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Effective Leadership on the World Stage CEO Memos to Congress

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Page 1: Effective Leadership on the World Stage - Amazon S3 · 1717 Rhode Island Avenue, NW Suite 800 Washington, DC 20036 Telephone 202.872.1260 Facsimile 202.466.3509 Website businessroundtable.org

1717 Rhode Island Avenue, NW

Suite 800

Washington, DC 20036

Telephone 202.872.1260

Facsimile 202.466.3509

Website businessroundtable.org

Effective Leadership on the World StageCEO Memos to Congress

Effective Leadership on the Wo

rld S

tage

CEO M

emos to Congress

Page 2: Effective Leadership on the World Stage - Amazon S3 · 1717 Rhode Island Avenue, NW Suite 800 Washington, DC 20036 Telephone 202.872.1260 Facsimile 202.466.3509 Website businessroundtable.org

Effective�Leadership�on�the�World�Stage�CEO�Memos�to�Congress�

Page 3: Effective Leadership on the World Stage - Amazon S3 · 1717 Rhode Island Avenue, NW Suite 800 Washington, DC 20036 Telephone 202.872.1260 Facsimile 202.466.3509 Website businessroundtable.org

Contents�

About�Business�Roundtable�Maintaining�U.S.�Leadership�in�the�World�Economy�U.S.�Corporations:�Drivers�of�Economic�Success�Business�Roundtable�Initiatives�Initiative�CEO�Chairs�and�Staff�Contacts�Endnotes�

Consumer�Health�and�Retirement�

Employee�Retirement�Income�Security�Act�(ERISA)�Health�Care�Reform�Legislation�Health�Information�Technology�Medical�Liability�Reform�Pensions�

Corporate�Leadership�

Corporate�Governance�

Education,�Innovation�and�Workforce�

Education�Reform�Legislation�Innovation�Policy�Workforce�Competitiveness�

International�Engagement�

Trade�and�Investment��U.S.�Corporate�Tax�Rate��Taxation�of�Foreign�Earnings�of�U.S.�Corporations�Expiring�Business�Tax�Provisions�Individual�Taxes�on�Dividends�and�Capital�Gains��Budget�Deficits�and�Spending�Controls�

Sustainable�Growth�

Building�Efficiency�Building�a�“Greener”�Energy�Infrastructure�Climate�Change��Domestic�Energy�Supply�Electric�Grid�Modernization�Wind�and�Solar�

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� 1

About�Business�Roundtable�

Business�Roundtable�(www.businessroundtable.org)�is�an�association�of�chief�executive�officers�(CEOs)�of�leading�

U.S.�companies.�Business�Roundtable�members�include�more�than�160�corporations�with�$5�trillion�in�annual�

revenues.�Combined,�Business�Roundtable�members:�

• Employ�nearly�10�million�people�in�stable�jobs�and�provide�health�care�for�them�and�nearly�35�million�

family�members;�

• Maintain�U.S.�technology�leadership�by�investing�$90�billion�in�research�and�development�(R&D)�every�

year�—�nearly�half�the�total�private�R&D�spending�in�the�United�States;�

• Contribute�$7�billion�to�charity�each�year,�nearly�60�percent�of�total�corporate�giving;�

• Comprise�nearly�a�third�of�the�total�value�of�the�U.S.�stock�markets;�and�

• Generate�$114�billion�in�dividends�to�shareholders�(in�2006)�and�pay�$179�billion�in�corporate�taxes�—�

more�than�40�percent�of�all�corporate�income�taxes�paid�to�the�federal�government.�

Business�Roundtable�unites�these�top�CEOs,�amplifying�diverse�business�perspectives�and�voices�on�solutions�to�

some�of�the�world’s�most�difficult�challenges.�Combining�those�insights�with�policy�know-how,�Business�

Roundtable�innovates�and�advocates�to�help�expand�economic�opportunity�for�all�Americans.�

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2

Maintaining�U.S.�Leadership�in�the�World�Economy�

The�U.S.�economy�today�drives�world�growth,�innovation�and�prosperity.�And�as�recent�events�reinforce,�the�

health�of�the�U.S.�economy�is�inextricably�linked�to�the�economic�health�of�the�rest�of�the�world.�If�America�is�not�

doing�well,�the�rest�of�the�world�is�affected.��

America�can�and�must�maintain�a�leadership�role�in�the�world�economy.�In�an�interconnected�and�increasingly�

competitive�global�environment,�the�members�of�Business�Roundtable�believe�that�it�is�now�more�important�than�

ever�to�commit�ourselves�to�the�core�values�and�policies�that�have�traditionally�made�America’s�economy�strong:��

• Sound�fiscal�policies�that�keep�us�on�a�path�of�growth�and�prosperity,�including�a�regulatory�and�tax�

structure�that�complements�growth;��

• Open�and�competitive�markets�built�upon�modern�and�efficient�infrastructure�and�robust�and�transparent�

financial�markets;�

• Innovation�driven�by�our�entrepreneurial�culture,�vigorous�investment�in�R&D�and�a�world-class�education�

system;�

• A�highly�productive,�skilled�workforce�with�access�to�the�highest-quality�health�care�system�and�lifelong�

learning;�and�

• A�commitment�to�environmental�stewardship�combined�with�the�development�of�sustainable,�secure�and�

reliable�energy�supplies.�

We�recognize�that�we�also�must�continually�re-evaluate�our�policies�to�ensure�that�they�reflect�emerging�21st�

century�issues.��

The�CEOs�of�Business�Roundtable�are�committed�to�preserving�U.S.�economic�leadership�and�to�the�people�who�

keep�our�economy�modern,�competitive�and�thriving�—�the�U.S.�workforce.�

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� 3

U.S.�Corporations:�Drivers�of�Economic�Success�

Providing�a�Foundation�of�Stability,�Growth�and�Prosperity�The�more�than�160�corporations�that�make�up�Business�Roundtable�represent�the�capstone�of�the�American�economy�

and�the�cornerstones�of�the�communities�in�which�we�operate.�We�employ�millions�of�workers�in�stable,�well-paying�

jobs,�providing�health�care�and�other�benefits�to�our�employees,�retirees�and�their�family�members;�contributing�time�

and�resources�to�philanthropic�causes;�and�keeping�America�growing,�prosperous�and�economically�secure.��

Serving�as�a�Historic�and�Vital�Repository�of�Middle�Class�Savings�

Despite�the�current�economic�crisis,�historic�growth�trends�of�America’s�corporations�have�made�corporate�equities�an�

ever-growing�part�of�the�savings�and�retirement�accounts�of�middle�class�Americans.�Half�of�all�U.S.�households�own�

corporate�equities,�both�individually�and�in�pension�and�other�retirement�funds.1�A�typical�investor�is�middle�class�with�

a�household�income�of�$65,000.2�These�households�must�be�able�to�trust�in�the�health�and�security�of�their�assets.��

Building�the�Infrastructure�of�the�21st�Century�Today,�America’s�corporations�are�building�the�infrastructure�of�the�21st�century�economy,�enabling�the�United�States�to�

maintain�its�economic�leadership�in�global�markets.�Every�year,�America’s�corporations�make�investments�that�have�been�

compared�to�the�building�of�the�transcontinental�railroad�in�the�19th�century,�which�united�our�nation�and�enabled�the�

United�States�to�become�a�world�power.�Who�else�but�large�corporations�could�invest�the�hundreds�of�billions�of�dollars�

it�costs�to�lay�fiber-optic�cable�and�raise�cell�towers�across�the�American�continent,�build�new�jetliners�to�compete�

against�foreign�competition,�and�bring�to�market�new�life-saving�drugs?�

� America’s�corporations�lead�the�world�in�innovations,�products�and�the�adoption�of�new�technologies.�

Just�a�few�examples�from�Business�Roundtable�members�include:�

• Chevron’s�5-mile-long,�36-inch-wide�drill�that�pushes�technology�to�the�limit�to�reach�new�sources�of�oil�7,000�feet�below�the�sea�and�20,000�feet�below�the�sea�floor.3�

• Dupont’s�corn�seeds�that�protect�themselves�from�pests�and�resist�herbicides�to�boost�farmers’�production�and�improve�crop�quality.4�

• GE’s�desalination�platforms�that�reclaim�more�than�2�billion�gallons�of�water�a�day�for�a�thirsty�world.5�

• Siemens’�7,000�wind�turbines�that�produce�some�7,000�megawatts�worldwide.6�The�Biglow�Canyon�Wind�Farm�in�Oregon�provides�141�turbines�that�produce�23�megawatts�each�with�a�total�output�of�324�megawatts.�This�is�equivalent�to�a�reduction�in�carbon�dioxide�emissions�of�approximately�500,000�tons�per�year.�

• Texas�Instruments’�visual�prosthetic�implant�that�gives�a�semblance�of�genuine�vision�to�the�blind.7�

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4

In�every�sector�of�our�economy,�America’s�corporations�are�leading�with�innovation,�investment�and�the�adoption�of�new�

technologies.�It�is�in�large�part�due�to�this�contribution�that�America�today�attracts�more�foreign�investment�than�any�

other�country,�maintains�the�world’s�leading�share�in�manufacturing�output�and�continues�to�enjoy�one�of�the�highest�

standards�of�living�in�the�world.8��

Seizing�Opportunities�Provided�by�World�Growth�

According�to�a�study�by�Goldman�Sachs,�the�world’s�middle�class�will�expand�by�1�billion�people�by�2020�9�and�

by�2�billion�by�2030.10�

The�advent�of�globalization�has�coincided�with�and�contributed�to�a�period�of�sustained�growth�in�the�world�

economy�that�has�helped�strengthen�growth�at�home�and�is�creating�unprecedented�opportunities�for�American�

business�and�workforce.�This�rise�in�global�prosperity�created�a�demand�for�American�products�and�services�in�a�

world�in�which�American�corporate�brands�still�overwhelmingly�dominate.�Seven�of�the�top�10�global�brands,�14�of�

the�top�20�and�52�of�the�top�100�are�owned�by�U.S.�companies.11��

Meeting�the�Challenges�of�a�Changing�World�

America�today�faces�real�challenges.�The�subprime�lending�crisis�and�ensuing�turmoil�on�Wall�Street�and�Main�

Street�have�revealed�how�deeply�interconnected�we�all�are�and�have�tested�our�economy�as�it�has�only�rarely�been�

tested�before.�Business�Roundtable�believes�that�one�of�the�greatest�strengths�of�the�American�economy�is�its�

resilience�in�the�face�of�such�shocks�and�that�we�will�return�to�our�historic�path�of�strong�growth�and�rising�

prosperity.�American�industry�will�be�a�vital�partner�in�that�recovery.�

Even�so,�America�will�face�the�ongoing�challenge�of�an�increasingly�open,�global�economy.�There�is�no�question�

that�globalization�is�creating�massive�structural�shifts�that�are�having�a�profound�impact�on�the�American�worker�

and�American�enterprise�in�general.�But�as�the�economist�Robert�Samuelson�has�said,�“It�is�no�more�possible�to�

undo�globalization�than�it�was�possible,�in�the�19th�century,�to�undo�the�Industrial�Revolution.”12�Competing�on�a�

global�scale�is�not�a�choice,�it�is�a�fact�of�life�in�the�21st�century,�and�we�believe�that�American�enterprise�is�up�to�

the�challenge.�The�prosperity�of�the�United�States�is�fundamentally�interconnected�with�the�global�economy,�

which�is�why�policies�—�from�taxes�to�regulation,�trade,�energy�and�education�—�must�be�structured�to�

complement�growth�in�the�United�States�and�around�the�world.�

�������������������

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� 5

Business�Roundtable�Initiatives�

To�address�the�challenges�America�is�facing�today,�Business�Roundtable�has�embarked�on�five�interconnected,�

mutually�supporting�initiatives�that�are�devoted�to�getting�the�fundamentals�right�by�integrating�domestic�and�

international�policy�to�create�opportunities�for�workers�and�for�strengthening�American�business.�

Consumer�Health�and�Retirement�

Health�care�delivery�needs�a�new�business�model:�one�that�puts�customers�in�the�center�and�uses�the�power�of�

the�market�to�lower�costs,�improve�quality,�create�more�consumer�choice�and�expand�accessibility.13�

The�rising�cost�of�health�care�is�one�of�the�prime�culprits�eroding�the�income�gains�of�the�American�middle�class.�

Health�care�also�has�become�the�principal�cost�driver�for�American�business,�creating�an�ever-growing�“health�care�

premium”�on�American�products�that�puts�us�at�a�disadvantage�in�global�markets.�Business�Roundtable�companies�

play�a�crucial�role�in�the�health�care�debate,�covering�nearly�35�million�people�—�one-quarter�of�all�Americans�who�

have�private�employer-based�or�group�health�insurance�coverage.��

We�believe�that�bipartisan�action�is�needed�to�make�the�health�care�system�more�efficient�and�transparent,�deliver�

greater�value�to�consumers,�and�provide�more�marketplace�options�for�employers�and�individuals�to�obtain�

coverage.�At�the�same�time,�we�must�maintain�the�innovation�and�expertise�that�make�American�medical�care�the�

best�in�the�world.�Long-term�financial�security�also�must�be�ensured�for�all�Americans.�Workers�should�be�provided�

with�financial�incentives�to�save�for�retirement,�families�should�have�access�to�tools�to�manage�their�finances�and�

Social�Security�must�be�strengthened�without�burdening�future�generations.�

Business�Roundtable�has�joined�with�AARP,�the�Service�Employees�International�Union�and�the�National�

Federation�of�Independent�Business�to�form�Divided�We�Fai l .�This�strategic�partnership�aims�to�create�an�

environment�that�will�foster�the�political�will�needed�to�encourage�policymakers�to�find�common�sense,�centrist�

solutions�to�health�care�and�long-term�financial�security�issues.�

Sustainable�Growth�

Energy�represents�one�of�the�greatest�cost�drivers�of�American�business�today,�and�dependence�on�foreign�sources�

of�oil�makes�our�economic�well-being�increasingly�vulnerable�to�world�events�outside�our�control.�At�the�same�

time,�environmental�challenges�—�including�threats�to�global�climate�change�and�water�quality�—�are�demanding�

ever�more�urgent�attention.�

America’s�energy�supplies�must�be�more�diverse�and�more�domestic.�All�options�should�be�on�the�table.�Demand�

will�only�grow,�and�we�must�be�able�to�answer�it.�That’s�why�Business�Roundtable�promotes�an�aggressive,�

comprehensive�response�on�the�part�of�both�the�public�and�private�sectors,�drawing�on�the�best�technology�to�

safeguard�the�environment�while�promoting�alternative�fuels,�energy�efficiency�and�the�abundant�domestic�energy�

supplies�necessary�to�keep�the�U.S.�economy�thriving�and�U.S.�business�competitive�in�the�global�marketplace.�

Meanwhile,�we�must�address�the�problem�of�global�warming.�Business�Roundtable�supports�collective�actions�that�

will�lead�to�the�reduction�of�greenhouse�gas�emissions�on�a�global�basis�with�the�goal�of�slowing�increases�in�

greenhouse�gas�concentrations�in�the�atmosphere�and�ultimately�stabilizing�them�at�levels�that�will�address�the�

risks�of�climate�change.��

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6

If�climate�legislation�is�to�be�politically�sustainable,�it�also�must�be�economically�sustainable,�reducing�our�nation’s�

carbon�footprint�in�such�a�way�that�it�does�not�put�American�industry�and�jobs�at�a�disadvantage�in�the�global�

marketplace.�It�also�is�crucial�that�we�minimize�compliance�costs�while�maximizing�the�certainty�and�predictability�

on�which�rational�business�planning�and�investment�depend.�

Education,�Innovation�and�Workforce�

If�we�take�our�scientific�and�technological�supremacy�for�granted,�we�risk�losing�it.�What�we�are�lacking�at�the�

moment�is�not�so�much�the�wherewithal�to�meet�the�challenge,�but�the�will.14�

In�the�knowledge-based�economy�of�the�21st�century,�the�United�States�needs�a�policy�agenda�that�focuses�on�

maintaining�its�place�as�the�world’s�pre-eminent�leader�in�science,�technology�and�innovation.�We�believe�that�the�

United�States�cannot�and�will�not�thrive�without�a�well-educated,�well-trained�workforce.�That�is�why�Business�

Roundtable�is�promoting�education,�innovation�and�workforce�policies�to�develop�the�U.S.�talent�pipeline.��

As�other�countries�have�improved�their�education�systems,�the�U.S.�high�school�graduation�rate�has�fallen�from�

first�to�21st,�and�our�college�attainment�rate�has�fallen�from�second�to�14th�among�industrialized�countries.�The�

problem�is�not�that�our�schools�are�getting�worse;�it�is�that�our�competitors�are�getting�better�at�a�faster�pace.�

Whether�the�measures�are�student�achievement,�patents,�investments�in�basic�scientific�research,�or�degrees�in�

engineering�and�computer�science,�the�United�States�risks�losing�competitive�advantage.��

Our�dynamic�economy�necessitates�a�new�lifelong�approach�to�learning�that�prepares�U.S.�students�and�workers�

with�the�skills�and�knowledge�they�need�to�succeed.�In�addition,�policies�to�assist�Americans�who�experience�job�

dislocation,�increase�and�sustain�investment�in�the�basic�sciences,�welcome�the�best�and�brightest�from�abroad,�

and�promote�innovation�and�risk-taking�at�home�will�all�be�vital�to�keeping�America’s�competitive�edge.�

International�Engagement�

The�success�of�American�companies�and�workers�in�the�21st�century�global�economy�will�depend�on�their�ability�to�

compete�on�a�global�scale.�For�many�Business�Roundtable�companies,�the�United�States�is�still�our�largest�market,�

but�international�markets�are�growing�faster�and�have�more�new�customers.�To�succeed�in�this�new�international�

competitive�environment,�we�have�to�be�able�to�export�goods�and�services�to�foreign�customers�from�our�domestic�

facilities,�reach�those�customers�through�our�international�operations,�and�also�import�products�and�services�to�

offer�the�best�prices�to�American�consumers.�There�is�no�either/or�in�the�global�competitive�struggle.��

To�ensure�we�are�able�to�meet�the�challenges�of�the�global�economy,�Business�Roundtable�supports�common�

sense,�pro-U.S.�tax�and�international�trade�and�investment�policies�that�put�American�companies�and�workers�on�a�

level�playing�field�with�their�foreign�competitors.��

We�support�the�reduction�of�high�corporate�taxes�that�put�us�at�a�competitive�disadvantage�with�other�countries�

and�tax�treatment�that�levels�the�playing�field.�We�also�support�international�trade�and�investment�agreements�

that�provide�fair�treatment�for�American�companies�and�workers�by�opening�markets�for�our�products�and�services;�

preventing�discriminatory�regulatory�barriers�and�intellectual�property�abuses;�and�promoting�best�corporate,�labor�

and�environmental�practices.��

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� 7

Corporate�Leadership�

Good�corporate�governance�is�essential�to�promoting�confidence�in�the�American�marketplace.�The�success�of�

American�corporations�is�based�on�trust�—�a�trust�that�can�come�only�through�transparency�of�operations;�

adherence�to�the�highest�ethical�standards;�and�a�track�record�of�behaving�responsibly�with�employees,�

shareholders�and�the�communities�where�they�operate.�

In�light�of�the�recent�economic�crisis,�Business�Roundtable�supports�regulatory�reform�for�the�financial�services�

industry.�Reform�efforts�should�focus�on�more�effective�and�modern�government�oversight�of�financial�institutions�

and�provide�better�disclosures�on�risk-taking.�Corporate�governance�reforms�should�focus�on�evolving�principles�

and�best�practices�without�being�prescriptive�so�that�individual�companies�of�all�sectors�of�the�economy�have�the�

flexibility�to�continue�producing�long-term�shareholder�value.�

As�part�of�our�commitment�to�ethical�leadership,�Business�Roundtable�has�established�two�key�programs:�

• Institute�for�Corporate�Ethics,�which�draws�on�the�best�thinking�in�business�and�academia�and�seeks�

to�advance�ethical�decisionmaking�in�everyday�business�affairs.�

• Partnership�for�Disaster�Response,�which�builds�on�the�recognition�that�American�corporations�often�

are�the�first�on�the�ground�in�responding�to�local�disasters.�Business�Roundtable�has�partnered�with�the�

American�Red�Cross�to�help�the�business�community�and�nonprofit�sectors�strengthen�the�nation’s�disaster�

response�system.�

Building�the�Framework�for�Continued�Prosperity�

These�five�initiatives�address�the�fundamentals�of�economic�growth�and�what�it�will�take�to�keep�our�living�

standards�on�the�rise�in�an�age�of�global�competition�and�economic�challenges.�While�each�is�important�in�itself,�

they�are�all�interconnected,�and�each�is�vital�to�the�success�of�the�others.��

A�thriving�21st�century�economy�will�depend�on�new,�innovative�ideas.�Those�in�turn�will�require�an�educated,�

knowledge-empowered�workforce.�That�workforce�must�have�the�resources�to�bring�those�ideas�to�fruition.�And�all�

of�this�must�take�place�in�a�climate�of�openness�and�personal�and�institutional�responsibility.�

America�has�always�been�at�its�best�when�faced�with�daunting�challenges.�Today,�health�care,�the�recession�and�

energy�security�are�among�those�at�the�top�of�the�list.�And�there�are�others.�We�know�that�we�can�meet�those�

challenges�because�America�has�faced�even�more�daunting�challenges�in�the�past�and�has�come�out�of�the�

experience�stronger�while�still�maintaining�the�freedoms�that�make�our�nation�not�just�a�leader�in�prosperity�but�

also�a�leader�in�hope�to�all�the�world.�

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�Initiative�CEO�Chairs�and�Staff�Contacts�

Consumer�Health�and�Retirement�

CEO�Chair:�Ivan�G.�Seidenberg,�Chairman�and�CEO,�Verizon�Communications�

Staff�Contact:�Maria�Ghazal,�Director,�Public�Policy,�202-872-1260,�[email protected]

Corporate�Leadership�

CEO�Chair:�Anne�M.�Mulcahy,�Chairman�and�CEO,�Xerox�Corporation�

Staff�Contact:�Thomas�J.�Lehner,�Director,�Public�Policy,�202-872-1260,�[email protected]

Education,�Innovation�and�Workforce�

CEO�Chair:�William�D.�Green,�Chairman�and�CEO,�Accenture�

Staff�Contact:�Susan�Traiman,�Director,�Public�Policy,�202-872-1260,�[email protected]

International�Engagement�

CEO�Chair:�James�W.�Owens,�Chairman�and�CEO,�Caterpillar�Inc.�

Staff�Contact:�Brigitte�Schmidt�Gwyn,�Senior�Director,�Congressional�Relations,�202-872-1260,�

[email protected]

Sustainable�Growth�

CEO�Chair:�Michael�G.�Morris,�Chairman,�President�and�CEO,�American�Electric�Power�Company,�Inc.�

Staff�Contact:�Marian�Hopkins,�Senior�Director,�Public�Policy,�202-872-1260,�[email protected]

Business�Roundtable�

President:�John�J.�Castellani,�202-872-1260�

Executive�Director:�Larry�D.�Burton,�202-872-1260�

Executive�Director,�External�Relations:�Johanna�Schneider,�202-872-1260�

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� 9

�Endnotes�

1.�Security�Industry�and�Financial�Markets�Association,�“U.S.�Household�Ownership�of�Equities�in�1999�and�2005,”�SIFMA�Fact�Book�2008,�p.�67.�

2.�Security�Industry�and�Financial�Markets�Association,�Equity�Ownership�in�America,�2005,�p.�5,�http://archives2.sifma.org/research/pdf/EquityOwnership05.pdf.�

3.�www.chevron.com.�

4.�www.dupont.com.�

5.�Business�Roundtable,�“SEE”ing�Change:�2008�Progress�Report.�

6.�Ibid.�

7.�www.ti.com.�

8.�Council�on�Competitiveness,�Competitiveness�Index:�Where�America�Stands,�www.compete.org/publications/detail/357/competitiveness-index-where-america-stands/.�

9.�William�J.�Amelia,�“Interconnected�We�Prosper,”�International�Herald�Tribune,�June�25,�2008.��

10.�Robert�Samuelson,�“A�Baffling�Global�Economy,”�Washington�Post,�July�16,�2008.�www.washingtonpost.com/wp-dyn/content/article/2008/07/15/AR2008071502428.html.�

11.�“The�Top�100�Brands,”�Business�Week,�September�29,�2008.�

12.�Robert�Samuelson,�“A�Baffling�Global�Economy,”�Washington�Post,�July�16,�2008.�www.washingtonpost.com/wp-dyn/content/article/2008/07/15/AR2008071502428.html.�

13.�Ivan�G.�Seidenberg,�“America’s�Health�Care�at�Risk:�Finding�a�Cure,”�Our�Common�Health�Care�Challenge:�Finding�Solutions�that�Work�for�All�Americans,�September�18,�2008.�

14.�Tapping�America’s�Potential:�The�Education�for�Innovation�Initiative,�July�2005,�p.�14,�www.businessroundtable.org/node/3719.�

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Consum

er Health

and Retirem

ent

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�CONSUMER�HEALTH�AND�RETIREMENT�

Employee�Retirement�Income�Security�Act�(ERISA)�

Introduction�

Most�Americans�—�a�total�of�177�million�—�obtain�health�insurance�coverage�through�their�employers.�

Approximately�133�million�are�covered�under�plans�regulated�through�a�nationally�uniform�framework�established�

by�the�1974�Employee�Retirement�Income�Security�Act�(ERISA).�This�law�has�fiduciary�requirements,�administrative�

requirements�and�remedies.�ERISA�provides�the�legal�authority�that�permits�employers�to�manage�health�and�

retirement�benefits�for�employees�in�locations�across�the�country�without�50�states�imposing�separate�

requirements.�

Background�All�employers�that�offer�health�and�retirement�benefits�(except�federal�and�state�governments�and�certain�religious�

organizations)�are�governed�by�ERISA.�The�law�was�enacted�in�1974�to�create�uniform�federal�standards�for�

employer-sponsored�benefit�plans,�including�both�health�and�retirement�plans,�and�pre-empts�the�application��

of�varying�rules�under�state�laws�that�“relate�to”�these�employer-sponsored�plans.�

Options�OPTION�1 : � Preserve�ERISA.�Congress�and�the�president�should�preserve�ERISA�without�changes.�

Pro:�Voluntary�employer-sponsored�health�benefits�are�preserved.�Employees�continue�to�obtain�

health�care�coverage�through�the�established�and�familiar�system�with�traditional�risk�pools.�

Continuation�of�coverage�is�ensured�for�patients�with�pre-existing�conditions.�Incentives�are�

maintained�for�businesses�to�participate�in�insurance�programs�for�the�people�who�work�for�them.�

Business�owners�and�managers�are�reassured�that�the�business�regulatory�climate�will�not�change�

in�this�respect�as�they�plan�in�midst�of�current�economic�difficulties.��

Con:�States�would�be�forced�to�abandon�insurance-related�tax�initiatives�on�businesses�to�fund�

expanded�health�care�coverage�for�their�residents.�States�would�not,�however,�have�to�abandon�

numerous�other�health�reform�initiatives�to�help�expand�health�coverage,�lower�costs�and�improve�

health�care�quality.�These�include�subsidizing�health�coverage�for�low-income�individuals�and�

families,�establishing�wellness�programs,�reforming�medical�liability�laws,�or�imposing�an�individual�

mandate�to�obtain�coverage.�

OPTION�2: � Change,�erode�or�eliminate�ERISA.��

Pro:�States�could�enact�broader�reforms,�use�employers�as�a�source�of�funding�and�covered�lives,�

and�spread�the�“risk”�for�state�health�reform�efforts�in�a�larger�risk�pool.��

(continued)�

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2

�CONSUMER�HEALTH�AND�RETIREMENT�

Employee�Retirement�Income�Security�Act�(ERISA)�

CEO�Chair�

Ivan�G.�Seidenberg��

Chairman�and�CEO�

Verizon�Communications�

Staff�Contact�

Maria�Ghazal��

Business�Roundtable�

202-872-1260�

[email protected]

Con:�States�already�have�the�authority�to�adopt�innovative�programs�to�expand�health�insurance�

coverage�for�all�without�modifications�to�ERISA.�Without�ERISA,�the�decline�in�employer-

sponsored�coverage�would�be�significant�and�would�add�to�the�uninsured�and�other�problems��

in�our�health�care�system.�ERISA�is�part�of�the�solution.�It�makes�coverage�more�affordable�for�

employers�to�sponsor,�and�employers�bring�innovation�and�significant�efforts�to�improve�quality�

and�efficiency�to�our�nation’s�health�care�system.��

�Resources�Business�Roundtable�Health�Care�Reform�Principles,�June�2007,�www.businessroundtable.org/sites/default/files/�

Business_Roundtable_Principles_for_Reform_06062007.pdf.�

Health�Care�Reform�in�America�—�A�Business�Roundtable�Plan,�September�2008,�www.businessroundtable.org/�

sites/default/files/Health_Care_Reform_Plan.pdf.�

National�Coalition�on�Benefits,�www.coalitiononbenefits.org.��

��Action�Recommended�� Business�Roundtable�urges�Congress�to�preserve�ERISA�so�there�is�no�disruption�to�the�current�

employer-based�health�care�system.�ERISA�provides�the�necessary�federal�framework�that�enables�

employers�to�provide�health�and�retirement�benefits�to�American�workers�and�their�families.�

� ERISA�is�critical�to�maintaining�a�voluntary�employer-sponsored�health�benefits�system,�which�Business�

Roundtable�will�continue�to�support.��

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�CONSUMER�HEALTH�AND�RETIREMENT�

Health�Care�Reform�Legislation�

Introduction�

When�it�comes�to�scientific�advances,�medical�technology,�and�the�quality�of�doctors�and�medical�institutions,�

America’s�health�care�system�is�arguably�the�best�in�the�world.�However,�rising�costs�mean�that�those�who�have�

coverage�are�paying�more�and�getting�less�value�in�return.�Americans�with�employer-provided�coverage�worry��

that�they�won’t�be�able�to�keep�their�health�insurance�if�they�switch�jobs,�retire�early�or�start�a�new�business.�In�

addition,�more�than�45�million�Americans�lack�health�insurance�altogether.��

Efforts�to�reform�our�health�care�system�offer�significant�opportunities�to�drive�down�costs,�drive�up�quality��

and�improve�access�to�health�care�for�all�Americans.�Promising�reforms�include�measures�to�use�the�power�of�

information�technology�to�liberate�doctors�from�today’s�pen-and-paper�system�and�empower�patients�to�take�a�

more�active�role�in�their�health�care.�Appropriate�health�insurance�market�reforms�could�break�down�barriers�to�

innovation,�promote�competition�among�health�insurers�and�expand�consumer�choice.�

Background�In�2007,�total�health�care�spending�in�the�United�States�reached�$2.3�trillion�—�an�increase�of�6.9�percent�over�the�

previous�year�and�more�than�twice�the�rate�of�inflation.�The�United�States�currently�spends�16�percent�of�gross�

domestic�product�(GDP)�on�health�care�—�more�than�four�times�the�amount�spent�on�national�defense�—�compared�

to�10.7�percent�in�Germany,�9.7�percent�in�Canada�and�9.5�percent�in�France.�Recent�federal�government�reports�

estimate�health�care�spending�could�rise�to�$4.3�trillion�by�2017�and�consume�nearly�20�percent�of�GDP.��

Health�care�costs�represent�the�fastest-growing�cost�for�American�businesses,�hindering�job�creation,�hurting�our�

ability�to�compete�in�global�markets�and�straining�the�household�incomes�of�many�Americans.�For�five�consecutive�

years,�Business�Roundtable�members�have�cited�health�care�costs�as�a�top�cost�pressure.��

There�are�many�factors�contributing�to�rising�health�care�costs.�Today’s�health�care�system�fails�to�make�use�of�

efficiency-enhancing�information�technology.�Health�care�consumers�find�it�difficult�to�obtain�reliable�information�

on�the�cost�and�effectiveness�of�care.�Our�health�care�payment�structure�rewards�volume�over�quality,�which�skews�

incentives�and�drives�up�prices.��

��Action�Recommended�� The�complex�issues�within�our�health�care�system�should�be�addressed�through�a�combination�of�private�

market�reforms�and�changes�in�government�programs.�Public�policy�should�be�aimed�at�creating�a�

transformational�change�in�the�system�to�ensure�that�all�Americans�have�access�to�affordable,�quality�

health�care.��

(continued)�

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�CONSUMER�HEALTH�AND�RETIREMENT�

Health�Care�Reform�Legislation�

CEO�Chair�

Ivan�G.�Seidenberg��

Chairman�and�CEO�

Verizon�Communications�

Staff�Contact�

Maria�Ghazal��

Business�Roundtable�

202-872-1260�

[email protected]

�Resources�Health�Care�Reform�in�America�—�A�Business�Roundtable�Plan,�September�2008,�www.businessroundtable.org/�

sites/default/files/Health_Care_Reform_Plan.pdf.�

Business�Roundtable�Health�Care�Principles,�June�2007,�www.businessroundtable.org/sites/default/files/�

Business_Roundtable_Principles_for_Reform_06062007.pdf.�

� As�leaders�of�companies�that�provide�health�care�coverage�to�nearly�35�million�Americans,�Business�

Roundtable�members�strongly�support�policy�reforms�that�would�make�our�health�care�system�more�

efficient�and�transparent,�deliver�greater�value�to�consumers,�and�provide�more�marketplace�options�

for�employers�and�individuals�to�obtain�coverage.�Our�proposal�builds�on�the�employer-based�health�

insurance�system�and�seeks�to�improve�quality�of�care�while�expanding�access�for�all�Americans.�

� Business�Roundtable’s�health�care�reform�plan�has�four�pillars:�

• � Creating�greater�consumer�value�in�the�health�care�marketplace�by�using�health�

information�technology�and�empowering�consumers�with�more�information�about�quality�

health�care.�

• � Providing�more�affordable�health�insurance�options�for�all�Americans�by�creating�an�

open,�all-inclusive�private�market�for�health�insurance,�replacing�today’s�highly�fragmented,�

state-by-state�market�with�multistate�markets.�To�ensure�insurance�plans�are�solvent�and�

meet�certain�minimum�requirements,�individual�states�should�continue�to�act�as�the�primary�

regulators.�Broader,�more�competitive�markets�will�create�more�choices�for�more�health�care�

consumers.�

• � Engaging�all�Americans�in�taking�an�active�role�in�their�health�care.�First,�place�an�

obligation�on�all�Americans�to�obtain�health�insurance�either�through�their�employer�or�

through�the�private�market.�Second,�encourage�all�Americans�to�participate�in�employer�or�

community-based�prevention,�wellness�and�chronic�care�programs.��

• � Offering�health�coverage�and�assistance�to�low-income,�uninsured�Americans�to�

create�a�stable�and�secure�public�safety�net.�This�assistance�would�be�financed�from�the�cost�

savings�and�efficiencies�generated�by�a�more�competitive�and�value-driven�health�care�

system.��

� Today,�our�health�care�system�leaves�major�consumer�needs�unmet,�costs�unchecked�and�basic�

practices�untouched�by�the�productivity�revolution�that�has�transformed�every�other�sector�of��

our�economy.�Business�Roundtable’s�health�care�reform�plan�will�strengthen�coverage�for�the��

177�million�Americans�who�receive�it�through�their�employers,�while�making�health�care�more�

accessible�and�more�affordable�for�everyone.

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�CONSUMER�HEALTH�AND�RETIREMENT�

Health�Information�Technology�

Introduction�

Health�care�is�one�of�the�few�segments�of�the�American�economy�that�has�not�yet�experienced�the�transformational�

benefits�of�modern,�efficient�information�technology�(IT).�As�consumers,�we�are�accustomed�to�electronic�communication�

and�data�exchange�in�the�form�of�ATMs�and�online�transactions.�But�the�lack�of�such�systems�in�health�care�—�the�lack�of�

health�IT�—�is�costly�and�dangerous.�When�a�business�fails�to�use�technology,�the�result�is�inefficiency�and�wasted�

spending.�In�medicine,�the�result�is�often�inferior�care,�personal�suffering,�loss�of�life�and�spiraling�costs.�

Background�

Health�IT�has�the�potential�to�save�as�much�as�$165�billion�a�year�from�efficiencies�and�improved�health�outcomes.�

Moreover,�many�of�the�more�than�98,000�people�who�die�each�year�from�preventable�medical�errors�could�be�

saved�through�the�use�of�accurate,�up-to-date�electronic�systems.�Finally,�health�IT�presents�an�unprecedented�

opportunity�to�replace�today’s�largely�insecure�paper-based�system�with�a�secure�system�that�provides�greater�

convenience�for�patients,�faster�and�more�up-to-date�answers�for�providers,�more�accurate�information�for�

pharmacists,�and�greater�service�to�underserved�and�distant�populations.�

Legislation�is�needed�to�create�the�legal�authority�to�establish�uniform�interoperable�standards�for�health�IT.�

Investments�in�health�IT�have�begun�but�will�never�fully�proliferate�without�the�established�foundation�in�law��

that�is�needed�for�widespread�deployment.�

Options�OPTION�1 : � Pass�legislation.�Congress�should�pass�and�the�president�should�sign�health�IT�legislation�to�

establish�interoperable�standards.���

Pro:�Approximately�98,000�lives�would�be�saved�each�year�from�a�reduction�in�deaths�due�to�

medical�errors;�the�United�States�would�save�as�much�as�$165�billion�each�year�in�efficiencies�and�

improved�health�care�outcomes;�IT�infrastructure�would�provide�the�basis�for�all�future�reform;�

underserved�and�remote�communities�would�gain�greater�access�to�health�care;�patients�and�

families�would�enjoy�greater�convenience�in�accessing�records;�patients�and�families�would�benefit�

from�secure,�improved�interaction�with�health�care�providers�to�support�better�lifestyle�choices;�

patients�with�chronic�diseases�would�receive�earlier�and�more�intensive�support,�thus�avoiding�pain�

and�suffering�and�reducing�greater�public�and�private�expense�later;�and�elderly�patients�would�

avoid�risky�travel�to�health�care�providers�by�relying�on�long-distance�imaging�and�interaction.�

Con:�Health�providers�and�patients�must�part�with�the�paper-and-pen�approach�to�record-

keeping,�which�will�require�substantial�financial�investment�and�a�change�in�the�way�health�

professionals�work�and�interact�with�patients.��

(continued)�

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�CONSUMER�HEALTH�AND�RETIREMENT�

Health�Information�Technology�

OPTION�2: � Legislation�fails.�Legislation�goes�unapproved;�the�issue�continues�to�be�raised�annually�but�is�

perpetually�bogged�down�in�ancillary�matters.��

Pro: �Preserves�patient�familiarity�with�current�paper-and-pen�system�in�spite�of�costliness�and�

loss�of�life;�allows�experiment�in�complete�laissez-faire�approach�to�risks�and�rewards�of�health�

care�outcomes.�

Con:�Lives�continue�to�be�unnecessarily�lost;�the�health�care�system�fails�to�control�rising�costs;�

the�U.S.�health�care�system�begins�to�significantly�lag�behind�those�of�other�nations;�the�health�

care�system�remains�in�a�paper-based�world�even�as�nearly�all�other�industries�and�businesses�use�

networked�electronic�services;�costly�lifestyle�issues�and�early�treatment�of�chronic�diseases�

remain�unaddressed�matters�among�patients�who�need�help;�and�the�lack�of�common�electronic�

language�for�health�care�leads�to�“Tower�of�Babel”�effect�in�which�different�systems�speak�

different�languages�and�use�different�formats�(imagine�planes�from�different�airlines�unable�to�

speak�a�common�language�with�air�traffic�control,�and�the�challenge�is�apparent).�

��Action�Recommended�� Business�Roundtable�urges�Congress�to�immediately�pass�legislation�providing�standards�for�secure,�

uniform�and�interoperable�health�IT.�As�providers�of�health�care�coverage�for�nearly�35�million�

Americans,�members�of�Business�Roundtable�support�widespread�adoption�of�health�IT�to�deliver�a�

new�dimension�of�safety,�quality,�choice�and�convenience�to�American�consumers.�All�Americans�

should�have�access�to�a�secure,�uniform,�interoperable�health�IT�system.�Its�adoption�will�improve�

the�patient�experience,�increase�positive�health�outcomes�and�generate�significant�savings.��

� Congress�should�immediately�pass�legislation�that�will:�

• Authorize�the�establishment�of�uniform�interoperable�standards�and�a�process�for�setting�

the�standards;��

• Include�grants,�loans�or�tax�credits�for�providers�to�assist�in�the�purchase�of�interoperable�

health�IT�systems;�

• Educate�Americans�on�the�value�of�electronic�health�records�and�health�information;�

• Protect�personal�health�information�without�over-regulating�or�creating�undue�burdens�

within�the�system�by�including�uniform�security�standards�to�protect�personal�health�

information�without�negatively�affecting�quality,�patient�safety�and�efficiency�of�health�

care;�and��

• Include�a�date�certain�by�which�all�payers�and�providers�are�required�to�have�implemented�

interoperable�systems.

(continued)�

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3

CEO�Chair��

Ivan�G.�Seidenberg��

Chairman�and�CEO�

Verizon�Communications�

Staff�Contact�

Maria�Ghazal��

Business�Roundtable�

202-872-1260�

[email protected]

�CONSUMER�HEALTH�AND�RETIREMENT�

Health�Information�Technology�

�Resources�Business�Roundtable�Letter�from�Verizon�CEO�on�Health�IT,�June�2008,�www.businessroundtable.org/�

sites/default/files/BRT_e-Communications_Edition%20-%20Ivan_letter_v4-BRT_letterhead.pdf.�

Business�Roundtable,�Upgrade�America’s�Health�IT�System�Now,�April�2008,�

www.businessroundtable.org/sites/default/files/BRT_Hill_Event_Brochure_Split-10-13.pdf.�

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1

�CONSUMER�HEALTH�AND�RETIREMENT�

Medical�Liability�Reform�

Introduction�

Reforms�to�our�medical�liability�system�have�the�potential�to�improve�medical�practice,�appropriately�compensate�

individuals�who�are�harmed�as�a�result�of�medical�negligence�and�reduce�costs�in�the�health�care�system.�Medical�

liability�costs�largely�are�driven�by�two�factors:�the�cost�of�defensive�medicine�and�the�costs�associated�with�

judicial�proceedings.�Fair�compensation�should�be�provided�when�medical�negligence�occurs;�however,�everyone��

in�the�system�will�benefit�if�defensive�medicine�and�unnecessary�lawsuits�can�be�reduced.�

Background�The�cost�of�defensive�medicine�is�difficult�to�determine,�but�the�most�commonly�accepted�estimate�is�substantial.�

In�2002,�economists�Daniel�Kessler�and�Mark�McClellan�examined�survey�data�on�the�effects�of�defensive�medicine�

on�physician�productivity,�as�well�as�its�impact�on�health�outcomes.�Overall,�they�found�that�about�5–9�percent�of�

total�health�care�expenditures�were�due�to�defensive�medicine�costs.��

The�U.S.�Department�of�Health�and�Human�Services�(HHS)�also�commissioned�a�survey�by�Harris�Interactive�on�

defensive�medicine.�In�its�July�2002�report�Confronting�the�New�Health�Care�Crisis:�Improving�Health�Care�Quality�

and�Lowering�Costs�by�Fixing�Our�Medical�Liability�System,�Harris�found�that:�

• 79�percent�of�physicians�have�ordered�more�tests�than�they�would�based�on�professional�judgment�of�

what�is�medically�needed;�

• 74�percent�have�referred�patients�to�specialists�more�often�than�they�believed�was�medically�necessary;��

• 51�percent�have�recommended�invasive�procedures�such�as�biopsies�to�confirm�diagnoses�more�often�

than�they�believed�was�medically�necessary;�and�

• 41�percent�have�prescribed�more�medications�than�they�would�based�only�on�their�professional�judgment.�

HHS�further�determined�in�2003�that�overall�medical�liability�reform�would�lower�Medicare�costs�by�some��

$31�billion�per�year.1�

High�medical�malpractice�premiums�and�fears�of�lawsuits�also�have�had�an�effect�on�the�supply�of�doctors�and�

medical�care.�Some�55�percent�of�hospitals�report�difficulty�recruiting�doctors,2�some�emergency�rooms�have�been�

forced�to�turn�away�ambulances�for�lack�of�specialists,3�more�than�70�percent�of�neurosurgeons4�and�55�percent��

of�orthopedic�surgeons5�report�limiting�the�kinds�of�procedures�they�perform,�and�7–8�percent�of�all�obstetricians�

have�stopped�practicing�obstetrics�altogether.6��

Medical�liability�law�should�be�reformed�to�ensure�fair�compensation�to�individuals�who�are�harmed�while�reducing�

unnecessary�defensive�medicine�and�lawsuits.�

(continued)�

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�CONSUMER�HEALTH�AND�RETIREMENT�

Medical�Liability�Reform�

Options�OPTION�1 : � � Enact�medical�liability�reform�that�includes�caps�on�noneconomic�damages,�similar�to�those�in�

place�in�California,�Texas�and�other�states.��

Pro: �State�reforms�that�include�a�cap�on�noneconomic�damages�have�proven�highly�effective�in�

lowering�doctors’�medical�liability�premiums�and�increasing�the�supply�of�doctors.�

Con:�Previous�attempts�to�pass�limits�on�noneconomic�damages�at�the�federal�level�have�failed�

to�pass�the�Senate�—�the�party�being�in�the�majority�did�not�affect�the�outcome.��

OPTION�2: � Adopt�legislation�to�authorize�pilot�projects�to�evaluate�alternative�resolutions�of�medical�liability�

claims,�including�medical�courts,�alternative�dispute�resolution�and�other�efforts.�Following�these�

pilots,�Congress�should�enact�those�programs�that�work�in�broader�legislation�to�set�up�a�national�

system�that�provides�fair�compensation�of�individuals�who�are�harmed�but�also�reduces�the�costs�

associated�with�defensive�medicine.��

Pro: �The�Fair�and�Reliable�Medical�Justice�Act�was�introduced�in�the�110th�Congress�by�Sen.�

Baucus,�D-MT;�Sen.�Enzi,�R-WY;�Rep.�Cooper,�D-TN;�and�Rep.�Thornberry,�R-TX.�Legislation�that�

supports�pilot�demonstration�programs�for�alternatives�to�medical�litigation�would�have�a�greater�

chance�of�achieving�sufficient�bipartisan�support�in�Congress�than�previous�attempts�at�liability�

reform.�

Con:�Pilot�demonstration�programs�for�alternatives�to�medical�litigation�would�require�significant�

time�to�fully�develop�and�prove�their�effectiveness,�which�would�delay�any�impact�on�a�national�

scale.�

OPTION�3: � Enact�legislation�to�encourage�and�support�the�use�of�appropriate�medical�practice�guidelines�

developed�by�national�professional�organizations�or�other�similarly�qualified�organizations.�If�a�

physician�follows�the�guidelines,�then�the�provider�should�be�able�to�use�adherence�to�the�

practice�guidelines�as�an�acceptable�defense�against�a�negligence�action.��

Pro: �Such�a�policy�has�the�potential�not�only�to�reduce�litigation�and�defensive�medicine�but��

also�to�encourage�national�practice�guidelines�that�would�improve�the�quality�of�medical�care�for�

everyone.�

Con:�Medical�care�is�as�much�an�art�as�it�is�a�science.�Rigid�adherence�to�medical�practice�

guidelines�inflicts�“cookbook�medicine”�when�clinical�care�should�be�tailored�to�the�needs�of��

each�individual.��

(continued)�

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3

CEO�Chair��

Ivan�G.�Seidenberg��

Chairman�and�CEO�

Verizon�Communications�

Staff�Contact�

Maria�Ghazal��

Business�Roundtable�

202-872-1260�

[email protected]

�CONSUMER�HEALTH�AND�RETIREMENT�

Medical�Liability�Reform�

�Resource�Business�Roundtable�Health�Care�Reform�Principles,�June�2007,�www.businessroundtable.org/�

sites/default/files/Business_Roundtable_Principles_for_Reform_06062007.pdf.�

1�Addressing�the�New�Health�Care�Crisis:�Reforming�the�Medical�Litigation�System�to�Improve�the�Quality�of�Health�Care�11,�Office�of�the�Assistant�Secretary�for�Planning�and�Evaluation,�U.S.�Department�of�Health�and�Human�Services,�2003.��2�American�Hospital�Association,�Professional�Liability�Insurance:�A�Growing�Crisis,�March�2003.�3�The�Schumacher�Group,�2004�Hospital�Emergency�Department�Administration�Survey,�cited�in�“Federal�Medical�Liability�Reform,”�Alliance�of�Specialty�Medicine,�July�2005.�4�American�Association�of�Neurological�Surgeons�and�Congress�of�Neurological�Surgeons,�2004�survey,�cited�in�“Federal�Medical�Liability�Reform,”�Alliance�of�Specialty�Medicine,�July�2005.��5�American�Association�of�Orthopedic�Surgeons,�cited�in�“Federal�Medical�Liability�Reform,”�Alliance�of�Specialty�Medicine,�July�2005.�6�American�College�of�Obstetricians�and�Gynecologists,�November�3,�2006.�

��Action�Recommended�� Business�Roundtable�urges�Congress�to�authorize�pilot�projects�to�evaluate�alternative�ways�to�resolve�

medical�liability�claims,�including�medical�courts,�alternative�dispute�resolution,�and�other�efforts�to�

reduce�the�costs�of�defensive�medicine�and�to�improve�health�care�quality.�Following�these�pilots,�

Congress�should�enact�those�that�enhance�the�fair�compensation�of�individuals�who�are�harmed�as��

a�result�of�negligence�while�demonstrating�a�reduction�in�defensive�medical�costs.�Congress�should�

support�the�use�of�appropriate�medical�practice�guidelines�developed�by�national�professional�

organizations�or�other�similarly�qualified�organizations�as�an�acceptable�defense�in�malpractice�actions.

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1

�CONSUMER�HEALTH�AND�RETIREMENT�

Pensions�

Introduction�

Defined�benefit�pension�plans�remain�a�critical�component�of�the�retirement�security�equation�for�most�Business�

Roundtable�member�companies.�These�retirement�plans,�whether�traditional�or�hybrid,�provide�an�ongoing�stream�of�

income�to�those�who�have�already�retired�and�remain�an�important�retirement�benefit�for�the�current�workforce.�The�

Roundtable’s�consistent�position�is�that�the�best�way�to�protect�pensions�is�for�Congress�to�pass�prudent�rules�that�

promote�the�long-term�retirement�security�of�Americans;�do�not�disrupt�the�economy�or�financial�markets;�and�do�not�

inappropriately�divert�capital�investments�away�from�creating�jobs,�capital�improvements,�or�research�and�development.�

Recent�adverse�economic�conditions�have,�unfortunately,�brought�the�importance�of�implementing�Business�

Roundtable’s�historical�position�on�pension�funding�into�stark�focus.�With�new�restrictions�being�implemented�or�

considered�that�could�undermine�the�ability�to�maintain�a�robust�defined�benefit�system,�the�rules�must�continue�

to�provide�employers�with�the�flexibility�to�design,�implement�and�prudently�fund�their�pension�plans�in�a�manner�

that�is�consistent�with�wise�business�practices.�

Background�

The�2006�Pension�Protection�Act�(PPA)�imposed�stringent�new�minimum�funding�requirements�on�pension�plans.�

Those�PPA�rules�have�only�begun�to�be�phased�in.�The�sudden�decline�in�the�value�of�pension�plan�assets�in�fall�

2008,�coupled�with�the�credit�crunch,�has�placed�defined�plan�sponsors�in�a�difficult�position.�At�a�time�when�

companies�need�cash,�they�also�are�required�to�make�unexpectedly�large�contributions�to�their�plans�under�PPA.�

While�the�phase-in�of�the�new�PPA�funding�rules�is�already�rapid,�the�changed�economic�environment�makes�the�

limited�transition�that�was�provided�to�the�2006�funding�regime�unworkable�for�many�employers.��

At�the�same�time,�proposals�have�begun�to�surface�that�would�erode�the�ability�of�an�employer�to�tailor�a�pension�

plan�to�best�meet�the�needs�of�its�unique�workforce.�PPA�contained�helpful�clarifications�regarding�the�treatment�of�

cash�balance�and�hybrid�plans.�There�has�been�discussion�that�some�of�those�decisions�could�be�reopened,�either�

through�narrow�regulatory�interpretations�or�legislative�changes.�Similarly,�recent�discussion�of�volatile�oil�prices�has�

led�some�to�propose�restrictions�on�pension�plan�investments�in�energy�or�other�commodities,�investments�that�have�

become�an�important�tool�in�diversifying�and�hedging�a�defined�benefit�plan’s�investments.�

Options�OPTION�1:� Temporary�relief�from�the�PPA�pension�funding�requirements.�With�the�stringent�new�funding�

rules�adopted�in�PPA�still�being�phased�in,�Business�Roundtable�has�taken�the�position�that�

recent�market�declines�and�the�shortage�of�available�credit�require�a�re-evaluation�of�the�

transition�to�those�new�rules.�Specifically,�the�volatile�and�unexpected�cash�flow�demands�on�

plans�caused�by�the�recent�economic�downturn�should�be�smoothed,�with�those�plans�prudently�

returned�to�full�funding�status�over�a�reasonable�period.��

�(continued)�

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2

�CONSUMER�HEALTH�AND�RETIREMENT�

Pensions�

CEO�Chair�

Ivan�G.�Seidenberg��

Chairman�and�CEO�

Verizon�Communications�

Staff�Contact�

Maria�Ghazal��

Business�Roundtable�

202-872-1260�

[email protected]

Pro:�The�large�and�unexpected�new�funding�obligations�created�by�PPA,�if�not�modified,�will�

divert�assets�away�from�job�retention,�job�creation�and�needed�business�investments,�thus�

increasing�the�number�of�Americans�who�are�unemployed�and�slowing�our�economic�recovery.��

In�some�cases,�employers�might�be�forced�to�freeze�or�terminate�their�plans.�

Con:�If�proposals�are�not�carefully�targeted�at�extended�transition�relief,�other�favorable�elements�of�

PPA�(e.g.,�hybrid�plan�clarifications)�or�other�changes�could�be�reopened�in�the�legislative�process.��

OPTION�2:� Flexible�rules�regarding�maintenance�of�hybrid�pension�plans.�The�Treasury�Department�continues�

significant�regulatory�projects�related�to�PPA�clarification�of�hybrid�pension�plan�rules.�Important�

technical�issues�remain�on�how�to�interpret�certain�PPA�provisions.�At�the�same�time,�elements�of�

the�plaintiffs’�bar�and�some�consumer�advocacy�groups�continue�to�press�for�a�reopening�of�hybrid�

plan�issues,�and�litigation�continues.�Any�erosion�of�the�current�hybrid�plan�rules�could�dramatically�

reduce�their�utility�and�undercut�an�important�element�of�the�defined�benefit�system.�Business�

Roundtable�supports�maintaining�the�flexibility�to�adopt�hybrid�plans�that�meet�workforce�needs.��

Pro: �Hybrid�plans�provide�a�unique�means�of�meeting�workforce�retirement�needs�and�should�

remain�a�viable�alternative�available�to�employers.�

Con:�None.�

OPTION�3:� Restrictions�on�investment�of�plan�assets.�Recent�efforts�to�prohibit�pension�plan�investment�in�

energy�or�other�commodities�continue�a�long-standing�debate�over�whether�the�government�

should�be�involved�in�managing�retirement�plan�investment�decisions.�These�efforts�may�take�

other�forms,�including�social�investing�in�which�the�government�attempts�to�direct�investment�into�

certain�activities�that�are�deemed�socially�desirable�or�away�from�undesirable�activities.�Attempts�to�

direct�proxy�voting�of�shares�held�in�pension�plans�are�similarly�aimed�at�government�involvement�

in�decisionmaking.�The�long-standing�Business�Roundtable�position�is�that�pension�plan�assets�

should�be�managed�prudently�by�employers�acting�on�behalf�of�their�employees,�with�employers�

continuing�to�have�the�freedom,�and�the�sole�responsibility,�to�invest�pension�plan�assets�within�

their�control�in�the�best�economic�interest�of�the�plan’s�participants�and�beneficiaries.��

Pro: �None.�

Con:�Government-mandated�investment�solutions�are�likely�to�be�counterproductive�and�driven�

by�political�winds.�Limits�of�that�nature,�once�enacted,�are�likely�to�erode�the�effectiveness�of�

fiduciary�responsibility�and�ultimately�will�multiply.��

��Action�Recommended�� Continue�to�support�the�defined�benefit�pension�system�by�working�for�reasonable�funding�rules�and�

promoting�hybrid�plans.�Oppose�efforts�by�the�government�to�micromanage�pension�plan�investments,�

leaving�that�responsibility�where�it�belongs�—�with�the�plan�fiduciary.

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Corporate Leadership

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1

�CORPORATE�LEADERSHIP�

Corporate�Governance�

Introduction�

Good�corporate�governance�is�essential�to�promoting�confidence�in�the�American�economy.�The�success�of�

American�corporations�is�based�on�trust�—�a�trust�that�can�come�through�transparency�of�operations;�adherence�

to�the�highest�ethical�standards;�and�a�track�record�of�behaving�responsibly�with�employees,�shareholders�and�the�

communities�in�which�they�operate.�

Background�

Regulatory�Reform�

Many�of�our�securities�laws�and�oversight�agencies�were�created�in�the�1930s,�and�given�overlapping�jurisdictions,�

they�cannot�effectively�monitor�today’s�global,�complex�financial�institutions�and�transactions.�

Although�there�were�many�factors�contributing�to�the�recent�economic�crisis,�the�common�denominator�was�that�

long-term�growth�and�value�were�sacrificed�for�short-term�gain.�The�relentless�drive�for�short-term�results�led�to�

the�creation�of�complex�financial�instruments�that�were�unregulated�and�not�transparent.�

In�addition,�the�current�system�for�companies�to�communicate�with�their�individual�shareholders�is�more�than��

25�years�old.�One�of�the�key�objectives�of�good�corporate�governance�is�effective�communications�and�dialogue�

among�boards,�management�and�shareholders,�and�currently�companies�cannot�communicate�directly�with�

shareholders�without�going�through�brokers�and�intermediaries.��

Proxy�Access�

The�issue�of�proxy�access�involves�how�corporate�director�elections�are�governed�and�how�a�company�proxy�is�used.�

Director�elections�are�governed�by�state�law�in�the�state�where�the�company�is�incorporated,�and�the�proxy�is�a�

management�mechanism�for�shareholders�to�vote�when�not�attending�shareholder�meetings.�Shareholders�

currently�have�the�right�to�nominate�directors�and�run�campaigns�but�not�on�the�company�proxy.�This�has�been��

an�important�protection�against�using�company�(shareholder)�resources�to�finance�a�hostile�takeover.�

Currently,�nominating�committees�identify�qualified�candidates�who�have�expertise�and�judgment�and�will�

represent�all�shareholders,�not�one�particular�group.�Proponents�of�proxy�access�want�to�allow�virtually�any�

investor�—�or�group�of�investors�—�to�place�their�board�candidate�directly�on�the�company�proxy.�This�would�

represent�a�fundamental�change�to�the�careful�balance�among�shareholders,�boards�and�management,�which��

over�the�long�term�has�proven�to�be�successful.��

Proxy�access�could�lead�to�special�interest�board�candidates�and�politicize�the�director�election�process.�In�this�day�

and�age�of�short-term�holdings,�“borrowed�voting,”�hedge�funds�and�sovereign�wealth�funds�investing�in�U.S.�

corporations,�the�last�things�shareholders�need�are�fractured�boards�representing�divergent�constituencies�or�

“single�issue”�board�members.�Today’s�corporations�have�millions�of�shareholders,�often�represented�by�thousands�

of�investor�groups�with�very�different�agendas.�A�company�proxy�card�with�dozens�of�board�candidates�is�not�a�

formula�for�stability�and�investor�confidence.�

(continued)�

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2

�CORPORATE�LEADERSHIP�

Corporate�Governance�

The�2007�and�2008�Business�Roundtable�governance�surveys�demonstrate�that�companies�have�transformed�

themselves�by�increasing�their�board�independence�and�demanding�accountability:�

• 90�percent�of�Roundtable�companies�reported�that�their�boards�are�at�least�80�percent�independent.�

• 75�percent�of�Roundtable�company�boards�meet�in�executive�session�at�every�meeting.�

• 76�percent�of�Roundtable�company�CEOs�serve�on�no�more�than�one�other�board.�

• 88�percent�of�Roundtable�company�boards�have�an�independent�chairman,�lead�director�or�presiding�

director.�

• 75�percent�of�Roundtable�company�boards�have�adopted�majority�voting�for�directors�in�just�two�years.�

• The�average�tenure�of�Roundtable�company�CEOs�is�down�to�five�years;�a�2006�Booz�Allen�study�showed�

that�CEO�turnover�had�increased�to�the�highest�level�in�10�years�and�that�one�of�three�CEOs�who�left�

their�jobs�was�forced�out.�

Given�the�overwhelming�evidence�that�boards�are�now�dominated�by�independent�directors,�we�believe�proxy�

access�is�an�idea�whose�time�has�passed.�Proxy�access�would�not�have�prevented�the�economic�crisis,�and�it�would�

not�help�solve�the�challenges�facing�us�today.�

Executive�Compensation�

Executive�compensation�is�a�controversial�issue,�and�given�some�of�the�highly�publicized�failures,�the�level�of�

outrage�is�justifiable.�

In�2007,�the�House�of�Representatives�passed�HR�1257,�which�would�mandate�an�annual�shareholder�vote�on�

executive�compensation�for�all�publicly�traded�companies.�However,�shareholders�already�have�the�right�to�vote�on�

compensation�—�in�2008,�more�than�90�proposals�were�filed�with�the�Securities�and�Exchange�Commission�(SEC)�

and�voted�on�by�shareholders.�In�addition,�mandatory�compensation�voting�could�lead�to�further�demands�to�vote�

on�other�aspects�of�board�decisionmaking,�such�as�capital�expenditures,�strategic�plans,�advertising�and�

endorsement�deals�—�all�involving�far�greater�dollar�amounts�than�compensation.�

There�also�could�be�widespread�disagreement�over�what�the�results�would�mean.�For�example,�would�a�“yes”��

vote�of�52�percent�be�seen�as�an�endorsement�of�compensation�plans?�Would�a�“no”�vote�of�48�percent�mean�

compensation�plans�should�be�restructured?�If�a�board�decides�to�retain�its�compensation�plan�following�a��

“no”�vote,�will�it�be�subjected�to�“withhold”�campaigns�the�following�year,�and�what�would�the�impact�on�

shareholders�be�if�the�board�were�destabilized?�

In�the�context�of�the�economic�crisis,�Business�Roundtable�believes�the�emphasis�on�producing�short-term�results�

led�to�increasingly�risky�behavior,�and�that�in�turn�produced�compensation�abuses.�The�key�to�curbing�this�

behavior�is�to�prevent�risks�associated�with�short-term�results�and�to�once�again�align�compensation�plans�with�

shareholder�interests.�

(continued)�

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3

Staff�Contact�

Thomas�J.�Lehner��

Business�Roundtable�

202-872-1260�

[email protected]

CEO�Chair��

Anne�M.�Mulcahy��

Chairman�and�CEO�

Xerox�Corporation�

�CORPORATE�LEADERSHIP�

Corporate�Governance�

�Resources�Business�Roundtable�corporate�governance�publications,�www.businessroundtable.org/initiatives/�

leadership/governance.��

Business�Roundtable�Institute�for�Corporate�Ethics,�www.darden.virginia.edu/corporate-ethics/.�

��Action�Recommended�� The�recent�economic�crisis�has�focused�attention�on�governance�issues.�Business�Roundtable�

recognizes�the�need�for�regulatory�reform�for�the�financial�services�industry,�and�we�are�

committed�to�working�constructively�on�a�meaningful�solution.�

� Corporate�governance�reforms�should�acknowledge�the�reforms,�evolving�principles�and�best�practices�

that�companies�have�instituted;�at�the�same�time,�they�should�consolidate�and�enhance�financial�

services�oversight�and�minimize�the�risk�that�contributed�to�the�economic�crisis.�By�doing�so,�Business�

Roundtable�believes�that�individual�companies�of�all�sectors�of�the�economy�will�have�the�ability�to�

innovate,�grow�and�continue�producing�long-term�shareholder�value.�Specifically,�we�recommend:�

� Regulatory�Reform�

� Business�Roundtable�believes�that�reform�efforts�should�focus�on�three�main�areas:�Modernize�

and�consolidate�government�oversight�agencies,�regulate�credit�default�swaps�and�other�

derivative�instruments,�and�require�companies�to�disclose�their�key�performance�indicators��

and�better�disclose�their�risk�management�processes�in�SEC�filings.�

� In�addition,�we�support�reforming�the�shareholder�communications�process�to�allow�companies�to�

communicate�directly�with�their�individual�shareholders�without�having�to�go�through�third�parties�

and�intermediaries.�We�also�believe�proxy�advisory�firms�should�be�regulated�to�prohibit�conflicts�

of�interest�and�should�be�required�to�make�their�processes�transparent.�

� Proxy�Access�

� In�the�past,�some�have�suggested�that�proxy�access�would�enhance�board�independence�and�

oversight.�Business�Roundtable�disagrees;�boards�have�become�overwhelmingly�independent�in�

recent�years,�and�the�unintended�consequences�of�proxy�access�far�outweigh�any�benefits.�The�issue�

has�been�thoroughly�debated�over�the�years,�and�the�SEC�has�repeatedly�concluded�that�changing�

the�current�system�is�inconsistent�with�state�law�and�unworkable�from�a�practical�standpoint.�

� Executive�Compensation�

� Business�Roundtable�believes�that�the�limits�placed�on�executive�compensation�for�those�companies�

using�funds�from�the�economic�rescue�legislation�are�reasonable�and�appropriate.�However,�we�

oppose�mandating�an�annual�shareholder�vote�on�executive�compensation�for�all�publicly�traded�

companies.�Subjecting�board�decisions�to�a�referendum�system�of�voting�could�lead�to�uncertainty,�

resulting�in�a�lack�of�investor�confidence�in�corporations�and�declining�shareholder�value.��

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Education, Innovation and W

orkforce

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1

�EDUCATION,�INNOVATION�AND�WORKFORCE�

Education�Reform�Legislation�

Introduction�

The�Elementary�and�Secondary�Education�Act�(ESEA),�first�enacted�in�1965�and�named�the�No�Child�Left�Behind�

(NCLB)�Act�in�its�current�iteration,�is�up�for�reauthorization.�An�initial�effort�to�begin�the�reauthorization�process�

failed�to�reach�bipartisan�consensus�at�the�committee�level�in�2007.�As�the�principal�federal�vehicle�to�improve��

K–12�education�in�the�United�States,�reauthorization�of�ESEA�has�the�potential�to�either�accelerate�or�slow�down�

momentum�for�providing�all�students�a�world-class�education.��

Background�

Business�Roundtable�has�had�a�long-term�commitment�to�improving�the�performance�of�the�education�system�and�

raising�student�achievement�in�the�United�States.�Changing�demographics;�upcoming�baby-boomer�retirements;�

growth�of�high-wage,�high-skill�jobs�that�require�postsecondary�education�and�training;�and�the�international�

marketplace�for�talent�are�forces�that�emphasize�the�need�for�all�U.S.�students�to�graduate�from�high�school�with�

the�foundation�skills�and�knowledge�that�prepare�them�to�succeed�in�college,�in�the�workplace�and�in�life.�

From�1965�through�2001,�the�federal�role�in�education�focused�primarily�on�helping�special�groups�of�students,�

such�as�disadvantaged�and�disabled�children.�NCLB,�signed�into�law�in�2002,�broadened�the�scope�of�the�federal�

role�in�terms�of�accountability�for�the�achievement�outcomes�expected�for�all�students.�Business�Roundtable�

supported�initial�passage�of�NCLB�and�viewed�two�dimensions�of�the�legislation�as�especially�promising:�

• First,�it�was�important�civil�rights�legislation�that�made�clear�that�standards�and�expectations�for�students�

must�not�vary�based�on�race/ethnicity,�language,�disability�or�economic�status.�

• Second,�it�established�a�more�transparent�data�reporting�system,�accountability�for�improving�student�

academic�achievement�and�options�for�students�to�leave�chronically�low-performing�schools.�

The�National�Assessment�of�Educational�Progress�(NAEP)�2007�reading�achievement�results�for�4th�grade�students�

and�math�results�for�4th�and�8th�grade�students�are�the�highest�in�the�history�of�the�NAEP�assessment.�Recent�

reports�using�state�assessment�data�also�show�that�student�reading�and�math�achievement�has�improved�since�

NCLB�was�enacted�six�years�ago.1��

From�a�business�perspective,�although�we�are�encouraged�by�recent�student�achievement�gains,�U.S.�education�

performance,�particularly�math�and�science�achievement�and�high�school�and�college�graduation�rates,�is�not�

getting�better�fast�enough�in�comparison�to�our�international�competitors.�For�most�American�students,�education�

will�determine�their�future�standard�of�living�—�the�income�an�individual�earns�over�a�lifetime�changes�based�on�

whether�he�or�she�is�a�high�school�dropout,�is�a�high�school�graduate,�or�has�a�two-�or�four-year�college�degree.�

(continued)�

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2

�EDUCATION,�INNOVATION�AND�WORKFORCE�

Education�Reform�Legislation�

�Options�OPTION�1 : � Reauthorize�ESEA�with�substantial�changes�to�the�basic�framework�of�NCLB,�particularly�to�limit�

annual�assessments,�lower�unrealistic�accountability�requirements�and�eliminate�punitive�

consequences�for�persistently�low-performing�schools.�

Pro:�The�NCLB�“brand”�is�politically�damaged�beyond�repair,�and�a�significantly�different�

approach�to�school�improvement�is�needed.��

(continued)�

Weak U.S. Performance in Science and Mathematics Literacy

Average scores of 15-year-old students on combined science literacy scale andmathematics literacy scale, by Organisation for Economic Co-operation andDevelopment (OECD) jurisdiction, 2006

Combined science literacy scaleJurisdiction ScoreOECD average 500

OECD jurisdictionsFinland 563Canada 534Japan 531New Zealand 530Australia 527Netherlands 525Korea, Republic of 522Germany 516United Kingdom 515Czech Republic 513Switzerland 512Austria 511Belgium 510Ireland 508Hungary 504Sweden 503Poland 498Denmark 496France 495Iceland 491UNITED STATES 489Slovak Republic 488Spain 488Norway 487Luxembourg 486Italy 475Portugal 474Greece 473Turkey 424Mexico 410

Mathematics literacy scaleJurisdiction ScoreOECD average 498

OECD jurisdictionsFinland 548Korea, Republic of 547Netherlands 531Switzerland 530Canada 527Japan 523New Zealand 522Belgium 520Australia 520Denmark 513Czech Republic 510Iceland 506Austria 505Germany 504Sweden 502Ireland 501France 496United Kingdom 495Poland 495Slovak Republic 492Hungary 491Luxembourg 490Norway 490Spain 480UNITED STATES 474Portugal 466Italy 462Greece 459Turkey 424Mexico 406

Average is higherthan the U.S. average

Average is notmeasurably differentfrom the U.S.average

Average is lowerthan the U.S.average

Source: National Center for Education Statistics, U.S. Department of Education and Institute of Education Sciences,Highlights from PISA (Programme for International Student Assessment) 2006, 2007

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3

�EDUCATION,�INNOVATION�AND�WORKFORCE�

Education�Reform�Legislation�

Con:�Data�show�that�student�achievement�is�improving�and�achievement�gaps�are�closing.�We�

need�to�stay�the�course�on�data�transparency;�accountability�for�all�student�groups�reaching�

reading,�math�and�science�proficiency;�and�options�for�students�trapped�in�consistently�low-

performing�schools.�

OPTION�2: � Reauthorize�ESEA�with�a�significantly�reduced�federal�role�in�education.��

Pro: �As�a�small�investor�in�K–12�education,�federal�education�requirements�should�be�minimal,�

leaving�states�and�local�school�districts�more�latitude�in�determining�education�policy�and�local�

education�priorities.��

Con:�In�an�economy�that�puts�a�premium�on�intellectual�capital�and�has�a�global�marketplace�for�

talent,�American�students�will�compete�with�their�peers�around�the�world.�It�is�in�the�national�

interest�for�the�federal�government�to�provide�resources,�research�and�data�to�improve�U.S.�

education�performance�and�to�expect�recipients�of�federal�education�funds�to�be�accountable��

for�demonstrating�improved�student�achievement.�

OPTION�3: � Reauthorize�ESEA�by�retaining�the�fundamental�principles�of�NCLB�while�also�addressing�

problems�that�emerged�during�implementation.�

Pro:�The�state�standards-based�education�reform�movement�and�NCLB�continue�to�help�raise�student�

achievement�and�close�achievement�gaps.�The�federal�insistence�on�accountability�was�long�overdue�

after�years�of�providing�funding�with�little�or�no�connection�to�measurable�improvement�in�student�

achievement.�Necessary�refinements�and�omissions�in�the�law�can�be�addressed�and�strengthened�

during�reauthorization�without�compromising�the�law’s�fundamental�principles.��

Con:�NCLB�has�laudable�goals,�but�the�law�is�fundamentally�flawed�and�needs�to�be�overhauled.

��Action�Recommended�� Business�Roundtable�supports�the�third�option.�K–12�education�in�the�United�States�is�a�local�

function�and�state�responsibility�with�the�lion’s�share�of�resources�provided�by�state�and�local�

funding�sources.�However,�in�our�international�economy,�it�is�more�important�than�ever�for�the�

federal�government�to�remain�committed�to�the�national�importance�of�improving�U.S.�education�

performance.�The�federal�investment�needs�to�be�targeted,�focused�and�aligned�with�policies�and�

programs�that�produce�high�school�graduates�academically�prepared�to�succeed�in�college,�work�and�

life.�Recipients�of�federal�funds�must�be�held�accountable�for�these�results.�During�ESEA�

reauthorization,�greater�emphasis�is�needed�on�improving�high�schools;�supporting�and�rewarding�

highly�effective�teachers;�strengthening�science,�technology,�engineering�and�math�education;�and�

creating�incentives�for�states�to�collaborate�on�common�higher�standards�and�better�assessments�

that�reflect�the�expectations�of�college,�work�and�international�competitors.�But�any�changes�

Congress�makes�should�retain�and�build�on�NCLB’s�fundamental�principles.��

(continued)�

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4

�EDUCATION,�INNOVATION�AND�WORKFORCE�

Education�Reform�Legislation�

CEO�Lead�Education�Reform�

Edward�B.�Rust�Jr.��

Chairman�and�CEO�

State�Farm�Insurance�Companies�

Staff�Contact�

Susan�Traiman�

Business�Roundtable�

202-872-1260�

[email protected]

�Resources�Business�Coalition�for�Student�Achievement,�“Framework�for�Reauthorizing�the�No�Child�Left�Behind�(NCLB)�Act:�

Recommendations�to�Improve�and�Strengthen�the�Law,”�January�2007,�http://biz4achievement.org/�

about_the_coalition/position_statement3.pdf.�

Business�Roundtable,�“Essential�Components�of�a�Successful�Education�System,”�2000,�www.businessroundtable�

.org/sites/default/files/2007.10.17_9-Essential_Components_of_a_Successful_Education_System.pdf.�

Business�Roundtable�and�Corporate�Voices�for�Working�Families,�“Early�Childhood�Education:�A�Call�to�Action�from�

the�Business�Community,”�2009.��

1�Center�on�Education�Policy,�Has�Student�Achievement�Increased�Since�2002?�State�Test�Score�Trends�through�2006-07.�

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1

�EDUCATION,�INNOVATION�AND�WORKFORCE�

Innovation�Policy�

(continued)�

Introduction�

In�the�world’s�advanced�economies,�a�nation’s�capacity�to�innovate�has�proven�to�be�a�key�determinant�of�economic�

success.��

For�the�better�part�of�a�century,�the�United�States�enjoyed�a�higher�rate�of�productivity�growth�and�a�higher�standard�of�

living�than�other�large,�industrialized�countries.�U.S.�economic�leadership�rested�on�abundant�natural�resources,�efficient�

capital�markets,�and�the�world’s�most�advanced�science�and�technology�enterprise,�which�fed�a�continuous�stream�of�

technological�innovation�into�an�entrepreneurial�business�culture�that�created�new�products�and�processes�and�even�

whole�new�industries.�

During�the�past�20�years,�however,�many�of�America’s�intrinsic�economic�advantages�have�been�globalized.��

Capital�and�natural�resources�can�be�sourced�almost�anywhere�in�the�world,�and�the�United�States�no�longer�can�claim�a�

competitive�advantage.�Over�this�same�period,�the�U.S.�economy�outpaced�the�rest�of�the�world�in�the�productivity�of�

our�workforce�and�the�increasing�sophistication�of�our�economy�because�we�held�a�clear�advantage�in�innovation�

capacity.�America’s�historical�strength�in�innovation�is�based�on�having�world-class�research�universities�and�national�

laboratories�and�on�holding�a�substantial�lead�in�public�and�private�research�and�development�(R&D)�investments.��

Business�Roundtable�leads�Tapping�America’s�Potential�(TAP),�a�coalition�of�16�national�business�groups�that�set�a�goal�

to�increase�the�annual�number�of�U.S.�science,�technology,�engineering�and�mathematics�bachelor’s-level�graduates�to�

400,000�by�2015.�Reaching�this�goal�will�be�very�difficult�unless�policies�and�funding�are�in�place�to�create�the�right�

incentives.��

� �

Deg

rees

Aw

arde

d

450,000

400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

0

Year

TAP Goal

STEM degrees awarded to U.S. citizens and permanent residents, 2001–06

400,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

U.S. STEM Bachelor’s Degree Production Not on Track To Meet TAP Goal

Source: National Science Foundation

201,055 208,243

220,360

223,148

223,255225,660

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2

�EDUCATION,�INNOVATION�AND�WORKFORCE�

Innovation�Policy�

Background�

Ironically,�a�fiscally�constrained�budget�environment�and�more�immediately�visible�short-term�policy�priorities�have�

led�the�United�States�to�substantially�underinvest�in�national�innovation�capacity�at�the�very�time�when�such�

capacity�is�paying�the�highest�dividends�to�the�U.S.�economy�and�the�American�people.�The�United�States�is�in�

danger�of�ceding�our�lead�in�innovation�to�emerging�economies�that�are�rapidly�investing�in�research�and�

education�to�increase�national�economic�performance.�

This�is�terribly�shortsighted�because�investments�in�U.S.�innovation�capacity�not�only�will�help�ensure�long-term�

economic�growth�and�a�rising�standard�of�living�for�all�Americans�but�also�will�drive�solutions�to�many�of�America’s�

most�challenging�problems.�For�example,�addressing�global�climate�change�and�reducing�U.S.�dependence�on�

foreign�oil�require�accelerated�technological�innovation�to�create�dramatically�more�efficient�automobiles,�lighting�

and�appliances�and�dramatically�lower�costs�for�renewable�sources�of�energy.��

Over�the�past�several�years,�a�strong�consensus�has�emerged�on�the�fundamentals�of�an�innovation�policy�agenda�

that�would�make�Americans�more�economically�secure�over�the�long�term,�ensure�higher�wages�and�a�higher�

standard�of�living�for�succeeding�generations�of�Americans,�and�create�the�technologies�that�will�solve�some�of�

America’s�greatest�problems.�

Articulated�by�leaders�from�the�business,�scientific�and�education�communities�as�well�as�in�the�National�

Academies�report,�Rising�Above�the�Gathering�Storm,�this�consensus�agenda�includes:�

• Renewing�America’s�commitment�to�knowledge�creation�and�discovery�by�significantly�increasing�federal�

investments�in�physical�sciences�and�engineering�research,�the�type�of�research�most�directly�coupled�to�

technological�innovation.�

• Building�the�most�highly�educated�and�highly�skilled�workforce�in�the�world�by�significantly�increasing�

federal�investments�in�math�and�science�education�programs�to�improve�U.S.�student�achievement�and�

recruit�and�train�more�qualified�math�and�science�teachers�for�America’s�schools.�

• Ensuring�that�cutting-edge�innovation�will�continue�to�be�“invented�in�America”�by�fostering�an�

environment�that�encourages�private-sector�R&D�investments.�

Significant�increases�for�math�and�science�education�programs�and�physical�sciences�and�engineering�research�

were�authorized�in�the�America�COMPETES�Act,�which�was�passed�with�strong�bipartisan�support�and�signed�into�

law�in�2007.��

So,�what’s�the�problem?�Action�on�appropriations�for�America�COMPETES�Act�priorities�was�thwarted�because�of�

unrelated�disputes�between�Congress�and�the�prior�administration�over�the�total�level�of�domestic�discretionary�

spending.�For�the�last�two�budget�cycles,�House�and�Senate�appropriators�approved�America�COMPETES�Act�

funding�in�committee,�but�the�bills�were�never�brought�to�the�floor�for�consideration.�As�a�consequence,�real�

federal�spending�on�science�and�engineering�research�and�math�and�science�education�has�dropped�over�the�last�

two�years.��

(continued)�

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3

CEO�Chair�

William�D.�Green�

Chairman�and�CEO�

Accenture�

Staff�Contact�

Susan�Traiman�

Business�Roundtable�

202-872-1260�

[email protected]

�EDUCATION,�INNOVATION�AND�WORKFORCE�

Innovation�Policy�

Similarly,�repeated�attempts�to�enact�a�long-term�extension�of�the�federal�R&D�tax�credit�have�foundered�over��

the�issue�of�budgetary�scoring,�and�the�credit�has�been�repeatedly�extended�for�short�periods�of�times,�greatly�

lessening�its�effectiveness�as�a�spur�to�increased�private-sector�R&D�investments.�

�Resources�Tapping�America’s�Potential:�The�Education�for�Innovation�Initiative:�Gaining�Momentum,�Losing�Ground,��

July�2008,�www.businessroundtable.org/sites/default/files/tap_2008_progress.pdf.��

Tapping�America’s�Potential:�The�Education�for�Innovation�Initiative,�July�2005,�www.tap2015.org/about/�

TAP_report2.pdf.

��Action�Recommended�� Business�Roundtable�believes�that�a�coherent�national�innovation�strategy�is�a�prerequisite�for�

sustained�growth�in�high-wage�employment�in�the�United�States�and�an�ever-rising�standard�of�living�

for�U.S.�citizens.�As�the�first�step�toward�demonstrating�a�long-term�commitment�to�the�essential�

investments�that�maintaining�U.S.�innovation�leadership�requires,�Congress�should�fund�annually�the�

science�and�engineering�research�and�the�math�and�science�education�programs�authorized�in�the�

America�COMPETES�Act�and�permanently�extend�a�strengthened�R&D�tax�credit.��

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1

�EDUCATION,�INNOVATION�AND�WORKFORCE�

Workforce�Competitiveness�

Introduction�

Despite�the�economic�downturn�and�rising�unemployment,�long-term�demand�in�the�United�States�for�educated�

and�skilled�workers�will�rapidly�exceed�the�supply.�To�compete�and�succeed�in�an�international�marketplace�for�

talent,�U.S.�workers�and�businesses�need�a�21st-century�approach�to�lifelong�learning�that�enables�them�to�

develop�and�refresh�the�skills�needed�for�high-skilled�service�and�manufacturing�jobs.�In�addition,�the�U.S.�

economy�benefits�from�welcoming�the�best�and�brightest�from�around�the�world�to�work�in�the�United�States,�

particularly�those�with�advanced�degrees�in�science,�technology,�engineering�and�math�from�U.S.�universities.��

Business�Roundtable�has�long�been�committed�to�improving�the�U.S.�education�system�for�individuals�of�all��

ages.�The�Roundtable�believes�that�a�competitive�workforce�starts�with�access�to�high-quality�early�childhood�

education�and�high-performing�schools�and�extends�to�relevant�and�effective�workforce�education�and�training�

opportunities.��

Background�Our�changing�economy�poses�recurring�challenges�for�U.S.�workers�as�new�jobs�are�created�in�once�unknown�fields�

and�old�jobs�disappear�in�once�rock-solid�occupations.�This�job�“churn”�is�causing�anxiety�for�workers�in�many�

industries�and�communities.�The�days�of�retiring�from�the�same�company�in�which�an�employee�started�a�first�job�

are�long�gone.��

Current�workforce�education�and�training�policies�and�programs�were�designed�to�meet�the�past�needs�of�U.S.�

workers,�but�they�now�are�outdated�and�need�to�adjust�to�current�economic�and�demographic�realities.�

• American�workers�can�expect�to�have�10�to�12�jobs�and�three�to�five�careers.�

• The�fastest-growing�segments�of�the�U.S.�population�increasingly�are�less�educated�at�a�time�when�the�

fastest-growing�new�jobs�require�education�beyond�a�high�school�diploma�and�strong�analytic�and�

problem-solving�skills.�

• Whether�job�loss�results�from�increasing�productivity,�technological�change,�or�domestic�or�international�

competition,�U.S.�workers�need�access�to�education�and�training�while�employed�as�well�as�to�transition�

to�new�jobs.�

• Unemployment�rates�decline�and�wages�increase�with�each�additional�level�of�education�and�training.�

The�United�States�has�an�important�education�asset�to�help�meet�this�need�—�community�colleges.�

(continued)�

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2

�EDUCATION,�INNOVATION�AND�WORKFORCE�

Workforce�Competitiveness�

�Options�OPTION�1:� Pass�legislation�to�improve�and�strengthen�current�Trade�Adjustment�Assistance�and�Workforce�

Investment�Act�programs�for�dislocated�workers.�

Pro:�Given�current�fiscal�restraints,�undertaking�a�major�overhaul�of�workforce�training�and�

assistance�programs�is�unrealistic.��

Con:�Differentiating�programs�based�on�why�a�worker�lost�a�job�no�longer�makes�sense.�To�meet�

current�needs�as�well�as�future�expectations,�the�worker�training�system�must�be�redesigned�to�

make�it�easily�accessible,�flexible,�accountable�and�responsive�to�labor�market�changes�and�

worker�needs.�

OPTION�2:� In�addition�to�continuously�developing�a�pipeline�of�American�talent�and�effective�worker�

education�and�training�programs,�pass�legislation�to�reform�the�immigration�policies�that�limit�

visas�and�green�cards�for�highly�educated�and�skilled�foreign�talent.��

Pro: �The�United�States�has�benefited�from�welcoming�the�best�and�brightest�from�around�the�

world�and�could�lose�this�talent�to�foreign�competitors.��

Con:�Any�changes�in�visa�and�green�card�availability�for�highly�skilled�foreign�talent�should�be�

done�in�the�context�of�comprehensive�immigration�reform.�

(continued)�

Source: Bureau of Labor Statistics, Current Population Survey

Education Pays

Doctoral Degree

Professional Degree

Master’s Degree

Bachelor’s Degree

Associate Degree

Some College, No Degree

High School Diploma

Less Than a High School Diploma

1.4% $1,497

$1,427

$1,165

$987

$740

$683

$604

$428

1.3%

1.8%

2.2%

3.0%

3.8%

4.4%

7.1%

Unemployment Rate in 2007 (Percent) Median Weekly Earnings in 2007 (Dollars)

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3

�EDUCATION,�INNOVATION�AND�WORKFORCE�

Workforce�Competitiveness�

CEO�Chair�

William�D.�Green��

Chairman�and�CEO�

Accenture�

Staff�Contact�

Susan�Traiman�

Business�Roundtable�

202-872-1260�

[email protected]

OPTION�3: � Establish�a�National�Commission�on�Workforce�Competitiveness�to�review�training�and�

adjustment�assistance�programs�to�determine�effectiveness�and�recommend�the�design�and�

funding�mechanisms�for�a�new�approach�that�offers�workers�easy�access�to�all�training,�assistance�

and�education�programs.�

Pro:�The�work�of�identifying�the�best�way�over�the�long�term�to�create,�fund�and�build�political�

support�for�a�portable,�flexible,�easy-to-use�system�for�individuals�to�access�education,�training�

and�assistance�would�benefit�from�the�recommendations�of�a�commission�of�well-regarded�

experts.��

Con:�Commissions�can�be�used�to�provide�excuses�for�postponing�difficult�policy�decisions.�

�Resources�America�21:�A�New�Approach�to�the�21st�Century�Workforce,�February�2008,�www.businessroundtable.org/sites/�

default/files/2008.05.20_One_pager_-_A%20New%20Approach%20to%20The%2021st%20Century%20�

Workforce.pdf.�

Prospering�Together:�America’s�Citizens,�Communities�and�Companies,�February�2008,�

www.businessroundtable.org/sites/default/files/2008.01.30_Prospering_Together.pdf.�

The�Untapped�Potential�of�Community�Colleges�to�Advance�U.S.�Competitiveness,�forum�on�Capitol�Hill,��

May�20,�2008,�www.businessroundtable.org/initiatives/education/workforce_competitiveness.

��Action�Recommended�� Business�Roundtable�believes�that�the�United�States�needs�both�short-�and�long-term�policy�strategies�to�

maintain�current�and�boost�future�workforce�competitiveness.�We�recommend�that�Congress�move�forward�

on�all�three�options�to�ensure�a�nimble,�productive�and�competitive�workforce�in�the�United�States.��

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International Engagement

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1

�INTERNATIONAL�ENGAGEMENT�

Trade�and�Investment�

Introduction�

An�intense�debate�is�under�way�in�the�United�States�over�the�future�of�U.S.�trade�and�investment�policies.�Some�

want�to�continue�current�U.S.�policies�of�international�economic�engagement�while�others�would�maintain�the�

fundamental�principles�of�those�polices�but�would�make�them�more�effective�for�American�workers�and�companies.�

And�still�others�want�the�United�States�to�abandon�international�economic�engagement.�

Contributing�to�the�sense�of�urgency�for�the�new�Congress�and�administration�to�resolve�this�debate�are�these�

inescapable�facts:�

• The�international�economy�is�a�reality.�

• American�companies�and�workers�have�to�be�competitive�on�a�global�scale�to�succeed.�

• Our�foreign�competitors�continue�to�pursue�policies�of�international�economic�engagement�to�benefit��

their�companies�and�workers�at�America’s�expense.�

Background�American�companies�and�workers�face�unprecedented�competitive�challenges�in�the�world�economy.�These�challenges�

and�uncertain�times�are�creating�anxiety�about�the�future�for�American�citizens,�communities�and�companies.�To�

overcome�these�anxieties�and�take�advantage�of�opportunities�in�the�world�economy,�we�must�develop�and�implement�

new�and�more�effective�domestic�and�international�policies�to�promote�American�competitiveness�and�fair�treatment�

for�American�exporters�and�investors�and�their�workers�—�not�abandon�international�economic�engagement.��

International�economic�engagement�is�the�cornerstone�of�U.S.�competitiveness�for�three�basic�reasons:�

• First,�the�global�economy�is�a�reality.�The�current�financial�and�economic�crises�make�this�point�sharply.��

• Second,�American�companies�and�workers�face�unprecedented�global�competition.�Our�foreign�competitors�

and�their�governments�are�working�closely�together�to�develop�and�implement�domestic�and�international�

policies�to�succeed�in�the�global�economy.�While�we�debate�the�merits�of�international�trade�and�investment�

negotiations,�they�are�moving�forward�with�new�bilateral�and�regional�trade�agreements�that�will�discriminate�

against�American�workers�and�companies�and�give�their�companies�and�workers�commercial�advantages�in�

important�foreign�markets.�

• Third,�American�companies�and�workers�have�to�be�even�more�competitive�and�on�a�global�scale�to�succeed.�

They�have�to�be�able�to�export�their�goods�and�services�to�foreign�markets,�market�their�goods�and�services�

through�foreign�operations,�and�import�goods�and�services�to�offer�the�most�competitive�prices�and�best�

quality�to�American�consumers.�There�is�no�either/or�in�the�new�international�competitive�struggle.�

American�workers�need�programs�to�develop�and�maintain�the�skills�needed�for�high-skilled�service�and�manufacturing�

jobs�that�increasingly�characterize�the�U.S.�economy�in�the�21st�century.�And�they�need�programs�to�help�them�

(continued)�

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2

�INTERNATIONAL�ENGAGEMENT�

Trade�and�Investment�

CEO�Chair�

James�W.�Owens��

Chairman�and�CEO�

Caterpillar�Inc.�

Staff�Contact�

Brigitte�Schmidt�Gwyn��

Business�Roundtable�

202-872-1260�

[email protected]

adjust�when�their�livelihoods�are�threatened�for�whatever�reason�—�whether�it�is�due�to�increasing�productivity,�

technological�change,�or�domestic�or�international�competition.�

American�companies�need�policies�to�help�them�compete�with�powerful�international�competitors�and�adapt�their�

domestic�and�international�business�operations�to�rapidly�changing�business�environments.�

��Action�Recommended�� Business�Roundtable�recognizes�there�is�a�need�to�change�U.S.�international�trade�and�investment�

policies�to�make�them�more�effective�for�American�workers�and�companies�in�the�21st�century.�

Some�of�these�changes�will�require�legislation;�others�can�be�developed�and�implemented�by�the�

new�president�in�consultation�with�the�Congress�and�private�sector.��

� Business�Roundtable�believes�these�new�policies�include:��

• Rebuilding�a�bipartisan�consensus�on�international�trade�and�investment,�including�new�

trade�negotiating�legislation;�

• Completing�the�World�Trade�Organization�Doha�Round;��

• Modernizing�Trade�Adjustment�Assistance�and�transitioning�it�to�a�more�comprehensive�

training�and�adjustment�program�for�American�workers�and�communities;��

• Developing�new�approaches�to�make�sure�international�trade�and�investment�agreements�

work�more�effectively�for�American�companies�and�workers�through�integrating,�expanding�

and�modernizing�existing�free�trade�agreements�(FTAs),�negotiating�new�FTAs�with�major�

markets�and�new�bilateral�investment�treaties,�and�improving�enforcement;��

• Using�existing�and�new�constructive�initiatives�and�tools�to�promote�beneficial�economic�

relations�with�China;�

• Developing�new�approaches�to�maximize�the�effectiveness�of�international�trade�and�

investment�negotiations,�such�as�using�“rolling”�negotiations,�plurilateral�negotiations�

with�“like-minded”�countries�and�alternative�formats�like�nonbinding�agreements;�

emphasizing�best�practices;�and�using�capacity�building�and�technical�assistance�

agreements�to�encourage�countries�to�eliminate�barriers�and�regulatory�discrimination;�

• Implementing�the�pending�FTAs�with�Colombia,�Panama�and�Korea;��

• Ensuring�U.S.�trade�programs�provide�real�economic�benefits�for�least�developed�countries;��

• Eliminating�laws�and�regulations�that�impede�U.S.�exports;�and�

• Improving�export�promotion�programs.��

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1

�INTERNATIONAL�ENGAGEMENT�

U.S.�Corporate�Tax�Rate�

Introduction�

The�U.S.�federal�corporate�tax�rate�is�35�percent.�Including�state�and�local�corporate�income�taxes,�the�combined�

corporate�tax�rate�was�approximately�39.3�percent�in�2008.�In�comparison,�the�average�combined�corporate�tax�

rate�in�other�Organisation�for�Economic�Co-Operation�and�Development�(OECD)�countries�was�26.2�percent.�

Background�

The�U.S.�combined�corporate�tax�rate�is�the�second�highest�in�the�30-nation�OECD�and�50�percent�higher�than�the�

average�rate�of�the�other�29�OECD�countries.�The�U.S.�corporate�tax�rate�is�9�percentage�points�higher�than�

Germany’s�and�more�than�11�percentage�points�higher�than�the�United�Kingdom’s�(see�figure).��

��������Source:�OECD,�2008�

Combined Corporate Tax Rates for OECD Countries, 2008

0

5

10

15

20

25

30

35

40

45

Ja

pa

n

Un

ited

Sta

tes

Canada

Fra

nce

Belg

ium

Italy

Germ

any

Au

stra

lia

New

Zeala

nd

Spain

Luxem

bourg

Me

xic

o

Norw

ay

Sw

ed

en

Unite

d K

ingdom

Kore

a

Po

rtug

al

Fin

land

Ne

the

rlan

ds

Au

stria

Denm

ark

Gre

ece

Sw

itze

rlan

d

Cze

ch

Re

pu

blic

Hungary

Tu

rke

y

Pola

nd

Slo

va

k R

ep

ub

lic

Ice

lan

d

Irela

nd

OECD Average (excl. US) = 26.2%

(continued)�

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2

�INTERNATIONAL�ENGAGEMENT�

U.S.�Corporate�Tax�Rate�

CEO�Chair�

James�W.�Owens��

Chairman�and�CEO�

Caterpillar�Inc.�

Staff�Contact�

Brigitte�Schmidt�Gwyn��

Business�Roundtable�

202-872-1260�

[email protected]

The�high�U.S.�tax�rate�reduces�capital�investment�in�the�United�States,�and�some�studies�indicate�that�the�reduced�

level�of�investment�results�in�lower�wages�for�American�workers.�Other�studies�suggest�that�total�corporate�tax�

collections�would�increase�if�the�corporate�tax�rate�were�lowered.��

Researchers�using�other�measures�of�corporate�tax�rates,�such�as�effective�tax�rates,�have�found�generally�similar�

patterns:�high�U.S.�rates,�with�our�major�competitors�having�lower�rates�that�have�declined�over�the�past�decade.��

A�recent�study�by�a�Canadian�researcher�finds�U.S.�effective�corporate�tax�rates�to�be�the�second�highest�in�the�

OECD�and�7–9�percentage�points�higher�than�competitors�such�as�Canada,�Germany�and�the�United�Kingdom.�

The�one�exception�to�the�pattern�of�high�U.S.�corporate�taxes�is�that�the�ratio�of�U.S.�corporate�taxes�to�gross�

domestic�product�(GDP)�is�lower�in�the�United�States�than�the�average�OECD�country.�In�2005,�for�example,�the�

ratio�of�corporate�taxes�to�GDP�was�3.1�percent�in�the�United�States�and�was�an�average�of�3.7�percent�in�the�

OECD�(the�average�OECD�rate�was�3.4�percent,�excluding�Norway,�which�receives�significant�corporate�tax�

revenue�from�oil�production).�However,�the�United�States�has�extensive�business�activity�that�is�not�conducted�in�

corporate�form�and�is�not�subject�to�corporate�tax.�If�the�corporate�share�of�business�income�in�the�United�States�

were�more�similar�to�the�average�OECD�country,�U.S.�corporate�tax�receipts�as�a�percentage�of�GDP�would�be�

among�the�highest�in�the�OECD.�

��Action�Recommended�� Overwhelmingly,�the�international�trend�is�for�lower�taxes�on�corporations�to�enhance�economic��

growth�and�provide�higher�paying�jobs�for�a�nation’s�workforce.�Business�Roundtable�believes�that�a�

significantly�lower�U.S.�corporate�tax�rate�would�increase�corporate�investment�in�the�United�States��

and�lead�to�stronger�economic�growth,�with�higher�and�growing�wages�for�American�workers.

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1

�INTERNATIONAL�ENGAGEMENT�

Taxation�of�Foreign�Earnings�of�U.S.�Corporations�

Introduction�

The�taxation�of�foreign�operations�of�American�corporations�has�become�a�major�tax�reform�issue.�There�is�a�

growing�belief�that�raising�taxes�on�the�foreign�operations�of�American�corporations�will�help�prevent�the�loss�of�

U.S.�jobs.�Proposals�to�raise�taxes�have�focused�primarily�on�changes�in�current�law�“deferral”�rules.��

The�U.S.�business�community�is�concerned�that�an�increase�in�U.S.�taxes�paid�by�American�companies�on�their�

foreign�earnings�would�reduce�the�ability�of�American-headquartered�businesses�to�compete�with�foreign-

headquartered�companies�for�sales�in�global�markets.�

Background�U.S.�Taxation�of�Foreign�Earnings�

The�United�States�follows�a�principle�of�“worldwide�taxation”�under�which�a�U.S.�company�is�subject�to�U.S.�tax��

on�its�worldwide�income�no�matter�where�the�income�is�earned.�This�includes�the�income�of�any�separately�

incorporated�foreign�affiliates.��

The�United�States�generally�does�not�tax�a�U.S.-based�company�on�the�active�foreign�income�of�its�separately�

incorporated�foreign�affiliates�until�those�earnings�have�been�paid,�typically�as�a�cash�dividend�to�the�U.S.�parent�

company.�

Because�the�parent�company�may�delay�payment�of�U.S.�tax�until�it�has�received�the�foreign�income�as�a�dividend,�

this�method�of�taxation�results�in�deferral�of�U.S.�tax�relative�to�when�the�foreign�earnings�arise.��

Foreign�countries�also�tax�the�profits�arising�from�the�foreign�operations�of�U.S.-based�international�companies.�

To�prevent�double�taxation,�the�United�States�provides�a�foreign�tax�credit�for�the�income�taxes�paid�to�foreign�

governments�by�the�parent�company�and�its�foreign�affiliates.�

Countries�not�following�a�system�of�worldwide�taxation�with�deferral�use�an�“exemption”�or�“territorial”�system�

under�which�the�active�earnings�of�foreign�subsidiaries�are�exempted�from�tax�in�the�home�country�of�the�parent�

company.��

About�one-third�of�Organisation�for�Economic�Co-Operation�and�Development�(OECD)�members�(nine�of�30�

countries)�follow�a�worldwide�system�of�taxation�with�deferral,�while�the�other�two-thirds�follow�an�exemption�

system.�

In�considering�a�U.S.-owned�foreign�subsidiary�competing�against�a�foreign-owned�foreign�subsidiary�operating��

in�the�same�country,�the�U.S.�system�of�worldwide�taxation�with�deferral�generally�results�in�the�U.S.�subsidiary�

paying�the�same�rate�of�tax�on�its�operations�as�the�foreign-owned�subsidiary�while�those�earnings�remain�

reinvested.�This�permits�U.S.-based�international�companies�to�compete�against�foreign-based�companies��

taxed�under�either�deferral�or�exemption�systems.�

(continued)�

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2

�INTERNATIONAL�ENGAGEMENT�

Taxation�of�Foreign�Earnings�of�U.S.�Corporations�

Operations�of�U.S.-Based�International�Companies�

U.S.-based�international�companies�employed�21.8�million�Americans�in�2005,�accounting�for�nearly�one-fifth�of�

total�U.S.�employment�in�private�industries.�More�than�8�million�Americans�in�manufacturing,�or�56�percent�of�all�

U.S.�manufacturing�employees,�and�13.4�million�Americans�in�service�industries�work�for�these�companies.�

Suppliers�to�U.S.-based�international�companies�and�spending�by�their�employees�created�an�additional�30�million�

American�jobs�in�2005.�Total�employment�generated�by�U.S.-based�international�companies,�both�directly�and�

indirectly,�is�conservatively�estimated�at�47�percent�of�total�U.S.�private�employment.�

More�than�70�percent�of�the�worldwide�employment,�investment�and�production�of�U.S.-based�international�

companies�and�their�majority-owned�foreign�affiliates�are�in�the�United�States.�

More�than�half�of�all�U.S.�exports�—�$491.5�billion�in�2005�—�were�associated�with�trade�by�U.S.-based�

international�companies.�A�10�percent�increase�in�sales�by�foreign�affiliates�is�estimated�to�increase�exports��

by�U.S.�parents�to�their�foreign�affiliates�by�5�percent.�

Because�foreign�affiliates�of�U.S.�companies�frequently�rely�on�supplies�exported�by�the�U.S.�parent,�expansion�

abroad�increases�the�demand�for�U.S.�workers.�When�the�typical�U.S.-based�international�company�expands�

operations�in�its�foreign�affiliates,�each�dollar�of�additional�wages�paid�in�the�foreign�affiliate�is�estimated�to�

increase�U.S.�wages�by�$1.84�as�U.S.�parent�operations�expand.�

American�companies�cannot�rely�solely�on�exports�to�penetrate�foreign�markets.�Foreign�operations�may�be�

necessary�to�market�products�effectively�to�foreign�consumers,�cut�transportation�costs,�avoid�tariff�barriers�and�

meet�local�content�requirements.�Approximately�90�percent�of�the�sales�of�U.S.�foreign�affiliates�are�to�foreign�

customers.�Services�provided�by�foreign�affiliates�often�cannot�be�exported�and�must�be�supplied�locally.�In�2005,�

foreign�affiliates�in�service�industries�represented�61�percent�of�all�U.S.�foreign�affiliates�and�48�percent�of�

employees�in�foreign�affiliates.�

��Action�Recommended�� Business�Roundtable�believes�that�foreign�activities�of�American�companies�enhance�economic�activity�

in�the�United�States,�lead�to�higher�wages�for�American�workers�and�promote�growth�of�the�U.S.�

economy.�Business�Roundtable�does�not�support�policies�that�would�increase�the�current�taxes�paid��

by�American�companies�on�their�foreign�earnings.�Proposals�to�require�current�U.S.�taxation�on�the�

earnings�of�foreign�subsidiaries�of�American�companies�would�reduce�the�international�competitiveness�

of�American�companies�and�their�workers�relative�to�foreign�competitors�and�—�contrary�to�certain�

expressed�views�—�would�lead�to�a�loss�in�jobs�and�reduce�American�living�standards.��

(continued)�

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3

CEO�Chair�

James�W.�Owens��

Chairman�and�CEO�

Caterpillar�Inc.�

Staff�Contact�

Brigitte�Schmidt�Gwyn�

Business�Roundtable�

202-872-1260�

[email protected]

�INTERNATIONAL�ENGAGEMENT�

Taxation�of�Foreign�Earnings�of�U.S.�Corporations�

�Resources�Business�Roundtable�international�tax�deferral�papers,�April�2008,�www.businessroundtable.org/sites/default/�

files/4.7.08_BRT_ITDP_1-8_Deferral_Papers.pdf.��

Taxing�U.S.�Corporations�in�the�Global�Marketplace,�June�2006,�www.businessroundtable.org/sites/default/files/�

20060509001TaxingUSCorporationsintheGlobalMarketplace.pdf.��

� The�current�deferral�rule�generally�ensures�that�foreign�subsidiaries�of�U.S.-based�companies�pay�the�

same�tax�rate�as�their�competitors�in�the�country�in�which�they�are�doing�business,�and�not�a�U.S.�

corporate�tax�rate�that�often�will�be�much�higher.�By�providing�a�level�playing�field,�deferral�allows�

U.S.�companies�to�increase�sales�in�world�markets,�leading�to�more�and�better�paying�jobs�for�

American�workers.�Studies�show�that�the�foreign�operations�of�American�companies�increase�the�

demand�for�American�products�and�services,�thereby�leading�to�more�exports�from�the�United�States�

and�more�jobs�for�Americans.��

� Maintaining�deferral�is�important�to�ensuring�the�competitiveness�of�U.S.�foreign�operations.�All�major�

trading�partners�of�the�United�States�(e.g.,�all�OECD�countries)�either�provide�deferral�or�exempt�the�

foreign�earnings�of�their�companies�from�taxation.�Restrictions�on�deferral�in�the�United�States�would�

be�a�disadvantage�for�American�companies�and�American�workers.�

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1

�INTERNATIONAL�ENGAGEMENT�

Expiring�Business�Tax�Provisions�

Introduction�

A�large�number�of�tax�provisions�will�expire�at�the�end�of�2009,�including�important�corporate�provisions�such�as�

the�research�and�development�(R&D)�tax�credit�and�provisions�affecting�the�taxation�of�foreign�subsidiaries�of�

American�companies�(the�active�finance�exception�and�look-thru�rules).�

Background�

A�large�number�of�tax�provisions�are�extended�on�a�nearly�annual�basis.�Because�these�provisions�are�not�

permanent,�it�is�difficult�for�businesses�to�make�long-term�plans.�For�example,�the�absence�of�permanency�for�the�

R&D�tax�credit�means�a�company�planning�the�location�and�size�of�a�research�facility�or�other�long-term�research�

project�cannot�be�certain�that�future�R&D�expenditures�will�qualify�for�the�R&D�tax�credit.�Therefore,�these�

provisions�have�smaller�incentive�effects�because�businesses�cannot�count�on�receiving�tax�benefits�in�future�years.�

Temporary�provisions�may�be�advisable�if�time�is�needed�to�evaluate�the�effectiveness�of�the�new�incentive.�

However,�the�R&D�credit�was�first�enacted�in�1981�and�has�now�been�extended�13�times�—�most�recently�in�

October�2008.�While�the�credit�has�been�modified�from�time�to�time,�lack�of�permanency�is�unnecessary�to�update�

the�credit�over�time.�

Technological�advancement�made�possible�through�private�R&D�performed�in�the�United�States�is�a�key�

contributor�to�America’s�productivity�gains�and�our�nation’s�rising�standard�of�living.�A�permanent�research�tax�

credit�will�promote�jobs�and�manufacturing�in�the�United�States�—�nearly�half�of�the�companies�claiming�the�

research�tax�credit�are�manufacturers�—�and�will�help�the�United�States�maintain�its�competitive�advantage.��

An�Organisation�for�Economic�Co-Operation�and�Development�(OECD)�survey�shows�that�R&D�credits�are�being�

used�increasingly�by�both�OECD�and�non-OECD�countries�to�stimulate�research�by�businesses.�In�2006,�20�OECD�

countries�had�R&D�tax�credits,�up�from�18�in�2004.�International�comparisons�show�that�U.S.�R&D�incentives�are�

among�the�least�generous.�According�to�the�OECD,�in�2007,�the�United�States�ranked�23rd�out�of�25�nations�in�

terms�of�the�cost�reduction�provided�by�the�R&D�tax�incentives.�Between�1999�and�2007,�20�OECD�countries�—�

but�not�the�United�States�—�increased�the�value�of�their�R&D�tax�incentives.�

Two�significant�international�provisions�are�set�to�expire�at�the�end�of�2009:�the�active�financing�exception�and�

the�look-thru�treatment�for�payments�between�American-owned�foreign�subsidiaries.1�These�provisions�help�level�

the�playing�field�for�American�companies�as�they�seek�to�expand�their�sales�of�products�and�services�to�foreign�

customers.�Expansion�by�American�companies�in�foreign�markets�increases�the�demand�for�American�workers�and�

raises�American�living�standards.�

(continued)�

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2

�INTERNATIONAL�ENGAGEMENT�

Expiring�Business�Tax�Provisions�

CEO�Chair�

James�W.�Owens��

Chairman�and�CEO�

Caterpillar�Inc.�

Staff�Contact�

Brigitte�Schmidt�Gwyn��

Business�Roundtable�

202-872-1260�

[email protected]

1�The�active�finance�exception�permits�certain�types�of�foreign�income�derived�from�the�active�conduct�of�a�banking,�finance�or�insurance�business�to�be�reinvested�in�the�foreign�location�without�incurring�current�U.S.�tax�liability.�This�provision�generally�results�in�U.S.-owned�financial�services�paying�the�same�current�tax�as�foreign-owned�companies�operating�in�the�same�foreign�location.�The�look-thru�rule�permits�certain�payments�of�dividends,�interest,�rents�and�royalties�among�related�controlled�foreign�corporations�to�be�reinvested�without�incurring�current�U.S.�tax�liability�when�the�underlying�source�of�income�is�from�active�earnings�also�eligible�for�deferral.�In�effect,�the�provision�“looks�through”�the�form�of�payment�to�the�underlying�source�of�income.�The�provision�was�adopted�to�permit�foreign�subsidiaries�of�U.S.�companies�to�redeploy�active�foreign�earnings�in�a�manner�similar�to�that�permitted�by�most�U.S.�trading�partners.�

��Action�Recommended�� Business�Roundtable�recommends�that�the�R&D�tax�credit�be�extended�and�enhanced,�and�it�as�well�as�

expiring�international�provisions�be�made�permanent.�If�permanency�cannot�be�achieved�in�the�near�

term,�a�long-term�extension�of�these�provisions�should�be�enacted.�At�a�minimum,�these�provisions�and�

other�expiring�business�provisions�should�be�extended�as�early�as�possible.�Continuing�these�provisions�

has�an�immediate�beneficial�effect�on�American�job�creation�by�reducing�significant�uncertainty�about�

the�tax�rules�that�will�apply�in�the�future�on�investment�projects�undertaken�today.

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1

�INTERNATIONAL�ENGAGEMENT�

Individual�Taxes�on�Dividends�and�Capital�Gains�

Introduction�

In�2003,�Congress�enacted�a�new�lower�maximum�tax�rate�on�dividends�and�capital�gains�income.�Unless�extended�

by�new�legislation,�the�reduced�rates�will�expire�at�the�end�of�2010.�

Background�

Corporate�income�in�the�United�States�is�subject�to�two�levels�of�taxation.�Earnings�of�a�corporation�are�first�

subject�to�corporate�income�tax�(with�graduated�rates�up�to�35�percent).�Dividend�distributions�paid�by�a�

corporation�to�its�individual�shareholders�are�then�subject�to�a�second�level�of�tax.�Gains�realized�on�the�sale��

of�corporate�stock�and�other�assets�are�taxable�to�individuals�as�capital�gains�income.��

Long-term�capital�gains�income�(i.e.,�gains�from�the�sale�of�assets�held�more�than�one�year)�of�individuals�has�

historically�been�taxed�at�a�reduced�rate.�Prior�to�legislation�enacted�in�2003,�long-term�capital�gains�were�subject�

to�a�maximum�tax�rate�of�20�percent.�In�contrast,�prior�to�2003,�dividend�income�was�generally�taxed�at�the�same�

rate�as�other�ordinary�income.�

To�minimize�the�double�taxation�of�individual�shareholders�and�to�encourage�investment�by�corporations�financed�

through�the�issuance�of�new�shares,�special�reduced�tax�rates�on�dividends�received�by�individual�shareholders�

were�enacted�in�2003�(and�extended�in�2006).�The�same�reduced�rates�were�applied�to�income�from�long-term�

capital�gains.��

Currently,�dividends�and�long-term�gains�are�subject�to�a�maximum�tax�rate�of�15�percent�for�individuals.�This�rate�

is�reduced�to�zero�for�individuals�who�face�a�tax�rate�of�15�percent�or�less�on�their�ordinary�income�(in�2009,�the�

zero�rate�for�dividends�and�capital�gains�generally�applies�to�joint�returns�with�taxable�income�less�than�$67,900�

and�for�singles�with�taxable�income�less�than�$33,950).�In�the�absence�of�new�legislation�to�extend�these�reduced�

rates,�beginning�in�2011,�dividend�income�will�be�taxed�at�the�same�tax�rate�as�other�ordinary�income,�while�capital�

gains�income�will�be�subject�to�a�maximum�tax�rate�of�20�percent.�

(continued)�

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2

�INTERNATIONAL�ENGAGEMENT�

Individual�Taxes�on�Dividends�and�Capital�Gains�

CEO�Chair�

James�W.�Owens��

Chairman�and�CEO�

Caterpillar�Inc.�

Staff�Contact�

Brigitte�Schmidt�Gwyn�

Business�Roundtable�

202-872-1260�

[email protected]

��Action�Recommended�� Business�Roundtable�believes�that�the�reduced�tax�rates�for�dividends�and�capital�gains�should�be�

made�permanent.�The�reduced�tax�rates�help�lessen�the�double�taxation�of�corporate�earnings�on�

equity-financed�investments.�The�reduced�tax�rates�provide�incentives�for�companies�to�finance�more�

of�their�investments�through�issuance�of�new�shares�and�the�use�of�retained�earnings�relative�to�the�

use�of�debt�finance.�Reductions�in�the�double�taxation�of�equity�earnings�also�help�mitigate�against�

the�incentive�companies�have�to�use�excessive�levels�of�debt�financing.�High�ratios�of�debt�finance�

can�make�companies�prone�to�insolvency�and�bankruptcy�during�an�economic�downturn.�In�addition,�

reducing�the�double�taxation�of�corporate�earnings�results�in�a�more�efficient�allocation�of�capital�in�

the�economy�by�reducing�the�tax�disadvantage�to�corporate�investments�relative�to�lesser�taxed�forms�

of�investment.�

� By�reducing�impediments�to�the�flow�of�equity�capital�to�the�corporate�sector,�the�U.S.�economy�can�

produce�more�for�any�level�of�savings,�and�corporate�investments�can�expand�over�time,�providing�

higher�wages�for�American�workers.�

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1

�INTERNATIONAL�ENGAGEMENT�

Budget�Deficits�and�Spending�Controls�

Introduction�

In�September�2008,�the�Congressional�Budget�Office�(CBO)�estimated�that�the�2009�deficit�would�be�$438�billion,�

or�about�3�percent�of�gross�domestic�product�(GDP).�Subsequent�legislation�and�an�economic�downturn�not�

included�in�the�CBO�forecast�raise�the�prospects�for�budget�deficits�exceeding�$750�billion,�or�more�than�5�percent�

of�GDP�in�2009.�Beyond�the�near�term,�CBO�forecasts�that�under�current�tax�and�spending�plans�significant�

deficits�will�arise�in�future�decades,�due�almost�entirely�to�growth�in�spending�on�Social�Security,�Medicare�and�

Medicaid.�

Background�A�slowdown�in�economic�activity�in�late�2008�and�unprecedented�measures�taken�by�the�federal�government�to�

achieve�stability�in�financial�markets�are�expected�to�lead�to�a�significant�budget�deficit�in�2009,�likely�exceeding�

$750�billion�or�5�percent�of�GDP.�In�contrast,�the�budget�deficit�over�the�past�40�years�has�averaged�2.4�percent�

of�GDP.�

Budget�deficits�are�appropriate,�and�indeed�desirable,�during�an�economic�downturn.�Tax�reductions�or�spending�

increases�can�provide�additional�resources�to�accelerate�an�economic�recovery�and�reduce�unemployment.��

Over�the�longer�run,�the�concern�about�budget�deficits�is�that�the�required�financing�of�this�debt�lowers�American�

living�standards.�It�can�do�this�in�two�ways.�First,�borrowing�by�the�federal�government�directly�crowds�out�funds�

for�private�investment�because�domestic�or�foreign�savings�are�diverted�to�finance�the�growing�government�debt.�

Second,�even�if�inflows�of�foreign�capital�are�sufficient�to�keep�private�investment�from�declining,�the�return�on�

this�capital�—�either�from�the�ownership�of�productive�private�capital�or�from�the�holdings�of�government�debt�—�

is�transferred�to�foreign�investors.�In�either�case,�through�a�reduction�in�the�productive�capacity�of�the�economy,�

our�American�standards�of�living�decline.�

Projections�beyond�the�next�10�years�show�that�spending�on�mandatory�programs,�largely�Social�Security,�

Medicare�and�Medicaid,�is�expected�to�increase�significantly�in�the�absence�of�policy�action.�The�CBO,�the�trustees�

of�the�Social�Security�and�Medicare�programs,�and�other�professional�bodies�that�have�examined�the�matter�all�

predict�that�federal�spending�on�retirement�and�health�will�eventually�overwhelm�the�federal�budget�and�the�

economy�if�the�programs�are�left�to�operate�under�the�provisions�of�current�law.�

Total�federal�government�spending�in�fiscal�year�2008�for�all�programs�governmentwide�was�$2.979�trillion,�or�

about�21�percent�of�GDP.�Between�2008�and�2030,�CBO�estimates�that�spending�on�Social�Security,�Medicare�and�

Medicaid�will�increase�from�8.5�percent�of�GDP�to�14.1�percent�of�GDP.�And�by�2050,�CBO�estimates�these�three�

programs�will�absorb�18.1�percent�of�GDP.�Under�many�scenarios,�spending�on�Social�Security,�Medicare�and�

Medicaid�together�could�equal�or�exceed�total�federal�government�spending�as�a�share�of�GDP�today.�The�most�

significant�growth�over�this�period�will�be�in�the�Medicare�and�Medicaid�programs,�which�today�represent�less�than�

(continued)�

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2

�INTERNATIONAL�ENGAGEMENT�

Budget�Deficits�and�Spending�Controls�

CEO�Chair�

James�W.�Owens��

Chairman�and�CEO�

Caterpillar�Inc.�

Staff�Contact�

Brigitte�Schmidt�Gwyn��

Business�Roundtable�

202-872-1260�

[email protected]

half�of�spending�on�these�three�programs�but,�under�CBO’s�projections,�will�represent�more�than�two-thirds�of�the�

total�cost�of�these�three�programs�by�2050.�

Maintaining�such�rates�of�spending�growth�would�cause�federal�government�debt�burdens�to�explode�to�

unsustainable�levels�because�lenders�would�recognize�the�government’s�inability�to�finance�this�debt.�Even�before�

such�a�breakdown,�large�deficits�would�crowd�out�private�investment�and�reduce�economic�growth�for�Americans.�

Although�reductions�in�discretionary�spending�can�help�reduce�the�deficit,�they�cannot�solely�offset�the�magnitude�

of�the�growth�in�mandatory�spending.�Similarly,�unprecedented�tax�increases�would�be�required�if�an�attempt�were�

made�to�reduce�the�deficit�through�tax�increases.�Such�tax�increases�would�stifle�economic�growth�and�reduce�

living�standards.�

��Action�Recommended�� Business�Roundtable�has�always�placed�a�high�priority�on�deficit�reduction�to�enhance�sustained�

economic�growth.�However,�to�avoid�a�prolonged�and�potentially�deeper�recession�than�the�country�

has�experienced�in�recent�times,�a�short-term�increase�in�the�deficit�in�2009�is�an�acceptable,�

although�unfortunate,�outcome.�This�does�not�mean�that�Congress�can�ignore�deficits�now,�or�when�

the�economy�recovers.�Measures�to�control�future�spending�will�be�even�more�important�given�the�

increased�debt�this�nation�is�now�incurring.��

� Business�Roundtable�believes�that�future�government�spending�must�be�restrained�to�ensure�that�

future�taxes�do�not�exceed�their�historical�average�as�a�share�of�GDP.�We�encourage�Congress�and�the�

administration�to�consider�the�adoption�of�explicit�spending�caps�for�discretionary�spending�to�ensure�

acceptable�spending�limits.�With�respect�to�Social�Security,�Medicare�and�Medicaid,�we�encourage�

reforms�be�adopted�to�slow�the�growth�in�spending�on�these�programs.�

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Sustainable Grow

th

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1

�SUSTAINABLE�GROWTH�

Building�Efficiency�

Introduction�

Commercial�and�residential�buildings�are�responsible�for�about�39�percent�of�primary�energy�use�in�the�United�States.�

Twenty�percent�of�the�nation’s�natural�gas�and�72�percent�of�the�nation’s�electricity�are�consumed�by�commercial�and�

residential�buildings,�more�energy�than�is�used�by�either�the�transportation�or�the�industrial�sectors�of�our�economy.�

While�many�cost-effective�technologies�to�make�commercial�and�residential�buildings�significantly�more�energy�

efficient�are�available�today,�market�barriers,�discussed�further�below,�have�blocked�these�products�from�moving�into�

homes�and�commercial�buildings�on�the�scale�that�would�be�economically�justified.�

�������Source:�Energy�Information�Agency,�www.eia.doe.gov/emeu/aer/pdf/pages/sec1_3.pdf�

Background�

The�U.S.�economy�has�steadily�become�a�more�efficient�user�of�energy�(energy�use�per�unit�of�gross�domestic�

product�has�declined�by�more�than�50�percent�since�1970),�but�there�is�significant�untapped�potential�for�greater�

efficiency�through�the�widespread�adoption�of�available�and�cost-effective�technology.�While�building�codes�have�

gotten�more�stringent�in�recent�years�and�appliances�and�electronic�equipment�more�efficient,�the�increasing�size�

(continued)�

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2

�SUSTAINABLE�GROWTH�

Building�Efficiency�

of�U.S.�homes,�additions�to�commercial�floor�space,�and�the�proliferation�of�electronic�devices�within�homes�and�

commercial�facilities�have�largely�offset�energy�savings�from�newer�homes�and�appliances.��

Lack�of�consumer�knowledge�and�understanding�is�probably�the�largest�single�barrier�to�greater�energy�efficiency.1�

Many�consumers�are�not�aware�of�how�much�more�efficient�today’s�appliances,�HVAC�systems,�furnaces�and�

windows�are�compared�to�those�on�the�market�just�five�years�ago.�In�addition,�small�steps�that�cost�little�—�such�

as�adding�additional�attic�insulation�and�sealing�gaps�around�pipes�and�wires�—�often�are�overlooked.�This�is�

particularly�important�in�view�of�estimates�that�up�to�30�percent�of�energy�used�for�heating�and�cooling�is�lost�

because�of�cracks�and�gaps�in�the�building�envelope.�Additionally,�consumers�often�do�not�understand�the�

concept�of�investment�“payback”�when�making�purchasing�decisions.�Energy�audits�by�qualified�professionals�and�

assistance�in�“buying�down”�the�initial�cost�of�upgrades�have�been�shown�to�be�highly�effective�in�motivating�

consumers�to�make�cost-effective�efficiency�investments.�

The�Energy�Policy�Act�of�2005�and�the�Energy�Independence�and�Security�Act�of�2007�provided�tax�incentives��

for�efficiency�investments,�updated�appliance�efficiency�codes�and�lighting�standards,�and�required�the�federal�

government�to�purchase�and/or�lease�only�energy-efficient�products�and�space.�In�the�Emergency�Economic�

Stabilization�Act�of�2008,�Congress�extended�certain�expiring�tax�provisions�relating�to�energy-efficient�investments�

in�products�such�as�appliances,�insulation,�windows�and�“green�buildings.”�Further�congressional�action�may�occur�in�

2009�to�spur�increased�building�efficiency,�but�much�of�the�activity�currently�is�occurring�in�the�states.�

��Action�Recommended�� Business�Roundtable�supports�federal,�state�and�local�efforts�to�significantly�strengthen�and�

continuously�update�and�enforce�building�codes;�state�regulatory�policies�to�make�the�delivery��

of�energy�efficiency�a�core�part�of�a�utility’s�business;�full�funding�for�energy�efficiency�programs�

authorized�in�the�Energy�Independence�and�Security�Act�of�2007;�the�promotion�of�“green�

mortgages”�by�lenders;�and�programs�to�extend�“energy�audits”�to�homeowners�and�owners�of�

commercial�buildings.��

� Business�Roundtable�believes�that�widespread�adoption�of�existing�technologies�and�continued�

technological�improvements�can�reduce�our�energy�intensity,�reduce�greenhouse�gas�emissions�and�

strengthen�our�economy�by�improving�productivity�and�efficiency.�There�are�no�“silver�bullets”�or�

“home�runs”�in�the�building�efficiency�area.�Increasing�energy�efficiency�is�often�a�series�of�small,�

cost-effective�steps.�Thus,�all�levels�of�government�need�to�be�involved.�

� The�federal�government�can�lead�by�example,�by�basing�its�purchasing�decisions�in�part�on�energy�

efficiency,�encouraging�state�utility�regulators�to�adopt�policies�to�make�the�delivery�of�energy�

efficiency�a�core�part�of�utilities’�businesses,�and�encouraging�state�and�local�governments�to�

continuously�update�and�enforce�modern�building�codes.�The�federal�government�also�needs�to�

(continued)�

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3

�SUSTAINABLE�GROWTH�

Building�Efficiency�

CEO�Lead�Energy�Efficiency�Campaign�

Michael�Thaman�

Owens�Corning�

Staff�Contact�

Marian�Hopkins�

Business�Roundtable�

202-872-1260�

[email protected]

�Resource�More�Diverse,�More�Domestic,�More�Efficient:�A�Vision�for�America’s�Energy�Future,�June�2007,�

www.businessroundtable.org/sites/default/files/Business_Roundtable_Energy_Report_06062007.pdf.��

� continuously�update�appliance�efficiency�standards,�aggressively�promote�the�Energy�Star�labeling�

program�and�“green�buildings”�initiatives,�and�continue�to�provide�favorable�tax�treatment�for�

efficiency�investments.��

� Concerted�action�by�all�levels�of�government�—�federal,�state�and�local�—�as�well�as�by�state�utility�

regulators�will�be�required�to�realize�the�full�potential�of�greater�building�efficiency.�In�2007,�Business�

Roundtable�released�its�comprehensive�energy�recommendations,�More�Diverse,�More�Domestic,�

More�Efficient:�A�Vision�for�America’s�Energy�Future.�Specifically,�the�Roundtable�called�for:�

� Improving�energy�efficiency�in�the�commercial,�residential�and�electric�power�sectors.�The�United�States�should�reduce�energy�intensity�by�at�least�25�percent�above�the�anticipated�business-as-usual�rate�by:��

• Substantially�boosting�the�efficiency�of�new�and�existing�commercial�and�residential�

buildings;��

• Deploying�a�broad�portfolio�of�energy-efficient�technologies�for�building�operations�and�

appliances;��

• Increasing�the�efficiency�of�the�transmission�and�distribution�system;��

• Optimizing�the�power�grid�with�new�or�advanced�technologies�to�save�energy�and�

improve�reliability;��

• Encouraging�smart�metering�and�other�strategies�that�reduce�peak�period�demand�on�

the�grid;��

• Improving�the�efficiency�of�the�nation’s�power�plant�fleet�through�upgrades�at�existing�

units�and�by�constructing�new�advanced�technology�units;��

• Accelerating�the�deployment�of�wind�and�solar-thermal�power�generation;��

• Increasing�reliance�on�efficient�combined�heat�and�power�units�at�industrial�facilities;�and�

• Challenging�individual�companies�to�set�and�meet�ambitious�energy�efficiency�goals.��

1�Alliance�to�Save�Energy,�Winter�Tips,�www.ase.org/content/article/detail/924,�and�Summer�Tips,�www.ase.org/content/article/detail/1078;�No-Cost�Low-Cost�Tips�for�Saving�Money�&�Energy,�www.ase.org/content/article/detail/965.�

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�SUSTAINABLE�GROWTH�

Building�a�“Greener”�Energy�Infrastructure�

Introduction�

The�United�States�faces�a�myriad�of�economic,�energy�and�environmental�challenges�in�the�years�ahead.�While�oil�

prices�have�declined�materially�in�recent�months�as�a�result�of�the�worldwide�economic�slowdown,�thus�providing�

much�needed�relief�to�consumers�and�businesses,�low�prices�historically�have�paved�the�way�for�even�higher�peak�

prices�in�subsequent�years�as�investment�in�new�and�alternative�resources�is�curtailed,�increased�efficiency�ceases�to�

be�a�priority,�and�complacency�becomes�the�norm.�Today’s�current�low�energy�prices�may�in�fact�lead�to�greater��

U.S.�dependence�on�oil�imports�in�the�years�ahead�as�investment�in�marginal�U.S.�production�is�curtailed.��

In�addition�to�our�oil�import�dependency,�there�is�increasing�concern�over�the�effects�of�global�climate�change.�

Addressing�this�challenge�will�require�greater�energy�efficiency,�a�larger�contribution�by�renewable�sources�of�energy,�

and�the�development�and�deployment�of�low�or�zero�carbon�fuels.�Casting�a�pall�over�the�policy�changes�that�will�be�

required�to�lessen�our�dependence�on�imported�fuels�and�reduce�greenhouse�gas�emissions�is�the�worldwide�

economic�recession�that�threatens�to�get�worse�before�it�gets�better.�Investing�in�a�“greener”�energy�infrastructure�

(renewables,�transmission�to�connect�renewables�to�the�grid,�a�smarter�grid�and�greater�building�efficiency)�can�help�

lessen�our�dependence�on�imports,�reduce�greenhouse�gas�emissions,�improve�our�energy�efficiency,�and�create�and�

sustain�thousands�of�needed�jobs.�

Background�

Our�new�President�Barack�Obama�has�indicated�that�one�of�the�highest�priorities�of�his�administration�will�be�

enacting�new�energy�policies�that�will�reduce�our�energy�dependence,�promote�energy�efficiency�and�renewable�

energy,�and�combat�climate�change�by�capping�and�reducing�carbon�dioxide�and�other�greenhouse�gas�emissions.�

The�new�president�and�congressional�leadership�also�have�discussed�the�possibility�of�providing�increased�incentives�

for�“green”�energy�(renewables�and�energy�efficiency)�infrastructure�as�part�of�an�economic�stimulus�bill�likely�to�be�

considered�by�Congress.�Although�the�timing�of�these�initiatives�is�uncertain,�it�is�likely�that�an�economic�

stimulus/“green�jobs”�bill�will�be�considered�soon�after�the�111th�Congress�convenes�in�January,�followed�by�longer-

term�energy�and�climate�proposals.�

��Action�Recommended�� Business�Roundtable�believes�that�while�the�issues�highlighted�below�do�not,�on�their�own,�represent�a�

comprehensive�energy�infrastructure�or�climate�policy,�they�will�make�an�important�down�payment�on�a�

more�secure,�more�diverse,�more�sustainable,�lower�carbon�energy�future.�

(continued)�

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�SUSTAINABLE�GROWTH�

Building�a�“Greener”�Energy�Infrastructure�

� �Increase�Production�of�Renewables�

� The�tax�code�provides�either�production�tax�credit�or�investment�tax�credit�subsidies�for�a�variety�

of�renewable�fuels,�including�wind,�solar,�biomass,�geothermal�and�small�hydroelectric�resources.�

In�October�2008,�Congress�extended�solar�investment�tax�credits�through�2016.�However,�wind�

production�tax�credits�(currently�equal�to�2�cents�per�kilowatt�hour)�were�extended�only�through�2009.�

Wind�holds�the�potential�of�providing�as�much�as�20�percent�of�our�electric�generation�by�2030,�given�

the�right�incentives�and�investment�in�infrastructure.�While�wind�is�our�most�economical�renewable�

resource,�it�is�still�more�expensive�than�conventional�resources�in�most�areas.�Business�Roundtable�

supports�extension�of�the�wind�production�tax�credits�for�an�additional�three�to�four�years.�

� Modernize�the�Electric�Grid�

� The�most�abundant�renewable�resources,�including�wind,�solar�and�geothermal�resources,�often�

are�located�in�remote�locations,�far�from�existing�load�centers.�Without�a�substantial�expansion�

and�modernization�of�the�transmission�system,�the�United�States�will�not�be�able�to�realize�the��

full�potential�of�our�renewable�resources.�Unfortunately,�multistate�high-voltage�transmission�

lines�are�difficult�to�site�and�build,�in�part�because�of�a�balkanized�planning,�cost�allocation�and�

siting�process�designed�for�a�different�era.�The�American�Wind�Energy�Association,�the�American�

Electric�Power�Company�and�others�have�called�for�new�legislation�that�would�expand�the�role�of�

the�Federal�Energy�Regulatory�Commission�to�include�overseeing�the�planning�of�long-distance,��

high-voltage�transmission�facilities;�allocating�costs;�and�ensuring�the�siting�of�these�facilities.�

Business�Roundtable�supports�legislation�embodying�these�principles.�In�addition,�a�smarter,��

more�controllable�transmission�and�distribution�system�will�help�utilities�and�their�customers��

more�optimally�use�electricity�and�generation�resources.�The�Roundtable�supports�full�funding��

for�the�Department�of�Energy’s�smart�grid�demonstration�programs�authorized�in�the�Energy�

Independence�and�Security�Act�of�2007.�

� Improve�Building�Efficiency�

� Commercial�and�residential�buildings�are�responsible�for�about�39�percent�of�primary�energy�use�in�

the�United�States.�Commercial�and�residential�buildings�consume�20�percent�of�the�nation’s�natural�

gas�and�72�percent�of�the�nation’s�electricity�—�more�energy�than�is�used�by�either�the�transportation�

or�industrial�sectors�of�our�economy.�While�building�codes�have�gotten�more�stringent�in�recent�years�

and�appliances�and�electronic�equipment�more�efficient,�the�increasing�size�of�U.S.�homes,�additions�

to�commercial�floor�space�and�the�proliferation�of�electronic�devices�within�homes�and�commercial�

facilities�have�largely�offset�energy�savings�from�newer�homes�and�appliances.��

� The�Energy�Policy�Act�of�2005�and�the�Energy�Independence�and�Security�Act�of�2007�provided�

tax�incentives�for�efficiency�investments,�updated�appliance�efficiency�codes�and�lighting�

standards,�and�required�the�federal�government�to�purchase�and/or�lease�only�energy-efficient��

(continued)�

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�SUSTAINABLE�GROWTH�

Building�a�“Greener”�Energy�Infrastructure�

CEO�Chair�

Michael�G.�Morris�

Chairman,�President�and�CEO�

American�Electric�Power��Company,�Inc.�

Staff�Contact�

Marian�Hopkins�

Business�Roundtable�

202-872-1260�

[email protected]

� products�and�space.�In�the�Emergency�Economic�Stabilization�Act�of�2008,�Congress�extended�

certain�expiring�tax�provisions�relating�to�energy-efficient�investments�in�products�such�as�

appliances,�insulation,�windows�and�“green�buildings.”��

� Preliminary�Business�Roundtable�economic�modeling�results�have�confirmed�what�other�studies�have�

found:�Increasing�the�efficiency�of�our�buildings�is�one�of�the�most�effective�and�cheapest�ways�to�

reduce�our�energy�usage�while�lowering�our�carbon�footprint.�Existing�building�stock�does�not�turn�

over�rapidly;�accordingly,�stringent�new�building�codes�and�new�building�technologies,�while�

essential,�will�have�little�immediate�effect�on�overall�building�stock�efficiency.�To�achieve�full�

potential�in�this�area,�existing�building�stock�retrofits�need�to�be�targeted.��

� Business�Roundtable�supports�increased�weatherization�assistance�funding�for�low-income�

consumers,�increased�educational�efforts�targeted�at�homeowners,�training�assistance�for�workers�to�

perform�activities�in�these�areas,�state�regulatory�policies�to�make�the�delivery�of�energy�efficiency�a�

core�part�of�a�utility’s�business,�full�funding�for�energy�efficiency�programs�authorized�in�the�Energy�

Independence�and�Security�Act�of�2007,�programs�to�extend�“energy�audits”�to�homeowners�and�

owners�of�commercial�buildings,�and�the�updating�and�adoption�of�new�building�codes.�

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1

�SUSTAINABLE�GROWTH�

Climate�Change�

Introduction�

The�majority�of�scientists�believe�that�man’s�activities�have�contributed�to�a�recent�increase�in�global�temperatures,�

which,�if�sustained,�can�have�far-reaching�negative�effects�on�our�world.��

The�United�Nations’�Intergovernmental�Panel�on�Climate�Change’s�2007�synthesis�report�says:1�

• Warming�of�the�climate�system�is�unequivocal,�as�is�now�evident�from�observations�of�increases�in�global�

average�air�and�ocean�temperatures,�widespread�melting�of�snow�and�ice,�and�rising�global�average�sea�

level.�

• Global�greenhouse�gas�emissions�due�to�human�activities�have�grown�since�preindustrial�times,�with�an�

increase�of�70�percent�between�1970�and�2004.�

• Most�of�the�observed�increase�in�global�average�temperatures�since�the�mid-20th�century�is�very�likely�

due�to�the�observed�increase�in�anthropogenic�greenhouse�gas�concentrations.�

In�Congress,�the�debate�over�climate�change�has�moved�from�a�debate�over�the�science�to�the�more�difficult��

and�contentious�issue�of�what�the�appropriate�legislative�and�regulatory�response�should�be�to�minimize�the�

contribution�of�man�to�predicted�future�warming�trends�while�also�minimizing�the�economic�cost�of�any�legislation.��

Also�contributing�to�the�likelihood�of�climate�legislation�is�a�series�of�court�decisions�and�mandated�actions�under�

the�Clean�Air�Act,�the�Endangered�Species�Act�and�the�National�Environmental�Policy�Act�that�will�require�the�

administration�to�make�decisions�that�could�lead�to�broad�regulation�of�greenhouse�gases�under�those�statutes.�

Background�

Many�of�the�“leading”�climate�scientists�and�the�environmental�community�have�urged�the�United�States�to��

reduce�its�greenhouse�gas�emissions�to�at�least�60–80�percent�below�2005�levels�by�2050�to�minimize�the�risk��

of�irreversible�warming.�In�2006,�according�to�Environmental�Protection�Agency�data,�the�United�States�was�

responsible�for�7.054�billion�metric�tons�of�greenhouse�gases�on�a�carbon�equivalent�basis.�Approximately��

34�percent�of�these�emissions�were�from�electric�power�plants;�28�percent�were�from�the�transportation�sector;��

19�percent�were�from�industry;�and�19�percent�were�contributed�by�the�residential,�agricultural�and�commercial�

sectors.��

The�top�two�U.S.�sector�emissions�contributors�—�electric�generation�and�transportation�—�contribute�

approximately�62�percent�of�all�U.S.�greenhouse�gas�emissions.�To�put�the�enormity�of�the�challenge�into�an�

understandable�context,�if�100�percent�of�emissions�were�eliminated�from�the�electric�and�transportation�sectors,�

the�United�States�still�would�be�approximately�18�percent�short�of�the�80�percent�reduction�goal,�even�assuming�

no�increases�in�emissions�in�the�years�ahead.�Obviously,�such�a�goal�envisions�a�massive�overhaul�of�our�

infrastructure�and�economy.��

(continued)�

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2

�SUSTAINABLE�GROWTH�

Climate�Change��

Even�if�the�United�States�were�to�reduce�its�greenhouse�gas�emissions�substantially,�this�alone�would�make�a�

negligible�contribution�to�global�greenhouse�gas�concentrations.�Unlike�most�other�“pollutants,”�greenhouse�gases�

do�not�affect�health�or�the�environment�on�a�local�or�even�regional�scale.�Their�effect�is�global�because�they�

increase�the�concentration�in�the�atmosphere�of�heat-trapping�gases.�Unilateral�action�by�any�one�country�may�

simply�serve�to�transfer�jobs,�economic�activity�and�greenhouse�gas�emissions�to�other�countries�that�do�not�have�

similar�emissions�reduction�requirements.�Unless�all�major�emitting�countries,�including�China�and�India,�take�

action,�global�greenhouse�gas�concentrations�may�not�decline�materially,�regardless�of�U.S.�policy.��

�Options�OPTION�1 : � Adopt�comprehensive�cap-and-trade�or�carbon�tax�legislation�that�would�gradually�increase��

in�stringency�in�a�time�frame�consistent�with�technology�development;�be�coordinated�

internationally�to�minimize�competitive�and�trade�dislocations;�pre-empt�conflicting�state�

programs;�and�in�the�case�of�a�cap-and-trade�bill,�contain�effective�cost�containment�

mechanisms.�

Pro:�While�any�legislation�must�reduce�carbon�emissions�in�a�manner�consistent�with�science,�we�

also�have�to�make�sure�that�technologies�necessary�to�make�reductions�will�be�available�by�the�

time�they�are�mandated.�Mandating�reductions�on�an�unrealistic�time�frame�will�simply�drive�up�

costs�unnecessarily�and�reduce�economic�output,�thus�costing�the�United�States�needed�jobs.��

Con:�The�longer�we�wait�to�make�greenhouse�gas�reductions,�the�more�difficult�and�expensive�it�

will�be�for�us�to�avoid�dramatic�climate�change,�which�could�cost�us�much�more�than�a�stringent�

greenhouse�gas�reduction�program.��

OPTION�2: � Do�not�enact�higher�carbon�taxes�or�a�cap-and-trade�bill.�Instead,�continue�to�fund�aggressively�

the�development�and�deployment�of�nuclear,�renewable�and�clean�coal�technologies�while�

encouraging�greater�efficiency.��

Pro: �Cleaner�technology�ultimately�will�be�the�solution�to�the�climate�change�challenge.�Taxes�

and�carbon�“quotas”�only�accelerate�the�time�when�these�technologies�are�economical�while�

imposing�unnecessary�costs�in�the�interim.�

Con:�Without�the�“stick”�of�higher�taxes�or�carbon�costs,�these�technologies�are�not�likely�to�be�

deployed�soon�enough�to�avoid�damage�to�our�climate.�In�addition,�this�option�does�not�deal�

with�the�impending�decisions�that�must�be�made�under�the�Clean�Air�Act�regarding�regulation�of�

carbon�dioxide�as�a�pollutant.�

(continued)�

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3

�SUSTAINABLE�GROWTH�

Climate�Change�

CEO�Chair�

Michael�G.�Morris�

Chairman,�President�and�CEO�

American�Electric�Power��Company,�Inc.�

Staff�Contact�

Marian�Hopkins�

Business�Roundtable�

202-872-1260�

[email protected]

�Resources�Climate�Change:�Business�Roundtable�Supports�Actions�to�Address�Global�Warming,�September�2007,�

www.businessroundtable.org/sites/default/files/publications/energy_efficiency/Business_Roundtable_�

Climate_Change_Statement.pdf.��

More�Diverse,�More�Domestic,�More�Efficient:�A�Vision�for�America’s�Energy�Future,�June�2007,�

www.businessroundtable.org/sites/default/files/Business_Roundtable_Energy_Report_06062007.pdf.��

��Action�Recommended�� The�two�most�frequently�debated�options�are�identified�on�the�previous�page,�but�consensus�on�one�

or�the�other�of�these�options�is�not�clear.�However,�Business�Roundtable�believes�action�is�called�for�

now�and�recognizes�that�science�provides�growing�evidence�that�Earth’s�climate�is�warming�and�that�

the�consequences�for�society�and�ecosystems�are�potentially�far-reaching.��

� Business�Roundtable�believes�that�any�climate�legislation�must�meet�some�important�benchmarks.�

These�include:��

• Reducing�the�U.S.�carbon�footprint�in�an�economically�sustainable�manner�without�

competitive�imbalances�that�threaten�economic�growth;��

• Minimizing�costs�and�maximizing�certainty�and�predictability,�which�are�essential�for�

rational�business�planning�and�investment�—�in�particular,�access�to�verifiable�offsets�

originating�outside�the�United�States,�liberal�opportunities�for�banking�and�borrowing�so�

that�businesses�can�minimize�compliance�costs,�and�other�cost-containment�measures;��

• Pre-empting�of�all�state�requirements�that�conflict�with,�or�add�burdens�to,�the�operation��

of�federal�cap-and-trade�requirements;�and��

• Paying�attention�to�international�competitiveness�issues�and�distortions.��

1�Intergovernmental�Panel�on�Climate�Change�Synthesis�Report�2007,�www.ipcc.ch/pdf/assessment-report/ar4/syr/ar4_syr_spm.pdf.�

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1

�SUSTAINABLE�GROWTH�

Domestic�Energy�Supply�

Introduction�

Today,�the�United�States�produces�roughly�5�million�barrels�of�crude�oil�and�consumes�approximately�20�million�

barrels�of�petroleum�products�per�day.�Although�the�United�States�is�the�world’s�largest�oil�consumer,�domestic�

production�has�steadily�declined�since�the�1980s,�and�our�imports�of�crude�oil�and�petroleum�products�have�

steadily�increased,�making�us�more�energy�dependent.�This�increasing�dependence�has�financial,�diplomatic�and�

security�implications.��

Background�

Virtually�all�Outer�Continental�Shelf�(OCS)�areas�other�than�offshore�Texas,�Louisiana,�Alabama,�Mississippi�and�

parts�of�Alaska�have�been�off�limits�to�oil�and�natural�gas�leasing�since�1982.�In�that�year,�Congress�first�enacted,�

as�part�of�the�annual�bill�funding�the�Department�of�the�Interior,�a�prohibition�on�the�use�of�funds�to�conduct�

leasing�activity�in�these�areas.�On�July�14,�2008,�President�George�W.�Bush�withdrew�the�presidential�directive�

barring�preleasing�or�leasing�activities�in�the�prohibited�areas�and�called�on�Congress�to�lift�its�annual�funding�

limitation.�Congress�passed�a�Continuing�Resolution�funding�the�Department�of�the�Interior�through�March�2009,�

without�the�OCS�moratorium�language.�However,�a�portion�of�the�Central�Gulf�of�Mexico�Planning�Area�and�most�

of�the�Eastern�Gulf�of�Mexico�Planning�Area�(Florida�coasts)�are�under�restriction�until�2022�as�part�of�the�Gulf�of�

Mexico�Energy�Security�Act�of�2006.�A�congressional�moratorium�on�the�development�of�shale�oil�lands�held�by�

the�Bureau�of�Land�Management�(BLM)�also�lapsed�at�the�end�of�fiscal�year�2008.��

Some�of�the�areas�holding�the�most�potential�for�oil�and�gas�production�are�located�on�the�OCS,�where�

approximately�80�percent�of�the�acreage�has�been�off�limits,�and�in�the�Coastal�Plain�area�of�the�Arctic�National�

Wildlife�Refuge�(ANWR).�According�to�the�Department�of�the�Interior’s�Minerals�Management�Service�(MMS),�

areas�currently�off�limits�to�leasing�on�the�OCS�total�19.1�billion�barrels�of�oil�and�83.9�trillion�cubic�feet�of�gas.��

By�way�of�comparison,�according�to�the�Energy�Information�Administration,�existing�proven�oil�and�natural�gas�

liquid�reserves�in�the�United�States�currently�total�approximately�29�billion�barrels�and�211�trillion�cubic�feet,�

respectively.��

ANWR�includes�19.6�million�acres�located�in�the�top�northeast�corner�of�Alaska.�One�and�a�half�million�acres�of�

ANWR�(the�1002�study�area�named�after�the�section�of�the�bill�categorizing�ANWR)�located�on�the�Arctic�Coastal�

Plain�have�been�set�aside�specifically�for�further�evaluation,�including�potential�oil�and�gas�exploration,�subject��

to�congressional�approval.�In�1998,�a�report�by�the�U.S.�Geological�Survey�estimated�that�there�were�between��

4.3�billion�barrels�and�11.8�billion�barrels�of�technically�recoverable�reserves�in�the�1002�area.�The�Department�of�

Energy�estimates�that�if�ANWR�exploration�and�production�were�permitted,�production�could�begin�in�2018�and�

would�peak�at�780,000�barrels�per�day�in�2027,�using�the�mean�U.S.�Geological�Survey�estimates�of�reserves.�Using�

the�U.S.�Geological�Survey�high�estimate�of�potential�reserves,�production�could�total�1.45�million�barrels�per�day�

in�2028.��

(continued)�

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2

�SUSTAINABLE�GROWTH�

Domestic�Energy�Supply�

The�largest�deposits�of�oil�share�in�the�world�are�found�in�the�Green�River�Formation,�which�covers�parts�of�

Colorado,�Utah�and�Wyoming.�The�Department�of�the�Interior�estimates�that�the�Green�River�Formation�contains�

1.2–1.8�trillion�barrels�of�oil,�with�approximately�800�billion�barrels�of�recoverable�oil,�based�on�mean�estimates.�

This�is�three�times�greater�than�the�proven�oil�reserves�of�Saudi�Arabia�and�more�than�27�times�greater�than�

current�proven�U.S.�conventional�oil�reserves.�

The�lapse�of�the�OCS�leasing�moratorium�will�not�result�in�the�immediate�leasing�of�areas�originally�included�in�the�

moratorium.�MMS�conducts�all�offshore�leasing�activities�pursuant�to�a�five-year�plan.�The�only�area�currently�in�

the�five-year�plan�that�was�subject�to�the�moratorium�is�offshore�Virginia,�which�was�included�at�the�request�of�the�

state.�With�the�lifting�of�the�moratorium,�additional�areas�are�likely�to�be�included�in�MMS’�revised�five-year�plan.�

A�number�of�environmental�reviews�and�approvals�are�required�before�exploration�activities�can�commence�on�the�

OCS,�including�reviews�under�the�National�Environmental�Policy�Act,�Coastal�Zone�Management�Act,�Clean�Water�

Act�and�Clean�Air�Act.�Accordingly,�the�lapse�of�the�offshore�moratorium�will�not�result�in�additional�leasing,�

exploration�or�production�anytime�soon.��

Leasing�activities�cannot�occur�in�ANWR�without�explicit�congressional�authorization.�Leasing�on�BLM�lands�for�

shale�oil�development�can�proceed�unless�Congress�or�the�next�administration�suspends�activities.�

�Options�OPTION�1 : � � Do�not�extend�leasing�moratoria�to�OCS�or�shale�development�areas.�While�reducing�oil�demand�

and�increasing�the�use�of�alternative�fuels�can�help�reduce�our�oil�dependence,�a�long-term,�

comprehensive�energy�strategy�also�should�focus�on�increasing�production�from�our�own�

resources�in�an�environmentally�sensitive�way.�Increasing�production�will�reduce�our�oil�

dependency,�help�create�thousands�of�jobs�that�pay�well,�and�increase�federal�revenues�by�

billions�of�dollars�from�leases�and�royalties�on�production.�

OPTION�2: �� Enact�legislation�to�restrict�leasing�in�some�areas�but�allow�development�of�others.�This�would�

allow�Congress�to�tailor�legislation�to�reduce�potential�environmental�impact.�But�existing�

environmental�laws�require�all�potential�environmental�impacts�to�be�taken�into�consideration.��

In�addition,�the�Coastal�Zone�Management�Act�gives�affected�states�leverage�to�substantially�

reduce�or�de�facto�prohibit�leasing�activities.�This�option�really�is�just�another�way�of�severely�

limiting�further�development�of�OCS�resources.�

(continued)�

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3

�SUSTAINABLE�GROWTH�

Domestic�Energy�Supply�

CEO�Chair�

Michael�G.�Morris�

Chairman,�President�and�CEO�

American�Electric�Power��Company,�Inc.�

Staff�Contact�

Marian�Hopkins�

Business�Roundtable�

202-872-1260�

[email protected]

1�More�Diverse,�More�Domestic,�More�Efficient:�A�Vision�for�America’s�Energy�Future,�June�2007,�www.businessroundtable.org/sites/default/�files/Business_Roundtable_Energy_Report_06062007.pdf.�

��Action�Recommended�� Business�Roundtable�opposes�any�extension�of�OCS�or�shale�oil�leasing�moratoria�and�supports�

expanded�access�to�our�domestic�energy�resources.�While�we�cannot�drill�our�way�out�of�our�

problems,�increasing�U.S.�production�will�help�reduce�pressure�on�prices�and�keep�good,�high-

technology�jobs�in�the�United�States.��

� �Increasing�domestic�energy�resources�is�a�central�theme�of�Business�Roundtable’s�More�Diverse,�

More�Domestic,�More�Efficient:�A�Vision�for�America’s�Energy�Future.1�We�must�take�full�advantage�

of�domestic�resources�to�reduce�our�reliance�on�energy�imports�and�provide�a�supply�cushion�that�will�

ease�pressure�on�prices�in�the�global�market.�Investment�in�enhanced�oil�recovery,�coal-to-liquid�

plants�and�nuclear�power�will�contribute�to�this�goal�as�well.��

� �Business�Roundtable�strongly�supports�expanding�opportunities�for�drilling�on�the�OCS.�This�is�a�goal�

that�the�Roundtable�has�advocated�over�several�sessions�of�Congress.�Our�members�support�a�

broader�lifting�of�the�OCS�moratorium�to�allow�oil�and�gas�leasing�in�all�areas�off�the�Atlantic�and�

Pacific�coasts�and�in�the�Gulf�of�Mexico.�Similarly,�the�Roundtable�urges�Congress�to�improve�access�

to�public�lands�in�the�Rockies�and�in�Alaska.

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� 1

�SUSTAINABLE�GROWTH�

Electric�Grid�Modernization�

Introduction�

The�nation’s�existing�electricity�transmission�system�is�aging,�highly�fragmented,�patchworked�and�overburdened,�

resulting�in�frequent�grid�congestion;�greater�threats�to�reliability;�and�limitations�on�the�ability�to�access�low-cost�

electricity�supplies�and�overcome�barriers�to�new,�renewable�generation.�Modernization�of�the�grid�to�upgrade�and�

expand�the�existing�transmission�and�distribution�network�and�the�deployment�of�advanced�technologies�to�make�

the�grid�smarter,�more�efficient�and�more�resilient�will�help�drive�energy�efficiency,�reduce�greenhouse�gas�

emissions�and�improve�reliability.���

Background�The�rate�of�investment�in�transmission�infrastructure�has�not�kept�pace�with�increasing�demand�for�electricity.�

Since�1996,�total�electricity�demand�has�grown�by�18�percent,�and�the�energy�sector�has�met�the�demand�with��

27�percent�growth�in�total�generating�capacity.�However,�transmission�infrastructure�growth�has�increased�by��

only�6.8�percent�in�the�same�period�—�and�only�12�percent�over�the�past�two�decades.�Investments�have�typically�

taken�the�form�of�small�upgrades�needed�for�reliability,�not�components�of�the�large,�high-voltage,�multistate��

and�inter-regional�transmission�network�needed�to�deliver�reliable�energy,�often�from�distant�generation�locales.�

Moreover,�investments�in�smart�grid�technology�have�been�minimal.1��

Advances�in�communications,�materials,�and�Internet�and�computer�technologies�have�made�possible�a�smarter�

electric�grid�—�a�national�electricity�delivery�network�that�incorporates�advances�in�digital�and�information�

technology�for�enhanced�operational�monitoring,�control,�intelligence�and�connectivity.�Embedding�smarter�

technologies�in�transmission�assets�can�greatly�improve�the�reliability,�security,�economy�and�efficiency�of�the�

electric�grid�by�permitting�greater�visibility�into�and�control�of�the�system.��

Congress�has�taken�a�number�of�initial�steps�to�advance�transmission�and�distribution�investments�and�a�smarter�

grid�in�recent�years.�The�Energy�Policy�Act�of�2005�included�a�number�of�smart�metering�provisions�such�as�

requirements�that:�

• States�and�nonregulated�utilities�consider�providing�time-based�rates�and�advanced�metering��

to�all�consumers;�

• Federal�Energy�Regulatory�Commission�(FERC)�conducts�an�annual�assessment�on�demand�response�and�

advanced�metering,�which�includes�a�national�survey�to�determine�the�penetration�and�saturation�of�

advanced�metering;�

• The�Department�of�Energy�issues�a�report�to�Congress�on�demand�response�potential;�and��

• All�federal�buildings�be�equipped�with�advanced�metering.��

The�Energy�Independence�and�Security�Act�of�2007�contains�various�provisions�designed�to�encourage�research,�

development�and�deployment�of�smart�grid�technologies,�including�requiring�the�National�Institute�of�Standards�

(continued)�

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2

�SUSTAINABLE�GROWTH�

Electric�Grid�Modernization�

CEO�Chair�

Michael�G.�Morris�

Chairman,�President�and�CEO�

American�Electric�Power��Company,�Inc.�

Staff�Contact�

Marian�Hopkins�

Business�Roundtable�

202-872-1260�

[email protected]

and�Technology�to�be�the�lead�agency�to�develop�standards�and�protocols;�creating�a�research,�development��

and�demonstration�program�for�smart�grid�technologies�at�the�Department�of�Energy�(the�Smart�Grid�Regional�

Demonstration�Initiative);�and�providing�federal�matching�funds�for�portions�of�qualified�smart�grid�investments�

(the�Smart�Grid�Investment�Matching�Grant�Program).�More�recently,�Congress�provided�as�part�of�the�financial�

rescue�package�(Emergency�Economic�Stabilization�Act�of�2008)�incentives�for�the�deployment�of�smart�meters��

by�accelerating�the�recovery�period�for�depreciation�of�smart�meters�and�smart�grid�systems.��

�Options�OPTION:� � Fully�fund�programs�that�have�been�authorized�by�the�Energy�Policy�Act�of�2005�and�the�Energy�

Independence�and�Security�Act�of�2007�and�are�designed�to�advance�smart�grid�technologies.�

Continue�to�encourage�FERC�to�exercise�its�authority�to�provide�incentives�for�upgrading�the�

nation’s�transmission�system.�

Pro: �Congressional�authority�already�exists�to�do�many�of�the�things�that�need�to�be�done.�

However,�Congress�needs�to�fully�fund�the�programs�it�already�has�authorized�to�establish�

standards,�promote�demonstration�projects�and�conduct�necessary�research.�Many�of�the�

technologies�are�ready�for�the�market�now.�Demonstration�projects�will�help�prove�these�

technologies�and�showcase�the�benefits�that�they�will�bring�to�our�existing�grid.�FERC�needs��

to�continue�to�use�the�authority�it�has�to�encourage�the�new,�high-voltage�transmission��

upgrades�necessary�to�connect�renewables�and�improve�reliability�and�market�access.��

Con:�This�area�is�one�best�left�to�the�private�sector�and�the�states.�

�1�A�smart�grid�is�a�transformed�electricity�distribution�network�that�uses�two-way�communications�to�improve�the�efficiency,�reliability�and�safety�of�power�delivery�and�use.�Smart�grid�is�called�several�other�things,�including�“smart�power�grid”�and�“smart�electric�grid.”�Deploying�the�smart�grid�became�the�policy�of�the�United�States�with�passage�of�the�Energy�Independence�and�Security�Act�of�2007�(Title�13).�The�law,�Title�13,�sets�out�$100�million�in�funding�per�fiscal�year�from�2008�to�2012�in�addition�to�other�reimbursements�and�incentives.�

��Action�Recommended�� Congress�needs�to�fully�appropriate�funds�authorized�for�modernization�of�the�grid,�including�the�

Smart�Grid�Regional�Demonstration�Initiative,�the�Smart�Grid�Investment�Matching�Grant�Program,�and�

efforts�by�the�National�Institute�of�Standards�and�Technology�to�help�develop�protocols�and�model�

standards�to�achieve�interoperability�of�smart�grid�devices�and�systems.�In�addition,�state�regulators�

need�to�be�encouraged�to�develop�predictable�cost�recovery�and�return�on�investment�methodologies�

for�regulated�utilities�making�investments�in�smart�grid�technologies.�Finally,�FERC�should�continue�to�

exercise�its�authority�under�existing�law�to�provide�incentives�for�upgrading�the�nation’s�transmission�

system�and�investing�in�advanced�transmission�technologies.

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� 1

�SUSTAINABLE�GROWTH�

Wind�and�Solar�

Introduction�

According�to�the�Energy�Information�Administration,�U.S.�electricity�demand�is�expected�to�increase�between��

18�percent�and�39�percent�by�2030.�While�greater�efficiency�and�conservation�can�reduce�our�need�for�additional�

electric�generation�capacity,�substantial�new�electric�generation�clearly�will�be�essential�to�meet�the�needs�of�a�

growing�economy�and�to�replace�older,�less�efficient�generation�units�that�are�approaching�the�end�of�their�useful�

lives.�Policies�that�either�cap�or�establish�a�price�for�carbon�dioxide�emissions�will�accelerate�the�need�for�new�

generation�capacity.�Two�of�the�fastest-growing�nonfossil�fuel�alternatives,�wind�and�solar�energy,�are�zero�

emissions�generating�resources�with�“free”�fuel�costs.�These�two�technologies�can�help�significantly�reduce�our�

dependence�on�fossil�fuels�for�generating�electricity.��

Background�

Over�the�past�eight�years,�cumulative�wind�capacity�has�grown�an�average�of�27�percent�a�year.�As�of�September�

2008,�the�United�States�—�with�more�than�20,000�megawatts�of�installed�wind�electric�generation�capacity�—�

now�leads�the�world�in�the�amount�of�electricity�generated�from�wind.�However,�wind�supplied�less�than�1�percent�

of�U.S.�net�electricity�generation�in�2007.�The�Department�of�Energy�has�estimated�that�with�the�right�policies�it�

may�be�possible�to�generate�up�to�20�percent�of�our�electricity�with�wind�by�2030.�However,�substantial�

transmission�upgrades�will�be�necessary�to�reach�this�goal.��

Solar�electricity�generation�also�has�been�expanding�rapidly,�but�it�would�take�a�decade�of�50�percent�annual�

growth�for�solar�to�generate�the�1�percent�that�wind�generates�today.�Both�wind�and�solar�today�are�more�

expensive�(solar�substantially�more�so)�than�other�generation�resources�and�are�competitive�only�with�government�

support.�However,�continued�technological�progress�is�bringing�costs�steadily�down.��

Congress�has�provided�production�tax�credits�(PTC)�for�wind�generation�since�1992,�and�in�the�Emergency�

Economic�Stabilization�Act�of�2008,�credits�were�extended�for�facilities�placed�in�service�before�the�end�of��

2009.�The�PTC�currently�amounts�to�2�cents�per�kilowatt�hour�for�the�first�10�years�of�facility�generation.�Solar�

generation�also�has�received�tax�credits:�The�30�percent�investment�tax�credit�has�been�extended�to�2016,�and��

the�previous�$2,000�cap�on�homeowner�tax�credits�has�been�eliminated.��

�Options�OPTION�1 : � � Extend�the�wind�PTC�for�an�additional�three�to�four�years�and�provide�continued�research�and�

development�support�for�electricity�storage�technologies,�offshore�wind�application�and�solar�

technologies.�Consider�giving�the�Federal�Energy�Regulatory�Commission�(FERC)�greater�

authority�over�siting�of�regional,�high-voltage�transmission�lines.�

(continued)�

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2

�SUSTAINABLE�GROWTH�

Wind�and�Solar�

CEO�Chair�

Michael�G.�Morris�

Chairman,�President�and�CEO�

American�Electric�Power�Company,�Inc.�

Staff�Contact�

Marian�Hopkins�

Business�Roundtable�

202-872-1260�

[email protected]

Pro:�In�optimal�wind�areas,�wind-generated�electricity�is�close�to�being�economic�today.�

However,�wind�is�intermittent�and�often�is�available�during�nonpeak�demand�time�periods,�thus�it�

commands�less�of�a�price�than�firm,�on-peak�power.�In�addition,�costs�of�transmission�upgrades�

and�materials�inflation�have�kept�wind�projects�on�the�margin�economically�without�the�benefit�

of�the�PTC.�Finally,�offshore�wind�installations,�where�operating�conditions�are�much�harsher,�are�

substantially�more�costly�than�onshore�applications.�Solar�generation�today�is�at�least�three�to�

four�times�more�costly�than�conventional�fossil�fuel�generation.�Even�though�technological�

advances�in�the�solar�industry�are�rapidly�driving�down�costs,�without�progress�on�transmission�

siting�issues,�renewables�development�will�be�stymied.��

Con:�Congress�has�provided�subsidies�for�wind�and�solar�production�since�1992.�In�addition,�

more�than�half�the�states�have�enacted�renewable�portfolio�standards�that�provide�a�further�

subsidy�in�the�form�of�a�market�set-aside�and�valuable�credits.�It�is�time�for�these�technologies�to�

compete�in�the�marketplace.�

OPTION�2: � Extend�the�wind�PTC�and�enact�a�renewable�portfolio�standard�requiring�each�regulated�electric�

utility�to�purchase�a�certain�amount�of�renewable�energy�for�its�energy�supply�portfolio.��

Pro: �This�would�provide�maximum�encouragement�to�wind�and�solar�technologies,�thus�speeding�

their�development.��

Con:�Congress�will�have�to�carefully�review�whether�onshore�wind�facilities�will�still�need�PTC�

support�if�a�renewable�portfolio�standard�is�enacted�into�law.�A�renewable�portfolio�standard�not�

only�will�create�additional�demand�but�also�will�have�credits�associated�with�production�of�

renewables�that�have�a�market�value.�Offshore�wind�and�solar�applications�probably�will�still�be�

above�market,�even�taking�into�consideration�the�market�value�of�renewables�credits.�A�

renewable�portfolio�standard,�however,�essentially�amounts�to�an�additional�subsidy�that�calls�

into�question�whether�the�PTC�is�still�warranted.��

��Action�Recommended�� Long-term,�stable�and�predictable�federal�policies�are�essential�for�the�private�sector�to�be�able��

to�make�the�investments�needed�to�fully�develop�the�potential�of�wind�and�solar�technologies.�

Accordingly,�Business�Roundtable�supports�extension�of�the�wind�PTC�and�continuation�of�the�solar�

investment�tax�credit.�In�addition,�federal�leadership�will�be�needed�with�respect�to�cost�allocation,�

planning�and�siting�for�the�necessary�new�transmission�lines.�The�Roundtable�urges�Congress�to�expand�

FERC’s�role�in�these�areas�and�encourages�the�Department�of�Energy�to�fully�exercise�its�existing�

authority�to�designate�National�Interest�Electric�Transmission�Corridors�necessary�to�integrate�wind��

and�solar�resources�into�the�grid.��

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Effective Leadership on the Wo

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CEO M

emos to Congress