Where is our economic policy? Chief executives say the Bush Administration lacks a viable strategy for U.S. competitiveness

Chief Executive, The,  June, 2005  by Peter Galuszka

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Energy Vacuum

Another drag on the economy, which showed its slowest rate of GDP growth in two years during this year's first quarter, is energy prices. So far, Bush's proposals to ease high prices have been to build new refineries on abandoned military bases and to build more nuclear plants in general. But cars don't run on nuclear fuel, and while Bush has called for tax credits for buyers of high-mileage, gas-hybrid cars, there have been no inducements for car manufacturers to move toward more fuel-efficient models, thereby maintaining--rather than reducing--U.S. dependence on foreign oil.

Critics say Bush's proposals are basically concessions to the oil industry, which makes huge profits off high oil prices. ExxonMobil racked up a 44 percent increase in earnings for this year's first quarter, with net income surging to $7.86 billion. High among unresolved issues is the escalating price for natural gas, which is critical for manufacturers and has risen to nearly three times its historical price, according to the American Chemistry Council.

So when W. Fletcher Steele, CEO of Pine Hall Brick Co. in Winston-Salem, N.C., says natural gas prices are killing his business, it's not hard to believe him. His firm, which supplies brick products throughout the eastern third of the U.S., depends on eight company-owned kilns that use great quantities of natural gas. "In a three-year period," he says, "prices have more than doubled." Steele says he realizes gas prices are market-driven, but improving the overall domestic energy picture would help. "What can be done is that electric power plants, be they coal or nuclear, should be made much easier to build," he argues.

The big question for Bush is whether he'll shift gears after reassessing the lack of traction he's gained so far on marquee issues such as Social Security. April 28 marked the President's first press conference in more than a year and he dedicated it to selling Social Security reform, so the signals are that a switch is unlikely.

Pressure, however, is growing on many economic fronts, particularly trade issues, as China-bashing is becoming more popular. Democratic Senator from New York Charles Schumer wants to impose a 27.5 percent tariff on all Chinese goods unless China adjusts its currency exchange rate system. Other protectionist schemes on Capitol Hill would set up duties that would cover what the Chinese government pays in subsidies to its exporters. Snow says the Bush Administration believes it is time for the Chinese "to move to a more flexible system and we are urging them to do so." He says Bush has been instrumental in convincing the Chinese to start regulating their banks, allow domestic firms to keep more foreign capital they earn and permit foreign firms to participate in their financial system.

Yet CEOs seem to believe that Washington has very little clout with Beijing. "Our trade deficit is unbalanced and our budget is way out of balance," wrote one survey respondent. "Foreigners, especially China, are accumulating too many U.S. dollars, and we are living high on borrowed money because of these imbalances. We're really just laying the seeds for the collapse of our economy."