American economy ‘improving’ but needs investment in infrastructure, U.S. Chamber chief says

The U.S. economy is improving but the recovery is “fragile and uneven” and needs further investment in its transportation infrastructure, America’s top business lobbyist says.

Thomas J. Donohue, in his annual “State of American Business Address” to business leaders at the U.S. Chamber of Commerce building across from the White House, is predicting 3.2 percent growth in Gross Domestic Product this year. That figure, higher than what most mainstream economists are predicting, is based on Donohue’s cautious optimism about overall economic conditions, including jobs and growth. He is predicting the economy could create as many as 2.5 million jobs this year.

While housing and construction remain “weak,” Donohue said uncertainty among lenders, investors and regulators “abounds” and threatens the economic recovery. Still, he is cautiously optimistic.

“We begin 2011 in a lot better shape than we found ourselves last year,” Donohue said. “The state of American business is improving.”

But he called the recovery “fragile and uneven,” echoing what many transportation CEOs have been saying for the last year or so. That has created uncertainty, causing U.S. companies to be slow in hiring, causing a stubbornly high official unemployment rate of 9.3 percent, which threatens consuming spending. Donohue said there are as many as 25 million Americans who are unemployed, underemployed “or have just given up looking” for full-time work.

“There are many unanswered questions that must be addressed before companies will start aggressively hiring,” Donohue said, adding the U.S. Chamber’s top priority this year is jobs.

One way to add jobs would be to increase spending on infrastructure, which the Chamber favors. The big question for this year is how to pay for it. Congress is balking at increasing the federal tax on fuel (18.4 cents on gasoline, 23.4 cents on diesel, unchanged since 1993). Donohue strongly hinted the Chamber is willing to support an increased fuel tax, echoing what many transportation CEOs also are saying.

“Everybody is saying all the right things on infrastructure,” Donohue said. “Everybody wants it—nobody wants to pay for it. We are prepared to support a means to pay for it—and will continue to do so.”

In a press conference, U.S. Chamber Executive Vice President Bruce Josten, Donohue’s right-hand man, quipped: “Nobody is offering up a way to pay for it. Maybe God is going to pay for infrastructure—because nobody else wants to pay for it.”

Donohue has been a frequent (and vociferous) critic of the Obama administration, but there are signs of a thaw in the pair’s relations. For starts, President Barack Obama is scheduled to give a major speech at the Chamber on Feb. 7. Donohue openly cheered the appointment of former Commerce Secretary William Daley (“A real pro,” Donohue called him) as Obama’s new chief of staff. Daley is widely considered pro-business, and as gatekeeper to the White House is viewed as a positive for the business community.

Live Webcast | Thursday, January 27, 2011 | 2:00 p.m. EST

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Donohue acknowledged a change in the Obama administration’s view of business, now that the White House is faced with the reality of dealing with a divided government now that Republicans have taken over the House by a wide majority.

“No one should expect the Chamber to march in lock step with anyone’s agenda but our own,” Donohue said, forcefully. “And our agenda is simple. We will continue to win important policy victories for the business community.”

With a multi-year highway reauthorization bill as large as $500 billion one of the major priorities in Congress this year, Donohue disclosed the Chamber was about to embark on a new project to outline what the U.S. must do to create and secure a 21st century global supply chain and logistics system.

Toward that end, Donohue said the Chamber was pressing four immediate priorities to boost America’s competitiveness in the global economy:
1-Rebuilding infrastructure, and expanding alternative, renewable and traditional energy sources. This can create jobs as well as reduce trade deficits;
2-Regulatory restraint and reform. Donohue said the Chamber is seeking to restore “some badly needed balance, restraint and common sense” to the U.S. regulatory system;
3-Expanding American trade. The Chamber is launching a new program to educate everyday Americans on the importance of expanding free trade that will clearly link global economic engagement to American jobs; and
4-Reducing deficits and debt. The Chamber, true to its deficit-hawk reputation, will support congressional efforts to lower overall spending and reduce entitlements. “Any plan that fails to tackle these runaway entitlement programs is doomed to fail,” Donohue said.

Donohue also unveiled a new Chamber initiative that would develop an overall analysis of the American business community’s understanding of American strengths and weaknesses, and those of its major foreign economic competitors.

“The Chamber is examining, a factual and objective way, the actions of our government and actions by the business community that are either moving us forward in the global economy or holding us back,” Donohue said.

Donohue said the Chamber would then analyze what our major competitors are doing, pinpointing U.S. strengths “so we can build on them and our weaknesses so we can fix them.”

Bob Costello, chief economist for American Trucking Associations, says increased infrastructure spending would help reduce congestion, and would also add to economic activity. Donohue agreed.

“Not only do you get long-term benefits from infrastructure spending, but you get a short-term boost for jobs,” Donohue predicted.

Donohue began his speech by expressing the U.S. business community’s shock and sadness over last weekend’s tragic shootings in Tucson, Ariz., when a lone gunman killed six and seriously injured Rep. Gabrielle Giffords, D-Ariz., at a grocery store town meeting.

“Under any circumstance, the violence, injury and loss of life that occurred are an outrage to us all,” Donohue said. “We are specifically offended by the fact that this rampage was directed at our democracy itself—striking down public servants as well as free citizens who had come to engage in a dialogue and express their views.”

In many respects, Donohue said, America is “not keeping up” with its major economic competitors. New regulatory activity is not helping, he said.

“We must reign in excess regulations,” Donohue said, saying a “regulatory tsunami” is looming, especially with passage of the recently passed health insurance reform package.

He said the Chamber is supporting efforts in the House to repeal much of the health care reform law.

“It’s time, in my opinion, to go back to the drawing board,” Donohue said.

Donohue also took a shot at unions, a frequent target of the Chamber’s wrath. “They have been using their position as a powerful political force to sabotage the nation’s trade agenda, which has damaged our standing overseas,” Donohue said. “Some want to vastly expand the size and cost of government, perpetuate the status quo in our failing public schools, and attack the nation’s best companies through destructive tactics.”

Donohue praised the Obama administration’s recent move to end the longstanding U.S.-Mexico trucking dispute. It’s been 15 years since the U.S. promised to allow Mexican-domiciled trucks to move freight in this country, under terms of the North American Free Trade Agreement (NAFTA).  But it has dragged its fleet on implementing the fine print. Mexico has retaliated with tariffs that Donohue says have cost 25,000 American jobs.

“It’s time to keep our word—and keep our trucks moving,” Donohue said.

Regarding increased spending on transportation, Donohue said that it’s time to renew the surface transportation reauthorization program that ended on Sept. 30, 2009, but funded since through a series of stopgap spending bills.

“If we fail to act as growth returns, we will soon run out of capacity,” Donohue predicted. “Our economy will hit the wall and we will be physically unable to grow. We’ll lose jobs and even lives as a result.”

The Chamber is leading a movement to remove regulatory, financial and legal barriers that have locked away hundreds of billions of dollars in private infrastructure spending,” Donohue said. “But we must also have a strong, consistent and reliable federal commitment to infrastructure—or these private dollars will go somewhere else.”

With crude oil prices on the rise and threatening to crack $100 per barrel this year, Donohue said it is time to expand domestic sources of energy, including expanding offshore drilling.

“There is no good or valid reason to send our money to other countries to pay for something we have plenty of right here at home,” he said.

Regarding supply chains, Donohue said it’s time to “connect our entire economy” to a seamless 21st century system of superior transport, high speed information and modern seaports, airports and border crossings.

Toward that end, the Chamber recently hired Jack Potter, former Postmaster General, to consult with leading supply chain companies and experts to help “rally the business community to improve, maintain, secure and advocate” for a 21st century global supply chain and logistics system.

Donohue called improving global supply chains the “single most important thing that could help our economy” and said the Chamber was committed to linking improved physical infrastructure with the flow of goods, money and data around the world.

Donohue then hinted at something that some business leaders balk at—how to pay for all this. In opening the door for an increase in the fuel tax to jump start the debate on this year’s highway reauthorization process, Donohue admitted he is stepping on the toes of some of his members, who oppose any and all tax increases.

“I’m going to say something that I’m not sure all my members will support: the Chamber will support strong proposals even if we don’t like all the details,” Donohue said. “I believe our elected officials can find enough common ground—or at least some shared enlightened self-interest—to make progress on the priorities I have outlined today.”

For more stories on transportation infrastructure, click here.

Live Webcast | Thursday, January 27, 2011 | 2:00 p.m. EST

Join Group Editorial Director Michael Levans, Executive Editor Patrick Burnson, and a distinguished panel of leading energy and transportation analysts as they give shippers an updated look at the key drivers behind the increasing transportation rates U.S. logistics professionals will face over the course of 2011. Our panel of top oil and transportation analysts will update shippers on: $ THE CURRENT STATE OF THE U.S. ECONOMY $ WHERE OIL AND DIESEL PRICES ARE HEADED AND WHY $ CAPACITY AND RATE FORECASTS FOR TRUCKING, AIR CARGO, OCEAN CARGO, RAIL/INTERMODAL, AND PARCEL EXPRESS

Don’t miss this important event