But it had a disproportionately large and longer impact on small and medium-sized enterprises and their ability to get capital.

So we’ve pushed a number of things through the Small Business Administration, including SBA loans, the loan guarantee programs. We’ve tried to find other ways to allow businesses to guarantee their loans in less conventional ways and to provide some access to capital that your businesses so badly need to make the investments and also to meet payroll.

The Federal Reserve officer made the most succinct statement I’ve heard, which was that this Administration does not have the economy as a priority. If you look at the energy that Congress has spent at the direction of the President, a very small part of that has been on things that will improve the economy and business, it’s been on a number of other social initiatives. And the second is the general sense that there is not a full appreciation of how much uncertainty about tax policy, healthcare, cap and trade and other initiatives, actually slows down the economy. Any comment?

Travis Sullivan: I’ve heard a lot of critiques about this Administration over the last year. Frankly, I’ve not heard the critique that we’re not focused on the economy. People may disagree on whether we’re doing the right things. But in terms of the focus on the economy, I think the President made clear in a variety of ways, whether it be in speeches or activity or proposals or legislative action or a host of things, the economy is front and center of this Administration’s focus.

We’ve only been here for a year, and you see financial regulatory [initiatives], the TARP program and others to really establish the foundation for a financial recovery. There has been a stimulus program, with massive stimulus investment. Some may perceive health care as a social program; but from the Administration’s standpoint, this is an economic program. If we don’t get a handle on our healthcare system, it will continue to be a drag on our economy.

If you look at everything we’ve done with respect to investments in clean energy and other growth industries for this country they all have an economic focus. They are about how we can position U. S. companies to be competitive. Look at the National Export Initiative. These all focus on how we can position U. S. companies to be more competitive overseas because we know the source of growth is going to have to come from places other than consumption and we see exports as being a huge place for that.

So we are focused 24 hours a day on economic policy and what we can do to help enable U. S. businesses to succeed. There could be some critiques on whether we’re looking at the right things or not. But the argument that we’re not focused on economics and economic policy is simply not one I can accept.

There is a view that there is [a dearth of people] who actually have real world business experience in political office today, and that the Administration views business as basically an ATM—the answer to everything is to impose a tax. What’s your view?

Travis Sullivan: My boss was on the board of a few companies back in Seattle. He’s been a lawyer practicing and supporting business. From our standpoint, one of the major challenges that we’re facing as a country from an economic policy standpoint is a massive constraining and draining deficit and the debt that accompanies that. More than 50 percent of that deficit is the outcome of policies taken in the last Administration. Whether they be in unpaid-for prescription drugs, unpaid-for overseas military conflicts, unpaid-for tax cuts, all those led to unsustainable deficits. The remaining portion of that is a combination of the impacts of the recession as well as a stimulus package.

So 50 percent of the deficit, which I think is one of the major problems facing this economy going forward, was created by an Administration that, by the stats over here, were 81 percent folks in the private sector. So I don’t buy the argument necessarily that good economic policy is naturally going to flow based on the statistics of people with particular experience within the Administration. I would suggest that we look more at the policies themselves and not necessarily on the resumes of the people who create them.

With that in mind, I think we have an Administration fundamentally focused on how we can help American businesses succeed. Nobody likes taxes. We have an unsustainable deficit and somehow you have to close that. Spending is going to be a big part of that, entitlement reform is going to be a big part of that. And there is a serious question on our overall tax policy. How we can we ensure the competitiveness of U. S. business? How we can ensure the standards of living of everyday Americans? But also how we can ensure a balanced budget?

The President put together a bipartisan, blue ribbon panel to focus on the specific question of how can we look at our fiscal situation, including our tax policies, and propose ways that do address those issues, competitiveness and standards of living for Americans. So I assure you that the Administration does not look at business as an ATM machine, per se. We’re looking at ways that we can address proactive policies that ensure the competitiveness of business.

My company finds it extraordinarily difficult to do export business based on the current rules that revolve around the ITAR, the International Trade and Arms Regulation. Many of the technologies we’re interested in exporting are readily available throughout the international community, yet I’m burdened with all of the requirements to seek export permission. By the time I get that permission, my potential international customers have moved on because they can get the information a lot more readily from my competitors. What’s going to be done to address that?

Travis Sullivan: I’m personally very sympathetic to that view. I came from a company that was involved in some of those similar exports. So from a commercial standpoint, export controls can be a significant obstacle for competition in overseas markets, particularly from competitors who aren’t constrained by those technologies and have them in the open market.

I can tell you this Administration is also very sympathetic to that concern. The President directed his cabinet back in August to reevaluate our export control regime under the premise that currently our system, which is based on a Cold War approach to controlling the use of technologies, simply is not good at doing a good enough job.

In its sub-optimization of adequately ensuring export control it is really putting U. S. companies at unnecessary disadvantage—a disadvantage that does not support our national security. So we’ve had about six months worth of a hardcore review of every element of our export control system. And Secretary Gates has laid out the principles of export reform that this Administration will be following. Those principles are based on simplifying the organizational system within the Administration. Instead of dealing with multiple bureaucracies, sometimes at loggerheads, we will have a single enforcement agency. We’ll have a single licensing agency. Instead of having multiple lists of controlled technology, we’ll be focusing on a single list and we’ll also have an IT system that’s brought together. Those are the four elements guiding an export control reform package.

Much of this can be accomplished from a regulatory standpoint; some of it has to happen through statutes. So we’re working with partners on Capitol Hill and seeing what can be done.

But the bottom line is that we want to look to a system that is more effective at defending our national security by really focusing on those technologies that are not available on the foreign markets, that are most threatening to our national security and that reflect the end-users that are most threatening to our national security—and in doing so, position U. S. companies in the other technologies to be much more competitive overseas. So we’re looking at it, we’ll see action in the very near future on that front.