A Few Simple Fixes Could Unleash An Economic Boom

In Washington, debates over how to grow the economy often devolve into endless budget battles over this or that public program.

Outside the Beltway, however, business leaders I talk to agree that simply removing a few self-imposed barriers to economic growth could unleash a surge of business activity.

Let's look at a few examples in just three areas of the economy: tax policy, the regulatory environment, and human capital.

First, fix the tax code. American companies operating in the global market contribute nearly $7 billion every year to national economic output. And they support about 70 million domestic jobs, constituting nearly half of all private-sector employment.

The tax code should encourage companies to help grow our economy. In reality, it does the opposite. At 39 percent, America's tax rate on corporate profits is nearly double the worldwide average. We are also the only country with a rate above 30 percent that taxes foreign earnings, creating a perverse incentive for American companies to keep money earned overseas offshore, rather than investing it here in the U.S.

Making matters worse, the code itself is overly complex and difficult to navigate. A 2014 report from the World Bank ranked the American tax regime a dismal 64th globally in terms of ease of compliance. Researchers found that the typical mid-sized U.S. firm devotes about 175 hours per year to taxes -- that's money and manpower that isn't going to genuinely productive projects.

Reforming and simplifying the tax code would result in an immediate boost to our economy, unlocking growth that we should already be enjoying today.

Next, ease the regulatory burden. It isn't only the tax code that is difficult to comply with. Each year, dozens of major new regulations are issued, adding to an ever-growing thicket of rules governing every aspect of American business operations. Because Congress and federal agencies almost never review or rescind regulations once they are passed, many of these new regulations duplicate existing regulations, or, worse yet, contradict them.

Regulations also require interpretation, which becomes more time-consuming the more complicated they are. Take Dodd-Frank, one of the most significant pieces of legislation of the last decade. It runs nearly 850 pages long. That's a full 23 times longer than Glass-Steagall, its post-1929 financial crash precursor. Today, a full five years since Dodd-Frank was enacted, government officials and private industry are still attempting to determine what it actually requires in practice.

Regulation is a particular drag on small businesses and startups, which don't have the same manpower to devote to compliance that larger companies do. The Small Business Administration has calculated that regulations cost the average small business more than $10,500 per employee annually.

For these reasons, the Business Roundtable recently proposed that federal agencies consistently apply cost-benefit analysis to new regulations, and that they periodically review existing regulations to determine whether they have outlived their usefulness. At a minimum, fewer and clearer regulations would be a big help to American companies trying to compete in a global economy.

Finally, cultivate human capital. The strength of any economy is ultimately a function of its workforce. Right now, Americans are lagging well behind their developed-world counterparts in the key "STEM" subjects of science, technology, engineering and math. With inaction, this skills gap will only widen.

Over the next five years, domestic employers hope to add 1 million new STEM positions. But in a recent survey of American CEOs, 97 percent said they were having problems filling STEM-related job openings today.

While the American education system certainly needs continued reform, small changes to our outdated immigration laws could immediately enable U.S. companies to hire the highly skilled workers they need today to compete and grow. It is absurd that we encourage the world's best and brightest to take advantage of our higher education system, only to force them to take their advanced degrees back to their home countries once they graduate.

These are just a few examples of simple reforms lawmakers could enact to allow the economy to reach its full potential. Stimulating the economy doesn't require a new act of Congress -- but updating a few of the old ones would certainly help.