I've Seen America’s Biggest Economic Challenge — and It Is... Us

When we look around the world today, the U.S. economy is doing pretty well. China is logging its slowest growth in 24 years. Russia has been downgraded to junk bond status. The EU teeters on the brink of an uncertain future. Meanwhile, the United States is growing steadily – and racking up its longest sustained period of job growth in history.

This is only part of the story, however. The U.S. economy may be growing, but not nearly fast enough. We have strengths we aren’t using – and potential unfulfilled. And as we work to reach that potential, the biggest obstacle standing in the way might be… us.

As the world economy has evolved in recent years, the U.S hasn’t always kept up. Too often, we’ve allowed politics to paralyze us. But now it’s time to put aside politics and focus on policies that position our economy to grow, compete, and succeed on the global stage.

This is critical because, right now, 95% of consumers and 80% of the world’s purchasing power is outside of the United States. Asia’s middle class is almost twice the size of our entire country. U.S. companies earn more than half their income abroad today. Thirty years ago, it was closer to a third.

These global realities present real opportunities and challenges for America’s future. That’s something we talked about this week at the Milken Global Conference in Santa Monica – where leaders in business, politics, and academics gather every year. On the panel I joined, three issues in particular stood out – and getting them right will be critical to keeping our economy moving forward.

If we want growth and jobs at home, we need a trade policy that empowers American businesses to compete and win worldwide. Unfortunately, we’ve often missed that opportunity in recent years. Around the world, countries are striking regional deals to liberalize trade and remove barriers to business. But in many of these cases, the U.S. is not at the table.

From 2000 to 2010, for instance, Asian nations entered into 48 trade agreements. Of those agreements, the US was part of only two – and our exports to that region dropped by over 40% in the same timeframe.

We can’t afford to stand on the sidelines like this – especially in critical emerging regions like Asia. As President Obama has said: “If we don’t write the rules, China will write the rules in that region…We will be shut out…That will mean a loss of U.S. jobs.”

Fortunately, the U.S. is negotiating two ambitious free trade agreements right now: the Trans-Pacific Partnership (TPP) in Asia and the Transatlantic Trade and Investment Partnership (TTIP) with Europe. Combined, they span economies that make up two-thirds of the world’s GDP – and they’re projected to create up to two million new jobs in the United States.

Our markets are already open to these other countries. These deals will open their markets to us. And they won’t just lower tariffs. They’ll also improve global regulations, raise governance standards, and implement environmental and worker protections. They are, in almost every sense, the kind of 21st century trade deals we need.

This is a rare issue that spans party lines, from President Obama to Republican House Ways and Means Chairman Paul Ryan. It’s not often that you see those two on the same side – and we should seize the opportunity for progress.

Tax Reform: The key to keeping our competitive edge

If our country is going to compete in the global economy, we need to compete with our tax code. But we’re not doing that today.

Thirty years ago, the U.S. had one of the lowest business tax rates in the world. Some even considered our country a tax haven. But a lot has changed since then. In recent years, 90% of OECD countries have lowered taxes to attract businesses – and we’ve been left behind. Today, the U.S. has the highest corporate tax rate among OECD countries. We are the only country on Earth that taxes worldwide income along with a rate above 30%.

Thanks to this uncompetitive tax regime, our businesses are at an international disadvantage. Consider the M&A market, where foreign buyers were able to acquire over $200 billion of U.S. companies and business assets between 2003 and 2013. If our tax rate had been more competitive at the time – even the OECD average of 25% – that decade could have been very different. U.S. firms would have actually acquired  $590 billion in assets – and 1,300 American companies would not have been purchased by foreign organizations.

It’s time to catch up to the rest of the world. The Business Roundtable and Rice University have estimated that tax reform would increase America’s GDP by 0.9% in 2 years, and 3.1% in 10 years. It would also drive higher incomes on average. This is a reform that’s long past due – and the rest of the world isn’t waiting around.

Immigration: Keeping the best talent in America

Right now, our immigration system is inefficient, outdated and ready for change. EY regularly recruits on university campuses, and I can’t tell you how many times we’ve had to turn away some of our best applicants because we know they can’t get the visas they need to stay in the US.

Even worse, our immigration system isn’t just turning away promising young people – it’s turning away future leaders. All you have to do is look at the list of Fortune 500 founders to see that. Of these entrepreneurs, 40% of them are either immigrants, or children of immigrants.

If we want to maintain a competitive edge in the global economy, we should be fighting to keep that kind of top talent here – not sending it away.

When you consider that kind of potential, it’s clear that immigration reform isn’t just a nice thing to do. It’s the smart path to drive economic growth in a big way. One study found that immigration reform would increase America’s GDP by almost 5%, increase average wages, and cut the deficit by over a trillion dollars over 20 years.

As we position our country for the future, let’s not lose sight of these drivers of growth. The opportunities and obstacles are clear – and now it’s up to us to decide what to do with them. In a very real way, the only thing standing in the way of America’s economic potential is… us.