The chief executive of the U.S. Chamber of Commerce on Thursday said the “exploding national debt” is the greatest threat to the U.S. economy.
U.S. Chamber chief Tom Donohue called for Washington to reach a broad deal to rein in deficits in the coming months, while warning that entitlement spending was unsustainable.
“As a nation and a people, we must finally face up to the single biggest threat to our economic future — and that is our exploding national debt, driven by runaway deficit spending, changing demographics and unsustainable entitlements,” Donohue said. “Congress and the administration must focus their attention on this critical priority. Economic growth cannot solve all of our problems, but without growth, we will not be able to solve any of them.”
“Do we have the leaders to put the country first, ahead of their own careers, politics, ideologies and egos?” Donohue, also the Chamber president, declared at his annual “State of American Business” address.
Donohue said that restraining entitlement spending and overhauling the tax code would be part of the Chamber's broader push to expand economic growth and the labor market, an agenda that also touches on energy development, immigration issues, trade and regulations.
The focus on debt and deficits signals something of a shift for the Chamber, which supported President Obama’s stimulus package and has long made job growth a signature issue. But Donohue said Thursday that putting the U.S. on firmer fiscal ground would play a big role in allowing the private sector to do its part to help spur growth.
“Economic growth must be front and center here in Washington,” he said.
President Obama is asking Congress to raise the nation’s $16.4 trillion debt ceiling, and Republicans in Congress are demanding steep spending cuts in exchange. With the Treasury Department already undertaking “extraordinary measures” to allow the nation to pay its bills, the fight over the debt will dominate the first months of Obama’s second term.
The Chamber president said that Medicare, Medicaid and other U.S. entitlement programs were “unsustainable” and had come to dominate American spending.
Still, Donohue said that changes to entitlement programs could be phased in over “a number of years.”
He also said that the tax code was long overdue for a revamp, and that the right kind of reform could make the U.S. more competitive around the globe and “turbocharge” economic growth.
But with Republicans and Democrats still arguing over how much revenue the federal government should collect, Donohue argued that a tax overhaul should not be seen as a substitute for spending restraint.
Republicans have said that after the recent fiscal-cliff deal, which extended Bush-era tax rates for family income up to $450,000 a year, they will not agree to any other revenue-raising deal. But Democrats have said what they call a “balanced” approach needs to be on the table in any future discussions.
Donohue says that allowing tax rates to rise for the highest earners will hurt businesses that pay taxes through the individual code. The differences over revenues have made some observers skeptical that tax reform can happen this year.
The business group will get behind tax reform, but Donohue warned that it cannot be seen as “a substitute for spending restraint.” Government spending needs to be addressed before — if not alongside — any tax reform effort, he said.
The Chamber wants to see the debt ceiling raised but recognizes Republican demands to pair that move with spending cuts. Bruce Josten, the Chamber’s executive vice president for government affairs, said Washington needs to get its fiscal house in order.
“I think the reality is that it’s going to be raised, and I think the reality is it’s not going to be a free-pass raise,” Josten said. “You don’t default, you get the spending movement that you need to start restraining, and you raise the debt ceiling, which you’re going to have to do.”
On another big issue, immigration reform, the Chamber is working to build a coalition with unions, law enforcement, faith and ethnic organizations for action on Capitol Hill. Donohue said he has been talking with AFL-CIO President Richard Trumka to help push along reform.
Donohue also said increasing energy production would create more jobs. The Chamber leader said more public lands should be opened up for energy exploration and repeated his call for the Keystone XL pipeline to be built.
The Chamber also expects to be active on trade this year. The business group will push for a trade agreement with the European Union and renewal of the president’s authority to fast-track negotiations for trade deals, a power known as Trade Promotion Authority.
— This story was updated at 12:54 p.m.