By LLOYD BLANKFEIN
There is a huge amount of investible cash that is now sitting on the sidelines, waiting for sensible reforms.
Four years ago, it was said that the incoming Obama administration aspired to the dynamic that existed in Abraham Lincoln’s cabinet, where former competitors and antagonists came together to help the country through the Civil War. If Doris Kearns Goodwin’s “Team of Rivals” was the historical aspiration then, the model to emulate after this election is her earlier book, “No Ordinary Time,” about Franklin Roosevelt’s domestic policies during the latter years of the Great Depression and into World War II.
The 1930s were a period of extreme bitterness between the business community and the Roosevelt administration. Many executives deplored the president’s policies and refused to even utter his name, referring to him as “that man in the White House.” In turn, the president famously declared during the 1936 re-election campaign: “I welcome their hatred.”
Yet, well before the bombing of Pearl Harbor, these adversaries made common cause to defeat Germany and Japan. The result was an unprecedented surge in industrial production that would crush the Axis powers and lift the American economy out of the Great Depression. Roosevelt showed leadership, and business answered the call.
Relations between the Obama administration and large segments of the business community have been strained and unproductive. But the election offers an important opportunity to forge a more productive relationship. By electing a divided government, Americans didn’t choose two years of squabbling and inaction until the next election—and the country cannot afford that. Both parties will have to compromise to make progress.
The challenges that America faces are not those of World War II. But meeting today’s challenges will demand a similar dedication to cooperation—and not just between political parties. A spirit of compromise and reconciliation would do wonders for the economy if government and business resolved together to address the following priorities:
• Remove the risk of a double-dip recession and give the economy a stimulative jolt. Expiring tax cuts and budgetary sequestrations that take effect on Jan. 1 will derail the fragile recovery. Any political agreement to cope with the “fiscal cliff” will require flexibility and shared sacrifice that some in both parties seem unwilling to allow.
We in the business community have a responsibility to contribute to a better understanding of the urgency of averting a crippling and self-inflicted recession. At the same time, we also need to talk about the significant opportunities that would result from forward-looking change.
There is more than a trillion dollars of cash that is sitting on the balance sheets of U.S. nonfinancial companies. With certainty about tax rates, companies will increase their capital expenditures (currently at anemic levels), contributing to a virtuous cycle of jobs and growth.
• Restore confidence in public finances. The United States currently enjoys low interest rates and modest inflation. But government budget deficits and a growing debt burden will eventually lead to sharp increases in both. A grand fiscal bargain—perhaps using the Simpson-Bowles plan as a starting point—should include spending cuts, entitlement reform and revenue increases. Some of the reforms should be enacted now but implemented later to avoid the risk of recession.
The business community vigorously supports efforts to conclude a bipartisan fiscal accord. I believe that tax increases, especially for the wealthiest, are appropriate, but only if they are joined by serious cuts in discretionary spending and entitlements. A number of CEOs and companies agree and support principles that call for a comprehensive and balanced solution to the debt problem—increased tax revenues and decreased spending.
• Keep marginal tax rates low. Democrats and Republicans complain about the complexity of the federal tax code, but serious reform has been almost nonexistent. Broadening the personal income-tax base by closing loopholes will generate substantial additional revenue while minimizing increases in marginal rates that could stifle risk-taking and robust growth.
The Obama administration has already signaled its interest in reducing the corporate income-tax rate. Business leaders should work with the administration and Congress on tax legislation that would reward work and bolster investment, while retaining the tax system’s essential progressivity.
• Act like we need to compete and win—because we do. For the first time in several generations, it has become clear that abundant domestic energy resources are within our reach, and that we have the technology to responsibly and safely extract it. The government needs to work with the private sector to implement effective and far-reaching policies to develop these resources.
Energy policy is crucial: Developing America’s domestic resources means every other industry in the economy can take advantage of lower energy prices and become more globally competitive.
The U.S. can compete more effectively in global trade. As the economy recovers, the country should move forward to realize bilateral and regional agreements, enhancing the international flow of goods, services and capital. America has more strengths at its disposal than most to compete, including a culture that encourages innovation and entrepreneurship, and favorable demographics.
Sensible immigration reform is also a high priority. Washington needs to make it easier for talented people to live and work in the U.S. Foreign students who graduate from American universities should be eligible to work in the U.S. permanently. The cap on visas for skilled workers should be removed; and let’s make it much easier for promising entrepreneurs to work and create jobs in the U.S. I know many in the business community are ready to get behind real immigration reform.
America has a long tradition of talented and experienced people who have gone to work for the government after a successful business career. They bring to public service useful perspectives about how business operates and, while in government, they develop a deeper appreciation for the responsibility government has to broader constituencies. Their experience is a virtue, not a vice, and should be encouraged in the years ahead.
My firm works with many companies in the Fortune 500 and, of course, the leaders in these organizations have different policy views and opinions. But I know that they all want to see progress and contribute to it. We are all ready to roll up our sleeves and work with the Obama administration and Congress to help fulfill America’s enduring promise.
Mr. Blankfein is chairman and CEO of Goldman Sachs. This Op-ed appeared on WSJ