Cspans q a. This week on newsmakers, neil bradley, the chief policy officer and executive Vice President of the u. S. Chamber of commerce. Thank you very much for being here. Neil thanks for having me. Greta we still we also have with us Jeanna Smialek with the New York Times and chris with rugaber with associated press. Chris. Chris lets talk about trade. 40 of the fortune 500 has complained on earning calls and so forth about the impact of President Trumps tariffs on chinese imports and other items. How big an impact, how much is this hurting companies . I am interested how you may compare it to the benefits of the tax cut in 2017, which reduced rates on business. Have these tariffs got into a point where there almost offsetting the benefits of the tax cut . Neil they are certainly dampening the benefit of the tax cut. There are two impacts of the tariffs on business. The first is the tariffs in already in place and are at cost. The is uncertainty of additional second tariffs. That is playing out over the next several months with respect to china and even automobiles, with respect to tariffs on automobiles. And if you are running a company by the way, not just Large Companies if you run a company, you have difficult planning, because you dont know the cost of goods you are buying to either sell to consumers in the United States or the cost of something you are making in the United States. That is a real problem. The other side of that is not just tariffs on our imports, it is tariffs posted in retaliation ag industry for the and increasingly manufacturers. Jeanna the university of Michigan Confidence numbers just came out. What we saw was a real confirmation that consumers are starting to get nervous, and a lot of them are spontaneously bringing up the trade war. So how do Companies Think about that, when they look at this environment where consumers have still spending pretty robustly, but it seems like that. Could be showing some cracks. Neil when we think about the economy, there are two different stories. On the consumer side, a lot of strength. Record generational low unemployment, wages rising 3 , lower inflation, people want to spend money. You go to the business side, you start a downturn in Business Investment for the first time in three years, manufacturing slipping into a recession. And it is not just Large Companies. One of the progressions we saw months the last on fortune 500, Large Companies, concerned about the tariffs. We are now seeing midsize companies, those with 600, 700 employees, 1000 employees, who are saying it is affecting their business and their ability to plan. The next phase of that is it slips into Small Businesses and consumers. And what we are especially worried about the next few months is that weakness and uncertainty on the business side moves from Large Businesses to medium businesses to Small Businesses and consumers. That is a recipe for a recession. At the chamber, we think the next months are critical. If policymakers make the right decisions, we can keep the economy growing. If they make the wrong they risk ones, pushing us into recession. Chris lets talk about some of those decisions that might be made. One is the federal reserve. The president has been tweeting about their decisions. There is a meeting next week in which, i guess, a rate cut is expected. Do your members feel Interest Rates are their biggest problem . How does this play out . Are there other decisions that could be made to support the economy, in addition to the fed . Neil fed policy is important. I dont want to understate that. The fed is being judicious and making good decisions about how they support their economy. But when we talk to our businesses, it doesnt matter the size, the geographic location, they tell us it is not the cost of borrowing, not the cost of capital, not the Interest Rate what is going on, what is driving their concern is uncertainty in the policymaking process, especially with respect to tariffs, the trade war, and then just this general uncertainty about how washington will operate and what the rules of the road are going to be that is causing them to pull back on investment. Greta rules of the road for what . Neil certainly for trade, but also the regulatory environment. So we have benefited, for the past three years, from a big push in deregulation, but everyone is watching what is going on in the president ial debate and in the next year, and there is a lot of uncertainty about where major aspects of the economy go. Very different views between the political candidates and the political parties. If you are in the healthcare space, you are watching and you are wondering what the system is going to look like in two years. If you are in the energy space, similarly you are watching regulatory actions by the administration, but also a lot of litigation, and a lot of litigation that is not going to play itself out until likely past the 2020 election. So you have to make some educated guesses and some assumptions about what the rules of the road are, and when there is this much uncertainty in the political environment, you tend to be a bit more cautious. And that is bad for the economy. Domesticndependent of policy, we are also seeing this Global Growth slowdown. If that were to spill back into america and we would see a recession, how prepared are companies to deal with that . Neil we are seeing Global Growth, and that is another headwind. By the way, we should also mention a lot of things outside our control that are also headwinds for american companies, whether that is the situation in hong kong or brexit and the e. U. U. K. Relationship. The u. K. Is a pretty important partner, as is the e. U. , for Many Companies in terms of operations, sales, global footprint. A lot of uncertainty being generated there. In terms of preparedness for a recession, that is one of the reasons you are seeing a slowdown or a decline in Business Investment. You are preparing if you are preparing for uncertainty, one of the things you do is you pull back on investment. This is also why we are at this danger point over the next several months. If you are generally preparing for what you believe could be a downturn, you will pull back from fixed investments, longterm first. You continue to support your employees in hiring and wages, particularly in a tight labor market. We should talk about how tight the labor market is, at some point. And then you reach a point where you begin to pull back on your employees. And that is how you begin to tip the u. S. Economy into a recession, and that is what we have to worry about. Jeanna interesting. You will never have to ask me twice to ask a labor question. Neil great. [laughter] jeanna i am curious about what you guys are hearing about the labor market, and how companies are dealing with the scarcity of, especially, skilled workers. Neil one, they are raising wages pay that is good. We like to see rising wages for american workers. But two, they are actually turning down jobs. We do surveys of event sectors of the economy. We were recently looking at the construction sector. And half of the Construction Industry selfreports they are turning down business because they dont have the skilled workers to complete the work that people are asking them to do. We just looked at the new Labor Department numbers that came out this week on job openings and compared it to the broadest possible outlook of employees that are available everybody who is unemployed and looked for work and the last month, plus anyone who does not have a job and looked for work in the past 12 months, kind of the broadest way you can look at the available workforce. And it is 1 1. One job opening for every available worker. And that assumes they all have the right skills and are the right match and are in the right geographic location, which we know they are not. So there is a real crimp on the economy. It is also a record low in terms of that 1 1 that we are facing. If you look at the average over the last two decades, it is usually 3 1, so it is a three times tighter labor market right now for american businesses. Chris on that note, how might businesses have more workers to choose from . One avenue might be immigration. And so can you tell us where the chamber sees that issue and what steps you may take over the next year or two to affect the debate there . Neil we absolutely need more workers. We need more high skilled and, frankly, more low skilled workers coming in through the immigration system. We are moving the wrong way on immigration, at the moment. We are limiting the supply of people coming into this country legally. That is important. We are not talking about illegal entry into the country. We are talking about the legal workforce. And we need to do more to expand legal immigration. Its a tough political issue. I suspect we are not going to make much progress until we get past the next election. Of course, we also have a lot of american workers. I mentioned the broadest, 1 1, a lot of those people need skill training. Businesses are stepping up and providing it, but they need partners, partners at the state level, the local level, who are helping them train individuals for the jobs they have. Jeanna i wanted to follow up on your wages point, actually. One thing that has been kind of iseresting about this cycle that, as you mentioned, by, a lot of measures, the job market looks very tight, but at the same time, wages have increased gradually. They havent shot higher. Based on your on the ground view of this, from what you are hearing from members, what is holding wages from rocketing higher, as they have in previous cycles . Neil well, they are rising, but you are right if they are not rising as fast as in previous cycles. One of the things is total compensation. Businesses do not just look at what is deposited in each of our bank accounts. They look at the total cost of employment. The total cost of employment, including health care, for example, is rising much more rapidly. So that is eating into a little bit of the wage support. And so i think we will probably actually continue to see greater wage growth, if we can keep the economy growing than what we have seen. It is just a slower acceleration than we have seen, when other benefit packages were more restrained in the past. Chris taking a broader step back, earlier this week, there was a report from the Census Bureau about Household Income and poverty. And while it had good news about in terms of reduction in poverty in 2018 from the previous year, it also showed that, basically, Household Income is about the same as it was 20 years ago, in 1999, even though the economy has enlarged, has grown 50 since then. So, just following up on the wages issue, is everyone benefiting from this economy . Is that an issue for the chamber . Is there more we can do to potentially spread these benefits more widely . Neil it is an issue for the chamber. It is something that we are concerned about. One of the factors both affecting Household Income and wage growth is whats the overall acceleration of the economy, right . We have had a recordlong extension. Also, historically weak growth, by u. S. Standards. So there is a little bit of math that works here, that the faster the overall economy is growing, not the duration of the expansion, but the size of the expansion, will propel wages higher and Household Income higher. There are also some other aspects going on in terms of household makeup, demographic changes, america getting older, our workingage population actually getting smaller, as a proportion. That is affecting some of those things. Core, things policymakers are trying to affect and things are were trying to affect at the chamber, it is getting us back to 3 growth, which is kind of the recipe for unlocking rapid wage growth and higher Household Income. Jeanna to follow up on this, one thing that has been really interesting in the last couple of months is once we got revisions of a lot of 2018 data, it sort of confirmed that, despite tax cuts and some of these policies folks have been pushing for for a long time, you didnt see that supplyside step up, sustainable change in the pace of growth last year and into this year. I am curious whether you think that is because the policy package was inadequate, whether supplies and benefits were over promised, or whether it is the trade war just offsetting the effect . Neil we have puts and takes. We got benefits from tax reform, which generally take a longer time to materialize than a lot of people would like to acknowledge. We were very cautious at the chamber not to promise immediate benefits. We think this is about longterm growth in the trajectory, not a shortterm sugar high. You also have shortterm costs, certainly in the tariff wars, et cetera. Looking at the overall structure of our economy, we are in a place where you have got to get a lot of the policy right, and you have to get all the pieces working in the right direction. It is really important to get tax reform done, important to do regulatory relief, but if you dont have labor policy, right and increasingly in a digital economy, if you dont have digital regulation right if you are not focused on the right immigration policies, intellectual property protection, if you dont get all of those pieces in place, you are not going to get the robust growth we have seen in the past. This isnt a situation where you can say, we did that one thing right, shouldnt everything be better . No. We need our elected officials to get almost everything right to get to the point of the growth that we want. Greta is there one policy area , one place, that could tip us back into a recession . Neil i dont think there is a particular industry that would do that. It is the overall sentiment, and it is the fear that it moves from lack of confidence on the business side into the consumer side. Consumer spending still makes up 70 of our economy. The warning signs we are starting to see is that they are becoming more uncertain about the future. If they become more uncertain at the same time businesses become more uncertain, that is where the real danger lies. There are certainly certain sectors we are watching manufacturing, which the most recent numbers, as you probably know, took us into recessionary territory for that industry. You know, you talk to anyone in the ag community, what is going on there four years of down prices. People in the ag world are really struggling. So we have individual sectors that are hard, but what would really push the American Economy is really the american consumer. Greta so you dont see a bubble anywhere . Neil i dont see a bubble right now, no. Jeanna so the opposite of gretas question are there any policies that you think would immediately serve to take away the Recession Risk . Neil most important, if i could leave one word, it is about certainty. And there are lots of Different Things that washington could do to restore certainty. On the trade space, it is not that they have to resolve every trade dispute that we are currently in. It is really about halting the escalation in the titfortat we are currently on. So removing the threat of continual escalation will provide a huge reassurance of the rules of the road for business. Usmca, the u. S. Mexicocanada trade agreement, which is our, numberchamber, legislative priority at the one chamber this Fall Congress enacting that without a lot of drama would provide reassurance that our trading relationship with our two biggest trading partners, canada and mexico, will continue to go smooth. If they can get an infrastructure bill done. Its one of those things that democrats and republicans both say they want to do. We are seeing, because of the manufacturing downturn, a lot of bluecollar workers not seeing the Job Opportunities they want. Doing something on infrastructure finally and making a big investment as they are talking about in the senate we think would provide a shot in the arm to the economy. Greta we heard the speaker of the house say this past week on usmca, democrats are waiting for enforcement language. What is she referring to . And is it something you can support . Neil so the speaker and a group of her colleagues in the house have been negotiating with aboutlighthizer four particular aspects of usmca, the most particular of which is enforcement. Just this week, they were trading proposals back and forth between Congressional Democrats and the administration. We think they are making progress. They are not there yet, but i suspect they will have a deal in the coming weeks. It will be one we will be able to support, and it is one that will deserve the support of, frankly every member of , congress. One of our messages, currently, to both republican and democrats, particularly given the importance of usmca its very difficult to say you are a progrowth, probusiness member of congress if you are not willing to get usmca passed. Chris it sounds like you do have differences with the administration, certainly on trade and immigration and lack of movement on the infrastructure bill. And i know in 2016 the chamber certainly actively supported Many Republican members of the senate in particular. Would you like to see more independence from some of those folks on the republican side of congress, more movement by them to change the dynamic on trade, immigration, and others . Neil i think the overall thing we would like to see from both parties is the resurgence resurgence in the, kind of, governing center. Folks interested in getting things done. Rarely in this town do you get 100 of your way. That never happens. It if youre waiting around, whether you are a republican or democrat, to get 100 of what you want, you are going to be waiting a long time. That