Immigration Policy, Vocational Specialization and Welfare Reform Needed to Address Labor Shortages, says Chairman Kevin Brady
by Charles Frantes on June 7, 2018 at 10:48 AM
Immigration policy, welfare reform, and trade specialization will be upcoming topics of legislative focus to address the seven million jobs in the US that can’t be filled today, according to Chairman Kevin Brady (TX CD-08) in recent remarks. "At the end of the day, to use an energy expression, it’s going to have to be an all of the above strategy," he said. His remarks were delivered at an annual Energy Forum sponsored by Calvetti Ferguson in Houston on May 29. “I can’t find an industry and few businesses that aren’t starved for workers or who don’t see real problems looking ahead at their workforce...what a shame if that problem of a skilled workforce and sometimes unskilled workforce, we can’t solve that in order to increase our economic growth," he said.
The first solution he mentioned to the labor shortages was immigration policy. Immigrant and migratory workers can undoubtedly play a valuable role in the American economy by helping to meet its dynamic workforce needs. "We are going to have to get immigration policy right so we have the workforce and we can recruit from around the world because you are competing around the world," he said.
Brady also highlighted the importance of having workers with the right skills, saying that avenues to promulgate vocational specialization and craft training are going to be a key focus in harnessing the full potential of the US economy. "We have got to get workforce right. We’ve got, depending on what industry you’re in, we have apprenticeships, we have workforce partnerships with the community colleges, internal programs, but they are not producing the numbers we need. So we are going to have to turn the volume up. We are going to have to magnify those in a really smart way," he said.
The third topic Brady plans to address in filling the labor shortages is welfare reform to incentivize work and help Americans trapped in the US entitlement system to stand on their own two feet. "Businesses always cringe when I talk about this, but here we are, we have a jobs gap, almost seven million job openings can’t be filled today. Some can be filled by immigration policy. Some can be by workforce. But we have got millions of Americans who are stranded on the side lines trapped in the welfare system. Good people trapped in the welfare system...get someone in a job and keep them in a job. Keep them in a job because that is when they have the greatest chance to be part of the workforce long-term and actually climb that economic ladder," he said.
While Brady spoke proudly of the increased growth and investment in US businesses and the one million jobs that have been created since the passage of The Tax Cuts and Jobs Act that he and Republicans in Congress led the way on, he also said workforce shortages in the US labor market that is currently at 3.8% unemployment are inhibiting the US from fully experiencing the economic benefits of the new tax code. He explained that the economic analysis of the new tax code all predicted greater future economic growth at home and world wide, but that the growth may begin to slow down after about 5-10 years because of labor shortages. "They are unconvinced that the U.S. will resolve the workforce and take full advantage of this new code. And I see that around the country," he said.
Brady explained that the best way to counteract these predictions of slowed growth is to make sure that the business and family provisions of the new tax code are permanent, and also that there will be enough workers. In order to supply the US economy with the optimal amount of labor needed to achieve maximum economic growth and the benefits for all which that entails, he said that the US will need new policies to address immigration, welfare reform, and craft specialization.
A full transcript of Chairman Brady’s statements at the event hosted by Calvetti Ferguson is below:
You had me here two years ago where we laid out the vision for the tax code. You may recall at the time, the two goals that I had set as we began this effort was one we wanted a tax code built for growth, designed to grow jobs and paychecks in the U.S. economy. Our second goal was to leapfrog America from nearly dead last among our global competitors when it came to competitiveness of our tax code, 31st out of 35 and falling. So our goal was to leapfrog from that position back into that lead pack as one of the top 3 or 4 best places on the planet for that next new investment, research, patents, and headquarters.
The point I make to all my colleagues is that there is plenty that you and I might do differently in tax reform, but we got the fundamentals right for the country in a big way. And though it’s very early into this process and the impact, I would say we are not just on the first inning of the ball game, we’re like on the second batter of the first inning of this ball game, and already, the results are very encouraging but there is still a long way for this to play out.
I say the early results are very encouraging because the first quarter we saw paychecks increase at the fastest rate in almost 17 years, something that had been stalled out for a decade and one of the reasons we were working so hard to reform this tax code. We saw business investment in the first quarter looks like it will be at record levels period, which is what we wanted to do was to unlock investment, get that capital off the side lines, get it moving in this economy in major ways. We saw small business impacts occur almost immediately. You probably saw the survey of small business owners, main street owners of America, two weeks ago. Their earnings, their profits are projected to be at a 45-year high. Six out of ten Main Street businesses are hiring as we speak, and already they reversed that trend, it was a troubling trend for the last decade or more where more small businesses were failing than starting up. Already that has reversed itself, which is a good healthy sign. We’re seeing, battling our manufacturers, they were quick out of the gate to be making new investments, they are hiring again at a good, strong pace.
We are seeing consumer confidence is at very strong levels; so much so that those who believe now is the best time to find a quality job is at a twenty year high. In housing, an area where we made some changes in this tax code related to housing, and there were lots of predictions of what it might do in a negative way, but our studies show that home values, home prices, home sales go up when the economy is good and when the economy is not, it goes the opposite direction. Well early on, now, home prices have increased four percent, the fastest rate in five years. Home ownership is hitting a new, all-time record in projected increase again this next year and continue to go up. Consumer confidence is so high that the percentage of Americans who plan on buying a new home in the next six months, so the number of Americans planning on buying that new home is at an all-time record level. And Zillow predicts that tax relief will inject 40 billion dollars into the housing market; people buying or renting bigger homes, or renovating the ones they’re in.
And so as we look at this continued, very strong, economic news, I’m really encouraged but my point is this: I think the best is yet to come. And here’s why: we really designed this to get America back into a competitive system, to bring those jobs and that investment, to create a giant sucking sound over time back toward United States. The early signals, again, are very encouraging. The number of companies bringing back dollars to invest in the United States, the announcements, whether it’s Apple with twenty-thousand new jobs here because of that new investment coming back. It was terrific to see dollars coming back, whether for bonuses or pay raises, increased benefits or even for stock buybacks, which are good for those who save as well. Very encouraging, but I think longer term what we are seeing as I travel the country is that we are influencing those vocation decisions.
I was in Boston three weeks ago with a medical company, does medical breakthroughs, you’d recognize them. Hugely successful, they’re working on their fourth medical breakthrough. And their point when I was in Boston was: you’ve changed everything for us, now our new research won’t be done in London, it’ll be done here in the U.S., our patents won’t be housed in Ireland, they’ll be here in the U.S., and we like to do our manufacturing where we do our research and so that is going to happen in New England if we can find workers to do the manufacturing.
I was here in Houston at a Fortune 100 company, you’d recognize their name, they are going to do well under tax reform and so their board of directors was in town to decide where to invest those dollars. And so, their public announcement was just sort of what you would hope. They’re investing in new facilities, they’re investing in their workforce, and they’re investing in new technologies to remain productive and become competitive going forward. That was their public announcement, just what you’d hope. The private announcement to me was what we are not saying yet is where those new facilities will go. They won’t go in Canada, and they won’t go in the UK as we had scheduled them. They’ll be occurring here in the United States because their tax code now justifies those investments here in America.
Those types of decisions are longer term. The impact will be felt longer term, but I think this tax reform is going to grow the greatest of economic benefits and personal benefits because of those types of location decisions. And you may remember, the whole reason we did this, was that not only had America fallen so far behind, but the economists, every economist was telling us the slow growth of the last decade, where it was two percent in a good year, where our jobs continue to move overseas, where our young people coming out of school, their jobs, their opportunities for good jobs were slim, every economist said, “just get used to that, that’s our future going ahead, not for another decade, but beyond that.” Every economist said, “there is a new normal, it’s dumbed down, it’s slower, the opportunities are fewer.”
That’s why we took on this effort, and I really credit my Speaker Paul Ryan and our Chairman of the Ways and Means Committee Dave Camp before him for laying the foundation of this, the President, President Trump weighed in on every key moment in decision on tax reform, and the Senate, to their credit, found a way to get this through that chamber and that doesn’t always happen. And so now we have a new tax code.
So where do we go from here? The first answer is we have to make sure we really maximize the growth from this tax code. There are a lot of questions about how soon provisions occur. We threw an awful lot at the tax code with very short time to be able to understand it all, so we expect a lot of clarity rules coming from treasury, especially in the areas of the pass-throughs, interest deductions, and the new international tax code. There’ll be a lot of clarity and rules required there. Many of you I want to thank have really weighed in constructively with us before tax reform and you are weighing in constructively with us with your clients as well now. And so we expect treasury, who is in the room as we develop this tax reform plan, not that they’ll mimic everything we ask them to do, but they know the congressional ten in all these key areas.
So you are going to see rules promulgated starting in June here, in just a few days, first on the pass through areas and interest deductibility, deemed repatriation in August and September they’ll be moving to the expensing, passages of expensing, interest deductibility, and foreign direct investment. All those will be promulgated in those initial rules here starting in just a few weeks. My ask of you is that this is sort of like building a house, you know, you go through and you have a punch list of all the things that need to be addressed. So if you or your clients are talking to the treasury about the clarity that is needed in some area, make sure it’s on our punch list as well so the Ways and Means Committee can work with them. We can help identify, “hey we addressed this in a positive way” So that’s one response.
Second is that we will need to do technical corrections on this new tax reform. Two of them surfaced the day after we passed the conference committee before out to the House and the Senate. More have surfaced as you would expect. So I anticipate that while the radian technical corrections occurred over a two and a half year period, I’m hopeful that we can bring out an initial and pretty well scrubbed list of technical corrections this fall and begin the process of trying to work with the Senate on passing that effort. It won’t be easy. Democrats, as you’ve noticed, aren’t big fans of the new tax code. Normally in technical corrections we create a real positive environment where Democrats and Republicans, the House, the Senate, work with treasury to identify these, scrub them, get them ready. We are going to try that again. We are going to attempt that approach. We think it is the most thoughtful but we don’t have necessarily high hopes. So at the end we are going to have to pay a price, find a way to get the technical corrections done. But there is another step that is needed beyond that.
So, I was really fortunate to be tasked with reconciling the House and the Senate tax reform bills in a ten day period. This is one of those, “kids don’t try this at home moments.” It is a challenge. So we didn’t get to do all of our punch list before this was finished. What we had hoped was obviously to be able to show you parts of the tax code, having modeled, having analyzed, take a look at the interactions because, as you know, it’s never just one provision that’s the challenge, it’s how it interacts with all the others. That’s always the impact.
So I think in the past, specifically on the foreign international concepts, we are going to have to do fine-tuning. We are going to have to actually change some of the policies in there to achieve what the intent of Congress is, to make this the most pro-growth, encourage investments, the intangibles, the patents, all that back here in the United States and increase growth as much as we can. We haven’t set a time table for when that fine-tuning draft will come out but we’re pointed toward that direction and this year if we can. And so, You’ve been terrific about staying engaged with us in those areas whether it’s on interest deductibility, how it interacts, foreign tax credits, the excess foreign tax credits, the denial of some of these credits, how we deal with treatment of services in the energy and other areas. We’ve got work to do there so my request is stay close with us as we’re working the fine-tuning of this because I’m just a believer that you improve on everything you do. Just continue to improve it, which leads me to, “what is tax reform 2.0?”
It’s probably not what you think. I’ve talked to the President at length about this. What we are trying to do is change the culture in Washington to let our code drift farther and farther behind our competitors, to try to address it by stuffing it full of special provisions that usually just make it more complicated and create another group that wants those special provisions, that’s been the culture. We think we ought to follow your lead and do things differently. And here is the main point I make up there. Look at every successful organization in America, especially in the business side of things. Every organization I know wakes up every day, every business, asking themselves, “how do we become more competitive, more innovative, better?” Well I want congress each year to look at our tax code exactly the same way, asking ourselves, “how do we make this country more competitive, more innovative, better?”
And so, we have already, sort of like the updates on your telephone, each year or more you have these updates. Some are more significant than others, but all are planned ahead. And so for 2018, I think the significant portions of 2.0 will be permanent. The individual in the pass through side, because the Senate budget rules we were able to go long-term but not permanent. We think for growth, and for certainty, permanence matters. That will be in the heart of 2.0. It probably ought to be called 1.1 because that’s really what it is, but I don’t want to confuse the media any more than I already do. So 2.0 will lead with permanence.
Secondly, we didn’t get to make some of the improvements in some of the areas we had planned. For example, in retirement savings, we are not a nation of savers, we need to be. It’s shocking how high up the income level most families get before they are putting any money away. And you know most families have next to no savings at all, can’t handle one bad paycheck. So we have got some work to do. We think there is a way to make it more consumer friendly, more user-friendly, better. We can help families save more and earlier in life, whether it’s for health care, education or retirement itself. The House had done, we had done a lot of work ahead of tax reform to be ready; the Senate wasn’t at tax reform time. Since then, they have done some good work in this area. Now they are ready to go.
So we think part of 2.0 can be changing the way we incentivize savings in America both for families, for younger people and then while larger companies tend to have good tools in place, medium and smaller businesses, not so much. We think we can do more. And I’ll tell you, maybe you have, but I have never met anyone yet who said, “man I wish I hadn’t started saving so early.” You know, you just never, who is that guy? We can do better. And so the second part is really us looking at where can we make the code more family friendly. Are there incentives where smaller, medium-sized businesses can also help employees with that burden of student debt?
Maybe there is just some good, I don’t want to clog the code back up with an arm’s length of new tax credits. That’s not the goal, and we are not putting back in the tax code the things we took out. Listen to what I just said, so we are not going to put back in the tax code the things we took out. But we think there are some good, smart improvements where every family can look at that and say, “ah, see that would be helpful for us to stretch that budget.” So that’s the second part, family friendly.
The third part is focused on innovation. So I noticed in February America had fallen out of the list of top ten most innovative nations in the planet for the first time ever. So that was before tax code really, the new tax got in place, so that probably shoves us back in there but it raises a question of, “are we doing enough to foster innovation here in the United States?” And as you know, the country that wins the innovation race wins, just wins period, economically and otherwise. So, I’ve tasked our teams and lawmakers with sort of examining what more, if any, can we do to encourage innovation. We think the lower rates, the form of limited expensing, there is a number of things in here already that are hugely helpful for innovation. But I don’t want us to be complacent.
I want us to be pushing the envelope because we know in talking with our counterparts, whether it’s in China or Germany, or Canada and Mexico, you know, they are not just going to stand around with our new tax code. They are going to find a way to try and gain and advantage. I want Congress to have the muscle memory that they are always thinking staying up, staying competitive, staying better anyway we go. And it’s a change from how they think. And the President, to his credit, has bought into this approach, don’t get complacent, but make it better, make it better, make it better. And so I expect a 2.0 bill to come out of our committee and announce later this summer with a vote later this year, this fall, and then working with the Senate to see which provisions they want to pick up and move forward as well.
And so 2.0 we think is important because it sets the tone for 3.0 next year and 4.0 the year after that. And we’ve already, just like any business, we’ve already started planning the parts of the code that could be modernized next year and the year after. So we are trying to think differently and better like a business does, especially when it comes to the tax code. I’ll finish with this. We have to do two more things if we want to maximize economic growth here in America. We are now armed with one of the better codes of the planet.
How do we grow from it? So to do that, we need more customers, that’s free trade and free trade agreements, and more workers. Let’s stop on trade but let me talk workers just a second. So I took a look at the economic analysis of our tax code, I looked at all these, and they were pretty consistent. So they all said higher U.S. growth, higher worldwide growth, lots of good fundamental changes, perfect. But in the out years, you know, 5, 6, 7, 8, 9, so they start pulling their punches. So they start leveling growth out and coming down. So the question is, “why?” Their answer is one, permanence, they want to make sure the business and family provisions are permanent, and secondly, workers.
They are unconvinced that the U.S. will resolve the workforce and take full advantage of this new code. And I see that around the country. I can’t find an industry and few businesses that aren’t starved for workers or who don’t see real problems looking ahead at their workforce. And what a shame if that problem of a skilled workforce and sometimes unskilled workforce, we can’t solve that in order to increase our economic growth. And at the end of the day, to use an energy expression, it’s going to have to be an all of the above strategy. So we are going to have to get immigration policy right so we have the workforce and we can recruit from around the world because you are competing around the world.
Secondly, we have got to get workforce right. We’ve got, depending on what industry you’re in, we have apprenticeships, we have workforce partnerships with the community colleges, internal programs, but they are not producing the numbers we need. So we are going to have to turn the volume up. We are going to have to magnify those in a really smart way.
But the third one is welfare reform. And I know businesses always cringe when I talk about this, but here we are, we have a jobs gap, almost 7 million job openings can’t be filled today. Some can be filled by immigration policy. Some can be by workforce. But we have got millions of Americans who are stranded on the side lines trapped in the welfare system. Good people trapped in the welfare system.
And so before we left for memorial day weekend on Thursday, the Ways and Means Committee, we passed out the first welfare reform in 22 years because the timing is perfect. Demand for jobs, millions of people stranded on the side lines, what do we do to get them to the front lines of employment. And so these new reforms are really about building off the success of 1996. They lifted families out of poverty, cut the roles in half because they got single moms back in work, they did amazing things. So the old reforms said states need to engage half the people on welfare to try and find a way to get into a job. We have the new standard. All, 100%, if you’re work eligible on welfare today, no American will be left behind, everyone will have a work plan that you sign, and a state plan tailored to you, to get you moved back into the workforce, whether it’s training, whether it’s experience, whether it’s childcare and transportation, an individual plan. But you’ll be expected to work or train or prepare for that job.
That’s the first change, the second, the old reforms were focused on single moms, perfect, that was the time, the era, to do that. But now we’ve got 7 million men, prime working age, 24-50, in the zone, disappear from the workforce. Nowhere engaged. We need those men back, and many of them are attached to those same welfare families as a father who doesn’t have custody or no connectional. So the new approach, we are focused on women and men to get them back in the workforce.
Thirdly, in the past we told states, “look if you can get someone into a temporary job for a month, perfect, good job you did it.” Well that doesn’t work. So our new rule is this, you succeed states if you get someone in a job and keep them in a job. Keep them in a job because that is when they have the greatest chance to be part of the workforce long-term and actually climb that economic ladder.
And then fourth part, which I love, is the current welfare system is just dark, it’s opaque. States are diverting that money to other stuff. You have no idea who is succeeding. So we are going to shove a bunch of sunlight into this. There is going to be a dashboard that every one of us can go to our states and look at how many people are on that path going to work, how many are training to go to work, how many aren’t doing a thing. And every state is going to have a letter grade. Governors hate letter grades, A, B, especially if it goes into the D’s and F’s, really get upset. But guess what? We are going to give them the flexibility to get people into jobs and keep them, but the whole world is going to see how successful every state is in helping these folks.
And I’ll close with this. It does tie to tax reform because this is all about maximizing growth and opportunities for this country and for people. We can’t leave folks who are on the side lines behind either. And our message to them isn’t get off your dead butts. Our message is we need you, you know, our economy needs you and by the way, your children need to see you go to work each day. That’s priceless going forward. And so, we’ve got a lot of work to do going forward.