Apr 28, 2015, 11:22 AM ETConference Presentation, Panel

Architecture of the American Economy: Policies to Drive Economic Growth and Our Competitiveness

First quarter GDP growth is projected to be soft, potentially around 1%, attributed to weather-related disruptions and a slowdown in overseas markets.
The U.S. economy is currently in the longest streak of job growth in history, spanning 61 months with over 12.1 million jobs added.
Middle-class wage stagnation remains a primary concern, though early signs of wage growth and improved consumer sentiment are emerging.
Structural headwinds include an aging demographic (retirement wave), rising debt-to-GDP ratios, and slower global growth affecting emerging markets.
Corporate earnings this quarter were driven primarily by cost reductions rather than top-line growth, with over 50% of large U.S. business income generated overseas.
A divergence in global monetary policy (e.g., ECB quantitative easing vs. potential U.S. rate hikes) is creating an "uncertainty tax" for businesses regarding currency fluctuations.
Alan Schwartz (Guggenheim Partners) argues the economy is on a solid, slow-growth trend ("growing longer, slower") to avoid building the excesses that typically trigger recessions.
Mark Weinberger (EY) warns that failing to invest in the future due to short-term pressures risks creating "secular stagnation."

Sequestration cuts, currently at 50-year lows relative to the economy's size, are scheduled to return in full force on October 1 if Congress takes no action.
The administration proposes a budget resolution to lift sequestration and invest in growth drivers (infrastructure, medical research, education) funded by long-term entitlement and tax reforms.
Specific budget proposals include lifting sequestration for both defense and non-defense spending, potentially using a "Murray-Ryan" bipartisan deal model.
Without action, the Highway Trust Fund is expected to run out of money in August, necessitating an immediate solution.
The administration views avoiding "manufactured fiscal crises" like debt limit standoffs as critical to preventing the loss of approximately one million jobs.
Republicans are reportedly open to a deal that raises the debt ceiling and fixes defense spending, provided it is paired with non-defense cuts or revenue increases.

The administration frames the Trans-Pacific Partnership (TPP) and Trade Promotion Authority (TPA) as essential for the U.S. to set global trade rules rather than ceding them to China.
95% of global customers are overseas, and the U.S. must shift from being a consumption engine to a producer for emerging markets' growing middle class.
The White House highlights that 48 trade deals were signed in the last 15 years, with the U.S. participating in only two, while China was part of most.
To address progressive opposition regarding secrecy, the administration offers full disclosure of deal details to Congress, though actual negotiation language remains confidential.
The Investor-State Dispute Settlement (ISDS) mechanism is defended by noting that in 14 of 17 historical cases under these provisions, the U.S. won.
Mark Weinberger suggests passing TPA could serve as a "canary in the coal mine," unlocking the possibility for bipartisan wins on immigration and tax reform.
Alan Schwartz argues that not getting TPP is a "significant negative" for the U.S. due to the alternative of other nations setting the rules, rather than a massive immediate economic boost.
The administration counters that U.S. markets are already open; the goal is to open foreign markets to reduce regulations and state-owned enterprise barriers.

The administration's tax reform plan centers on three pillars: lowering domestic corporate rates, creating an international minimum tax, and funding a $240 billion, six-year infrastructure package.
Proposed international reforms include a mandatory 14% "toll charge" to repatriate $2 trillion in overseas earnings and a 19% minimum tax rate to stop a "race to the bottom."
Mark Weinberger (Business Roundtable) notes that the current U.S. effective rate is the highest in the world, but disputes the specific "minimum tax" structure as unique and not aligned with global norms.
The business community is increasingly shifting toward revenue neutrality, prioritizing system simplification and reduced compliance costs over pure tax cuts.
Alan Schwartz expresses concern that a voluntary repatriation holiday could cost $100 billion in lost revenue, whereas a mandatory toll charge is necessary to prevent continued capital parking offshore.
The administration argues that closing loopholes and preferences to lower rates will create a "level playing field" and allow companies to focus on work rather than tax minimization.
The decline in corporate tax revenue as a share of federal revenue (from 30% to 11%) is attributed to the proliferation of pass-through entities and legal changes rather than just corporate avoidance.

While a Greek exit from the Eurozone is a known risk, Alan Schwartz identifies pressure on emerging markets and the "triple-A" asset bubble as more likely triggers for future crises.
Mark Weinberger cites rising nationalism and anti-globalization sentiment (e.g., UKIP in the UK, National Front in France) as a greater threat to the global economy than specific currency events.
Secular stagnation is attributed to three divides: rich vs. poor, public vs. private workers, and old vs. young, creating political gridlock on entitlement reform.
Immigration reform is identified as a critical tool to counter demographic decline, with the Senate's previous bill projected to save $1 trillion in deficits over 20 years.
Wage growth remains stuck in a "middle-class trap," with increases seen primarily at the bottom (low-wage) and top (high-skill) of the labor market.
Investment in capital intensity (infrastructure, technology, skills training) is required to drive sustainable wage growth, as the U.S. has seen declining capital investment for years.

Market consensus suggests the Federal Reserve is more likely to raise interest rates in September rather than June.
Alan Schwartz predicts the Fed will move slowly due to low global interest rates and a desire to "get it off the table" after the "taper tantrum."
Mark Weinberger believes the primary risk is deflation due to slack in the system and low energy prices, rather than inflation.
The divergence between ECB easing and Fed tightening is expected to significantly impact emerging market currencies and create acquisition opportunities in Europe due to a weak Euro.
Some analysts argue the Fed's relevance is diminishing, with monetary policy acting as a short-term fix while structural reforms are delayed.