Execerpts from Obama's Speech to the Business Roundtable

I have taken some key parts of the president's speech to the Roundtable and added some commentary - this is not the entire speech:

#1 Instead, we need an economy where we borrow less and produce more. We need an economy where we generate more jobs here at home and send more products overseas. We need to invest and nurture the industries of the future, and we need to train our workers to compete for those jobs. I guess this does not apply to government where in the last year we have begun to borrow in unprecedented amounts.

#2 A thriving, competitive America is within our reach — but only if we move forward as one nation; only if we move past the old debates and the crippling divides between left and right, between business and labor, between private enterprise and the public sector. Whatever differences we have in this country, all of us have a stake in meeting the same goal, which is an America in which a growing prosperity is shared widely by its people.

Now, contrary to the claims of some of my critics and some of the editorial pages, I am an ardent believer in the free market. I believe businesses like yours are the engines of economic growth in this country. You create jobs. You develop new products and cutting-edge technologies. And you create the supply chains that make it possible for small businesses to open their doors. So I want everyone in this room to succeed. I want your shareholders to do well, I want your workers to do well, I want you to do well — because I firmly believe that America’s success in large part depends on your success internationally. I just do not believe in the market for health care

#3 Now, I also believe this: Government has a vital, if limited, role to play in fostering sustained economic growth and creating the foundations for you to succeed. Throughout our history, government has done so in three ways.

First, government has set up basic rules of the marketplace –- from the enforcement of contracts and managing the money supply, to maintaining airline safety standards and creating federal deposit insurance. And on balance, these rules have been good for business, not bad, for they ensure honest competition and fair dealing and a level playing field.

Second, only government can make those investments in common goods that serve the general welfare but are too expensive for any individual or firm to purchase on their own. Our Armed Forces is the most obvious example. But government has also built infrastructure – from roads and ports to railways and highways that enabled commerce and spurred entire industries. Government has invested in basic research that led to new crop yields for farmers and the Internet. Government has invested in our people, through land grant colleges and the GI Bill.

And finally, government has also provided a social safety net to guarantee a basic level of security for all our citizens. Now, this last role has been obviously a source of great controversy over the last several decades. But I think most Americans and most business leaders would agree that programs like Social Security and Medicare and Medicaid and unemployment insurance haven’t just saved millions from poverty, they’ve helped secure broad-based consensus that is so critical to a functioning market economy. There is a debate in economics about what constitutes public goods. Public goods are indivisible - in essence my consumption does not diminish your ability to consume - defense is a great example. But the President extends this logic to what are called Merit Goods - those are things that some people believe should be provided in the public sector because some people think we do not produce enough of them in the private sector. That is a very slippery slope.

#4 Now, the Business Roundtable has always understood that in each of these instances, government hasn’t stepped in to supplant private enterprise, but to catalyze it, to create the conditions for entrepreneurs and new businesses to adapt and to thrive.

But I take the time to make these points because we’ve arrived at a juncture in our politics where reasonable efforts to update our regulations, or make basic investments in our future, are too often greeted with cries of “government takeover” or even “socialism.” Because indeed imprecision of definition and a huge increase in the amount of GDP going to the federal government looks a lot like a takeover.

If we don’t pass financial reform, we can expect more crises in the future of the sort that we just saw. On the other hand, if we design the new rules carelessly, they could choke off the supply of capital to businesses and families. If we allow our safety net to be weakened, or lose a sense of fairness in our tax code, then we can expect more anger and frustration from citizens across the political spectrum. And at the same time, if an exploding entitlement state is gobbling up more and more of our tax dollars, there’s no way we’ll retain our competitive edge. There may be a good reason to suggest that we should change the rules on regulation of financial entities but the President should first address why a major cause of the financial meltdown was caused by government sponsored enterprises like Fannie Mae and Freddie Mac.

#5 Now, our first and most immediate task is to complete the economic recovery by taking additional steps to bolster demand and keep credit flowing. Along with our efforts to unfreeze credit and stabilize the housing market, the Recovery Act helped to do this, and it’s one of the main reasons our economy has gone from shrinking by 6 percent to growing by nearly 6 percent.

But we need to do more. We should make it easier for small businesses to get loans, and give them a tax credit for hiring new workers or raising wages. We should invest in infrastructure projects that lead to new jobs in the construction industry and other hard-hit businesses. And we should provide a tax incentive for large businesses like yours to invest in new plants and equipment. That would make a difference now. Right now the excess liquidity in the banks is more than $1 trillion. That has been caused in part by the Administration's efforts a changing the rules in financial markets.

#6 And we need businesses to support these efforts. The Business Roundtable supported the Recovery Act, and for that I’m grateful. But I think one of the reasons businesses haven’t been as vocal about their support is a belief that extraordinary measures like the Recovery Act or our financial stability plan somehow represent a lasting increase in government intervention. So let me assure you, let me be clear, they do not. The evidence is to the contrary - federal spending now takes up the largest share of GDP since the end of WWII.

#7 One year ago, we were looking at the possible end of General Motors. Today, GM has increased production, is paying us back ahead of schedule. Yesterday, we learned they’re hiring 1,200 more workers in their Lordstown, Ohio plant. One year ago, there was a chance we would lose most of the $700 billion we were given to rescue the financial system. Today, most of that money has been repaid. The financial fee we’ve proposed would recover the rest and close the books on government’s involvement.

And let me say a word about compensation here. Most Americans — including myself — do not begrudge reasonable rewards for a job well done. What’s outraged people are outsized bonuses at firms that so recently required massive public assistance. Once that money is fully repaid, I don’t believe it’s appropriate for the government to be in the business of setting compensation levels. I do believe that shareholders should have a say in compensation packages given to top executives, and that those packages should be based on long-term performance instead of short-term profits. And I think that’s particularly important in the financial industry, where reckless risks in pursuit of short-term gain helped create a crisis that engulfed the world economy.

But here’s the larger point that I’m trying to make. The steps we took last year were about saving the economy from collapse, not about expanding government’s reach into the economy. The jobs bill working through Congress right now are similarly designed to be targeted and temporary. And I’m pleased that a few hours ago the Senate just passed a series of tax cuts for small businesses that hire more workers. This is an important step forward in putting more Americans back to work as soon as possible. The premises here are absurd. As Bastiat pointed out we always need to look at what would have happened with the seen (which Obama describes somewhat accurately) and the unseen. Would we have been closer to recovery if we had simply let the market take care of GM - which was and continues to be a horribly run company.

# 8 Now, the larger question is this: Beyond the immediate requirements of recovery, how do we lay the foundation for a more competitive America? How do we help you succeed? Now, I believe it starts with investments in innovation, in education, and a 21st century infrastructure. To build the infrastructure of tomorrow, we’re investing in expanded broadband access and health information technology, clean energy facilities and the first high-speed rail network in America.

To spur the discovery of services and products and industries we have yet to imagine, we’re devoting more than 3 percent of our GDP to research and development -– an amount that exceeds the level achieved at the height of the space race. We’ve also proposed making the research and experimentation tax credit permanent –- a tax credit that helps companies like yours afford the high costs of developing new technologies and new products. How about just lowering rates which most of the rest of the G8 have done in the last couple of years.

To train our workers for the jobs of tomorrow, we’ve made education reform a top priority in this administration. We are not interested in just putting more money into our schools; we want that money moving toward reform. And last year we launched a national competition to improve our schools based on a simple idea: Instead of funding the status quo, we will only invest in reform –- reform that raises student achievement and inspires students to excel in math and science, and turns around failing schools that steal the future of too many young Americans. The Administration has done some interesting initiatives in this area.

I just met this week with the nation’s governors, and education reform is one of those rare issues where both Democrats and Republicans are enthusiastic.

And to achieve my goal of ensuring America again has the highest proportion of college graduates in the world by 2020, I’m urging the Senate to pass a bill that will make college more affordable by ending the unnecessary taxpayer subsidies that go to financial intermediaries for student loans. It’s a bill that will also revitalize our community colleges, which this organization has recognized are a career pathway to the children of so many working families.

And just as government needs to support young people eager to learn, I’m very pleased to see that the business community has already begun to bet on the next generation of American talent. Just yesterday, 17 high-tech companies announced plans to hire over 10,000 college graduates this year. That’s good news. That’s the kind of partnership that we need.

Finally, we’re investing in innovation that will lead to a more efficient, affordable and consumer-friendly federal government. Almost all of you have harnessed new technologies to build thriving businesses and provide better services to your customers. There’s no reason government shouldn’t do the same, and give taxpayers a better bang for their buck. Government is rarely the locus of innovation.

#9 That’s why, in the State of the Union, I set a goal of doubling our exports over the next five years, an increase that will support 2 million jobs. And to help me meet this goal, Gary Locke recently announced that we’re launching a National Export Initiative where the federal government will significantly ramp up its advocacy on behalf of U.S. exporters. We’re substantially expanding the trade financing available to exporters, including small and medium-sized companies. And while always keeping our security needs in mind, we’re going to reform our export controls to eliminate unnecessary barriers. So some of the sectors where we have a huge competitive advantage in high-tech areas, we’re going to be able to send more of those products to markets overseas. And we’re going to pursue a more strategic and aggressive effort to open up new markets for our goods.

Now, I know that trade policy has been one of those longstanding divides between business and labor, between Democrats and Republicans. To those who would reflexively support every and any trade deal, I would say that our competitors have to play fair and our agreements have to be enforced. We can’t simply cede more jobs or markets to unfair trade practices. At the same time, to those who would reflexively oppose every trade agreement, they need to know that if America sits on the sidelines while other nations sign trade deals, we will lose the chance to create jobs on our shores. In other countries, whether China or Germany or Brazil, they’ve been able to align the interests of business, workers, and government around trade agreements that open up new markets for them and create new jobs for them. We must do the same. And I’m committed to making that happen. Fair trade often becomes a stalking horse for allowing labor to run roughshod over other countries regulations. Ultimately what do we lose by doing less with trying to make regulations uniform regardless of a country's economic circumstance?

#10 What we can’t do is stand still. The only certainty of the status quo is that the price and supply of oil will become increasingly volatile; that the use of fossil fuels will wreak havoc on weather patterns and air quality. But if we decide now that we’re putting a price on this pollution in a few years, it will give businesses the certainty of knowing they have the time to plan for the transition. This country has to move towards a clean energy economy. That’s where the world is going. And that’s how America will remain competitive and strong in the 21st century.

We will also be more competitive if we address those costs and risks that are preventing our economy from reaching its full potential. I’ll list three critical areas: outdated financial regulations, crushing health care costs, and a growing deficit. Which stands still more often the government which is still using outdated technologies or firms which have to compete?

Right now we have a financial system with the same vulnerabilities that it had before this crisis began. And as I said in the State of the Union, my goal is not to punish Wall Street. I believe that most individuals in the financial sector are looking to make money in an honest and transparent way. But if there aren’t rules in place to guard against the recklessness of a few, and they’re allowed to exploit consumers and take on excessive risk, it starts a race to the bottom that results in all of us losing.

And that’s what we need to change. We can’t repeat the mistakes of the past. We can’t allow another AIG or another Lehman to happen again.(Or fannie or freddie?) We can’t allow financial institutions, including those that take your deposits, to make gambles that threaten the whole economy. What does that mean? It means we’ve got to ensure consolidated supervision of all institutions that could pose a risk to the system. It means we have to close loopholes that allow financial firms to evade oversight and circumvent rules of the road. It means that we need more robust consumer and investor protections.

#11 We’ve also incorporated almost every serious idea from across the political spectrum about how to contain the rising costs of health care. As a result, our proposal would reduce the deficit by as much as a trillion dollars over the next decades, and would directly affect your bottom lines — each and every one of you who are already providing insurance to your employees — by a significant amount. The term "almost every serious idea" is in the eyes of the beholder.

#12 I walked into office facing a massive deficit,(and increased it to unbelievably new heights) most of which was the result of not paying for two wars, two tax cuts, and an expensive prescription drug program. Keep in mind the budget was balanced; in fact, we were running a surplus in 2000. When we walked in, we had a deficit of $1.3 trillion (that is simply not true) and projected debt over the course of a decade of $8 trillion. (scheduled to exceed even that amount)The lost revenue from this recession put us in an even deeper hole. And the steps we took to save the economy from depression last year have necessarily added to the deficit — about $1 trillion, compared to the $8 trillion that we inherited.