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Richard Trumka Response To the Report of the President's Council on Jobs and Competitiveness Road Map to Renewal

Richard Trumka • January 17, 2012

I am honored to have been asked to serve on the President’s Council on Jobs and Competitiveness, and I applaud and appreciate the Council’s dedication to addressing our nation’s jobs crisis.  I agree with the overall spirit and a number of the specific recommendations in today’s report, Road Map to Renewal, and I understand that there is a diversity of viewpoints within the Council. However, I have fundamental disagreements with the report’s conclusions about the broad challenges facing the United States and in the priorities for needed reforms. For these reasons, I offer what I hope is a constructive dissent to the report.

I look forward to continuing to work with the Jobs Council and with the President on the urgent task of creating the millions of good jobs needed to put America back to work in the context of a dynamic, complex, and increasingly competitive global economy.

I absolutely agree with the Jobs Council that the United States is falling behind our international counterparts in investing in modern infrastructure, education, and skills; supporting a vibrant manufacturing sector; developing cost-effective and globally responsible energy practices; and supporting innovation.  In each of these areas, workers and their unions are engaged in developing solutions—from investing in job-creating infrastructure, to tackling our energy and climate challenges, to job training, to improving our public schools.  But it is clear from our work in all of these areas that without timely action by government on a large scale, solutions will continue to elude us as a nation.

Unfortunately, I believe the report downplays the need for a proactive role for the U.S. government in many of these areas; fails to address the significant additional revenues needed to address the challenges identified on an appropriate scale; and in many cases erroneously identifies the root causes of the underlying structural problems.

Over all, I disagree that reforming our regulatory system and reducing the statutory corporate tax rate are crucial elements of “competitiveness” for the United States going forward, nor does empirical evidence support the claim that significant net new job creation would result from such “reforms.”  And I believe strongly that the Jobs Council’s membership is simply too narrowly representative of our country to provide a balanced set of recommendations to the President in these critical areas. 

Certainly, in order to achieve the delicate balance between public policy objectives and efficient regulation that the report references, the informed voices of environmental, consumer, women’s, civil rights, and community organizations would be essential. A similar problem exists in the areas of energy exploration, corporate tax reform, and education.  As a result, the report addresses regulatory issues as if we were not in the midst of a prolonged economic crisis whose proximate causes clearly included inadequate regulation of business, and in particular financial markets and institutions.

With respect to corporate tax reform, I believe that corporations as a group pay too low a share of taxes to support the kind of infrastructure investment and education/skills upgrades that are so urgently needed at this time – and that are so essential to the success of business, as the report points out.    

The report places way too much emphasis on statutory tax rates, mentioning only as an aside that the effective rates paid by corporations are much lower, and that overall corporate tax revenues as a percent of GDP are the fourth lowest in the OECD.  The report mentions a couple of times that “the high statutory corporate tax rate in the United States reduces the returns to saving and investment.” But having a high statutory tax rate does not “reduce the return to saving and investment” if few pay the full statutory rate – which is clearly the case with most multinational corporations based in the United States.

The report makes several assertions about proposed changes in the tax code that would encourage more investment and jobs in the United States – including that “many” members of the Jobs Council support a shift to a territorial tax system, which would completely eliminate taxation of profits earned offshore. I certainly share the goal of attracting more investment and good jobs to the United States, but disagree strongly with the assertions that lowering the statutory rate or shifting to a territorial tax system would accomplish those objectives. In fact, by reducing overall revenues these reforms could easily have the opposite effect – providing tax subsidies for companies offshoring jobs and starving the government of the revenue it needs to create good jobs and upgrade our infrastructure and education systems, thereby making the United States a less attractive place to invest.

The Jobs Council report references the Simpson-Bowles National Commission on Fiscal Responsibility and Reform a couple of times (on pages 46, 47, 48, and 50). It is worth noting that the Simpson-Bowles Commission never did issue an official report, as it failed to achieve the required support. The report that was issued came from the co-chairs, not the commission itself, and this should be made clear.

There are certainly inefficiencies and inequities associated with our current corporate tax code, and the AFL-CIO supports reforms that would raise additional revenues over all, reduce incentives to offshore production, and reward companies that create good jobs in the United States and invest in research and workforce development.   However, in an era of difficult budget choices, cutting the revenue we receive from corporate taxes or even leaving the revenue level unchanged is fundamentally inconsistent with any notion of shared sacrifice.

With respect to the education section of the report, I believe that the Jobs Council’s education recommendations begin and end in the wrong place: focusing on providing businesses with an endless supply of workers -- as opposed to supporting, improving and sustaining a strong public education system.  The report confuses tools – like data – with actually providing students with a sound education. The report claims that there are insufficient data about performance in American public schools. In fact, there is broad agreement that there is too much, not too little, standardized testing in American schools. The problem is that standardized testing is too often relied upon to the exclusion of more nuanced information, while existing data largely are used for the wrong reasons—to penalize and sort schools and teachers, rather than to inform and improve instruction.

And while I fully agree that closing the skills gap is critically important, the Council’s report omits other important goals, excessively narrowing the choices available. It also ignores the critical and constructive role that teachers, workers and their unions can play, both in supporting education reform that empowers and rewards great teachers and in providing ongoing skills development, in partnership with business and government, through apprenticeship and other training programs.

Some of the policies advocated in the report would move us further from the goal of providing all Americans with a great education that prepares them for life, college and career.  

  • The section devoted to the needs of students at “the bottom of the socioeconomic spectrum” is overly narrow. The need for high-quality preschool programs is widely acknowledged. But these children and their families also need wraparound services to address issues that cause students to enter school behind and interfere with their ability to reach their potential. In order to improve educational outcomes, we must also address the enormous impact of out-of-school factors such as poverty and long-term unemployment, poor health, family instability and language barriers. Services based in or coordinated with public schools are an effective way to foster student success.
  • The strong support for the Common Core State Standards (CCSS) is rightly placed. But accelerating the implementation of the CCSS without first developing all the needed supports is unlikely to succeed. Teachers and other stakeholders must have meaningful involvement in the planning, development, and rollout of the standards, curriculum, professional development and all other supporting components of a successful, comprehensive system.

The United States’ public education system has been and must remain a fundamental building block of our strong democracy and a key component of U.S. global competitiveness and a stable and vibrant economy.  We must collectively focus on systemic, effective education reform that provides all children access to the high-quality education they need to succeed—and that reinvigorates America’s competitiveness. Such reform must be focused on evidence, equity, scalability and sustainability. And these efforts must be achieved through collaborative efforts and shared responsibility.

I agree with the report’s emphasis on the role of a vibrant and growing manufacturing sector in supporting a strong middle class and a healthy, innovative U.S. economy. But the report does not come to terms with the challenges faced by domestic producers in today’s global economy. Not only have we failed to invest adequately in our own infrastructure and skills, but our government’s own policies with respect to trade, taxes, and currency have created enormous competitive disadvantages for American-based producers. Until we address these challenges, we will continue to place our manufacturers at an unfair disadvantage.

Perhaps most profoundly, the report does not ask the critical question: why is our country suffering a manufacturing crisis, complete with massive job loss and a structural trade deficit, when countries with higher overall taxes, higher wages, and more robust health, safety and environmental regulations are enjoying trade surpluses?  

The answer lies in the view that we share with so many of our fellow Americans: that our country has become dominated by the interests of the wealthiest 1% at the expense of the remaining 99%.  It turns out that a country run in the interests of the wealthiest 1% systematically underinvests in public goods; systematically silences, disempowers,   and underinvests in its workers; and in the end is less competitive and creates fewer jobs than a country that focuses on the interests of the 99%. 

It is this difference of perspective that leads me to respectfully dissent.

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