US Chamber chief: 'Exploding debt' is threat to economy

U.S. Chamber chief Tom Donohue called for Washington to reach a broad deal to rein in deficits in the coming months, while warning that entitlement spending was unsustainable.

“As a nation and a people, we must finally face up to the single biggest threat to our economic future—and that is our exploding national debt, driven by runaway deficit spending, changing demographics, and unsustainable entitlements,” Donohue said. “Congress and the administration must focus their attention on this critical priority. Economic growth cannot solve all of our problems, but without growth, we will not be able to solve any of them.”  

Donohue said policymakers had squandered the chance for a larger tax-and-spending pact during the recent “fiscal cliff” negotiations, and said that officials on both sides of the aisle needed to put their partisan differences aside.

“Do we have the leaders to put the country first ahead of their own careers, politics, ideologies and egos?” Donohue, also the Chamber president, declared at his annual “State of American Business” address.

Donohue said that restraining entitlement spending and overhauling the tax code would be part of its broader push to expand economic growth and the labor market, an agenda that also touches on energy development, immigration issues, trade and regulations.

The focus on debt and deficits signals something of a shift for the Chamber, which supported President Obama’s stimulus package and has long made job growth a signature issue. But Donohue said Thursday that putting the U.S. on firmer fiscal ground, Donohue added, would play a big role in allowing the private sector to do its part to help spur growth.

“Economic growth must be front and center here in Washington,” he said.

President Obama is asking Congress to raise the nation’s $16.4 trillion debt ceiling, and Republicans in Congress are demanding steep spending cuts in exchange. With the Treasury Department already undertaking “extraordinary measures” to allow the nation to pay its bills, the fight over the debt will dominate the first months of Obama’s second term.

The Chamber president said that Medicare, Medicaid and other U.S. entitlement programs were “unsustainable” and had come to dominate American spending.

Still, Donohue said that changes to entitlement programs could be phased in over “a number of years”

He also said that the tax code was long overdue for a revamp, and that the right kind of reform could make the U.S. more competitive around the globe and “turbocharge” economic growth.

But with Republicans and Democrats still arguing over how much revenue the federal government should collect, Donohue also argued that a tax overhaul should not be seen as a substitute for spending restraint.

Republicans have said that after the recent fiscal cliff deal, which extended Bush-era tax rates for family income up to $450,000 a year, that they will not agree to any other revenue-raising deal. But Democrats have said what they call a “balanced” approach needs to be on the table in any future discussions.

Donohue says that allowing tax rates for the highest earners will hurt businesses that pay taxes through the individual code. The differences over revenues have made some observers skeptical that tax reform can happen this year.