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Delivering a 21st Century Economy: More Trade, Less Debt, New Jobs


Abstract:

Scott Davis, UPS Chairman and CEO, calls on leaders in Washington DC to back away from the looming fiscal cliff and pass a bipartisan debt reduction plan in early 2013. He says policy uncertainty and lack of free trade is holding back U.S. economic growth. But, he adds, "It's not too late to act."

Thanks Don, and the entire AWB team, for inviting UPS to take part in this year's policy summit. It is an honor for me to be with you.

I love the Northwest. This part of the country attracts a certain kind of individual - honest, hardworking and creative. Seattle is the home of iconic global brands like Microsoft, Amazon, and Starbucks-and dreamers and doers like Bill Gates, Jeff Bezos, and Howard Schultz.

I grew up in Medford, Oregon-rugged timber country near the California state line. During the summers in high school, I worked in a local saw mill: it was hot, grueling, and sometimes dangerous work. The hours were long and the pay was meager. Working in the saw mill helped me make one critical life decision: I was going to have a job with air conditioning!

I went to the big city in Oregon for college: Portland State University.

In one of my first jobs, I worked for a technology company called II Morrow that UPS eventually acquired. We made hi-tech electronic equipment for aircraft.

Our culture at II Morrow was very laid back. I grew a beard, and I wore sandals and jeans to work. I really miss that! So coming back here is really like a homecoming for me, without the beard and sandals!

In the time we have together, I want to tell you two stories. That's it. Just two stories. The first is a story about business, a story that inspires me. In many respects, I think it's the story of many in this room. Maybe not with the same facts, the same plot, or the same twists and turns. But it's a story that causes you to swell with pride-because it's your success story. And my second story involves politics. It's a story quite frankly, I wished I didn't have to tell. My hope is that my two stories will cause you to pause, to think, and most importantly, to act. 

Origins of UPS in the Northwest

What do you see when you look at this $100 bill? Some of you simply see a $100 bill. Some of you see, sadly, about what it takes to fill up your car with gas these days. But I see something quite different. I see our story, UPS's story.

You see, on August 28th, 1907, 105 years ago, about 80 miles from here in downtown Seattle, a young man with a big dream began writing his chapter of the American story in a way that may sound familiar to many of you. He borrowed $100 from a friend to create his own business. His name was Jim Casey, and he started UPS. He was just like you: an innovator, an entrepreneur, and a builder.

We started UPS taking simple steps. We delivered messages by bicycle. And with tons of hard work, sacrifice, and foresight, the business started to grow and flourish. Soon, we began serving retail customers for Seattle department stores. Then, we started driving parcels across the country. Then, delivering packages around the world overnight. Along the way, we built one of the world's largest airlines. Today, we are a global logistics and supply chain business.

Every day, we move 15.8 million packages across more than 220 countries and territories from two page documents to two-ton whale sharks. We've come a long way from peddling around Seattle on bicycles and sorting packages on 4x8 plywood sheets atop saw-horses.

I am very proud of what we have built. But this is not just our story. It's the story of every successful business-businesses that create jobs, generate new industries, expand existing markets and drive our economy.

Constructive dissatisfaction

Last spring, I was on hand to launch the New York Stock Exchange Century Club. This index is comprised of business icons and household brands. Every member of the club represented a company that had been incorporated in the United States for at least 100 years. UPS is proud to be among them.

I talked with fellow executives from companies like Smuckers, and McCormick, and Footlocker, which was originally Woolworths. Who would have thought that Woolworths would evolve into a sporting shoe company called Footlocker? I was struck by the variety of goods and services these legendary businesses provide and the differences in these companies, then and now.

But something else struck me. I started wondering: How does any company excel and prosper? What are the qualities of the companies that succeed despite the economic conditions, setbacks, and challenges that every business inevitably faces? I think there are four essential qualities that distinguish the simply good companies from the truly great ones.

First, is constant evolution. Woolworths is an excellent example of a company that did exactly that. And so is UPS. Jim Casey had a phrase we use often at UPS: "constructive dissatisfaction." That simply means never being satisfied, always looking for ways to do what we do even better. Great companies adapt to the conditions. They don't deny that the conditions exist. They remain nimble and agile. They are constructively dissatisfied.

Second, I think great companies ask tough questions: Why are we doing this? Where are we headed? Is this the best way to get there? They have foresight to look around the bend, to anticipate and plan. Above all else, great companies never create unnecessary, avoidable challenges for themselves.

Third, great companies are disciplined. They make decisions that are in the best interest of their customers and employees. They don't make the expedient choice, or even the safest choice. They evaluate their situation and try to make the best choice.

And finally, great companies have the courage to act even when the decisions may not be popular. This is the story of every great business.

Risk of the fiscal cliff

This leads me to my second story-a story about where we are as a country.

I think that this country that I love is at a crossroads. I want our elected officials in Washington DC to start running this country the way we run our companies-with real leadership, courage, discipline, and foresight.

Simply put: we need our representatives to reach out more, and to dig in their heels less. Our economy needs pragmatic leaders who work together to solve problems. At this moment, our country's Board of Directors, the President and Congress, are facing not one, but two self-inflicted crises: The impending fiscal cliff and the crushing trade imbalance.

Let's look at the fiscal cliff. Because Congress couldn't agree on common sense fiscal reforms last year, we now face a double whammy of potential shocks to our economy. In January, 2013, some $100 billion in automatic budget cuts will take effect. And that's just the start of $1.2 trillion in cuts over the next decade. At the same time, tax cuts are set to expire on January 1st, which will suck even more money out of your customers' pockets and out of the economy as a whole. 

The nonpartisan Congressional Budget Office says that, taken together, these budget cuts and tax hikes will send the U.S. economy plunging back into a recession. Does that make any sense when we are creeping along at an anemic 1.7% GDP growth rate?

With this madness becoming a real risk, executives at companies in every industry are understandably scaling back. More than 40% of companies surveyed by Morgan Stanley this summer cited the fiscal cliff as a major reason for spending restraint.

When companies don't spend and hire, the business engine driving our country sputters along. And the economy stagnates. And 23 million people can't find work. That is unacceptable, and frankly, inexcusable, in my view. Would you run your business this way? 

Businesses have three-, five-, and ten-year horizons. We need to know where our energy will come from, what we'll owe in taxes, what services and support we'll get in exchange for them, in which markets we can buy and sell, and on what terms. We need a predictable environment in which we can plan, invest, hire, grow, trade, and prosper. When that happens, the private sector will do what it does best - innovate, invest, and hire. What follows is sustainable growth, more jobs, rising incomes, and improved living standards. So I decided to act.

Fix the Debt now

Along with about 70 other CEOs, I recently joined an organization, founded by former U.S. Senator Alan Simpson and President Clinton's Chief of Staff Erskine Bowles. It's called Fix the Debt. I believe strongly that our nation must effectively address debt reduction without compromising economic growth opportunities.

The Simpson Bowles Commission showed us the way with a plan it proposed in 2010. They brightly lit the path forward. Was it a perfect solution? No. But it was a terrific starting point. They proposed lower tax rates, eliminating deductions, and common sense entitlement reform. And they proposed something that has become almost toxic in DC-compromise.

Many of our elected officials are too scared to be seen walking the path of common sense and compromise together. So nobody acted. Our current debt is $16 trillion dollars. Worse, our deficits are growing by more than a trillion dollars a year.

Did anyone see the national debt clock whirling away at one of the recent National Conventions? The numbers were spinning so fast you got dizzy watching. Let me put this in perspective. Our national debt increases about $3,000,000 every minute-every minute!

By the end of my talk, our national debt will have increased about $135 million.

That is shameful.

Why does this matter? Because debt is smothering our economy. And it grows worse as more time passes. Our fiscal debt is now 70% of the nation's economy, and it's projected to more than 200% by 2040. If that happens, the next generation will pay a devastating price for our failures.

But it's not too late to act. Our goal with "Fix the Debt" is to have a bi-partisan debt reduction plan drafted when Congress returns in January. I believe it's realistic to have it approved early next year. If our leaders come together and deal with these problems, we'll still have time to get our nation on a sustainable fiscal path. But only if we have the courage to act! 

Our second real challenge is global trade. The United States has free trade agreements in effect with 19 nations. This is inadequate at a time when other nations are forging more and more agreements.

Importance of global trade

For brazen political reasons, our policymakers have been far too slow to adopt trade deals that can support economic growth and jobs in this country. Trade is too often viewed as a four letter word in Congress. It's easy to blame our trading partners for stealing jobs.

But the reality is just the opposite. Trade has always been the world's most powerful engine of growth, job creation, and prosperity. So today, I call on our leaders to resist protectionism and clear the way for more trade, which our economy desperately needs.

Two years ago, as Don mentioned, I joined the President's Export Council.

Our goal is to double exports by 2015. Recently, I met with leaders in Southeast Asia. Many of their countries have been entering bi-lateral deals with China. They asked why their friends in the United States were so reluctant to enter agreements with their countries.

They want to expand trading partnerships with us as a counterweight to China's growing influence in Asia. Since 2008, the United States has been working on the Trans Pacific Partnership. This ambitious agreement involves 11 countries.

It would become a 21st century global commerce model, opening countless avenues of expanded trade. It's taken a while. But we're making progress.

As a major gateway to Asia, Washington State stands to reap huge benefits from the Trans Pacific Partnership.

So I urge you to join me in encouraging our leaders to quickly enact this critical agreement now. To that end, I applaud recent United States trade agreements with South Korea, Colombia, and Panama. These trade deals make it easier and more cost-effective to sell products to consumers in those countries. They also mean more and better jobs in this country. But these recent trade deals should be the first of many, not the last in memory.

We know what kind of economic environment helps businesses flourish, and what kind of economic environment causes them to flounder. And we are fed up with a federal government that perpetuates the latter.

In closing, let me say this. Lack of political will by our leadership in Washington is immobilizing us. We won't solve our problems by burying our heads in the sand and refusing to recognize and act on this very serious crisis. And we won't solve our problems demagoging ideas or demonizing opponents.

We need an open dialogue and an honest debate on these critical issues of our national debt and our trade imbalance. Our leadership needs to ask tough questions, adapt to the economic realities, take a disciplined approach. And most importantly, act.

We have a choice of the story we write for our next generation. We can write a story we won't be proud to tell our kids or grandkids. Or we can write an inspiring story, a rich story that might be symbolized by a $100 bill-a flourishing economy, and robust global markets open to all. A story about when this country and its leadership did the right thing. I want that to be the story we write.

For more information, contact:

404-828-7123

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