Former President George W. Bush recently asked me to offer my perspective on economic growth at the launch of the Bush Institute’s 4 Percent Project. The idea was to pull together the very best ideas on how to get the economy growing again — and growing fast. The Four Percent Project refers to growing the U.S. economy at a 4 percent gross domestic product annual growth rate.
Some suggest that 4 percent growth is too ambitious. Yes, it’s ambitious, but it’s necessary. In America, we achieve big things when we need to. Big goals lead to historic achievements, innovations and incredible benefits previously thought impossible. The most ambitious of goals are called BHAGs (Big Hairy Audacious Goals). BHAGs work because they become a symbol of what we stand for and strive for as individuals, organizations and as a country.
OK, so how do we achieve the 4 percent BHAG? It starts with partnership. Businesses cannot do it alone. Government cannot do it alone. They have to work together.
There’s a rich history of collaboration between business and government in America. From the creation of the “arsenal of democracy” in World War II to the race to space, government investment in high tech made innovation scalable and affordable. Even the Internet was originally a government initiative embraced by business to change the world.
By its actions today, however, government policies are hurting economic growth. They’re driving U.S. companies’ operations away to foreign shores at the fastest rate in history. If we want to do what’s absolutely essential to restore job growth, strengthen our economy and get more revenues flowing again, we need government to reconnect with entrepreneurs on three dimensions: tax reform, regulatory and tort reform, and education.
We’ve got to make the tax code competitive. We cannot have a 39 percent corporate tax rate when the competition is less. The average European tax rate has been declining for the past 15 years and is now 24 percent. Also, we must make the tax code fairer, simpler and, yes, close loopholes. Business should also be able to repatriate profits at a more reasonable tax rate. The crazy policy of taxing overseas cash at high rates is an incentive to keep billions out of the U.S. that should be invested here.
Next, we need more incentives for research and development. The R&D tax credit is a proven job creator. Our competitors know this and are beating us in this area. Sadly, we haven’t improved our position in years. Finally, we should reform the personal income tax. Its complexities and inequities hurt a struggling middle class and debilitate small business owners who file individual returns.
Regulations are also a job killer. My favorite description of their effect came from a small-business person who compared it to “swimming through peanut butter.” He’s right. Today, it costs nearly 18 percent more to do business in the United States, a serious handicap in the global economic arena. Companies want regulations that are reasonable. They want to play by rules that are based upon rational, broadly beneficial objectives.
Tort reform is also mandatory. Our well-intentioned litigation system is distorted and manipulated by frivolous claims that paralyze progress. California’s tort system, for example, imposes about $32 billion in costs annually.
Finally, we need a herculean effort to improve education — the biggest long-term threat to our economic growth. We have to get more dollars to the classroom while rewarding outstanding teachers the same way we reward excellence in other professions — with more money. We should allow more charter schools to increase competition and innovation, and we should increase investment in higher education.
Just as wildfire can foster new growth from ground that has been long shadowed, the worst economy since the Great Depression can be the catalyst for reform. It won’t be easy, but failure isn’t an option. America depends on actions taken right now by government and business. Working together, we can make this BHAG reality.
Meg Whitman is the former CEO of eBay and was the Republican nominee for governor of California in 2010. She currently serves on the board of directors for Procter & Gamble, Hewlett-Packard, Zipcar and Teach for America. She is also a strategic adviser with Kleiner Perkins Caufield & Byers.