U.S. House Majority Leader Eric Cantor, a Virginia Republican, told a gathering of chief executive officers and university leaders that the U.S. must grant visas to skilled workers from overseas more quickly to halt an “exodus” of “foreign nationals in this country who come here” to attend universities “and then find it too difficult to stay here.” The Oct. 5 event at Bloomberg News’ Washington bureau was sponsored by Harvard University and the Business Roundtable.
Participants during the day’s series of discussions on innovations and the economy included Drew Gilpin Faust, president of Harvard University; former Michigan Governor John Engler, president of the Business Roundtable; Albert R. Hunt, executive editor of Bloomberg News; Bill Green, chairman of consulting firm Accenture Plc; Tim Solso, CEO of diesel-truck engine maker Cummins Inc.; Susan Hockfield, president of the Massachusetts Institute of Technology; Sally Mason, president of the University of Iowa; Ellen Kullman, CEO of DuPont Co.; James Goodnight, CEO of SAS Institute Inc.; Freeman Hrabowski, president of the University of Maryland, Baltimore County; John Hennessy, president of Stanford University; Linda Katehi, chancellor of the University of California-Davis; John Lechleiter, CEO of drugmaker Eli Lilly & Co.; and Teresa Sullivan, president of the University of Virginia.
(This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.)
DREW GILPIN FAUST: Why don’t we get started. I’m so delighted to have Leader Cantor here with us. I know how busy he is and it is a deep honor to have him join us and to be so eager to hear about our conversation.
Let me just say a couple of words about Leader Cantor. It’s a great privilege for me to introduce him because I am a fellow Virginian by origin. As you know, he has represented the 7th District of Virginia very ably since 2001 and was elected majority leader in January of this year. He is a deep friend to innovation; he came to Harvard last year and spoke about universities as the anchors within the United States for growth and prosperity and for the future, and I know he made similar remarks at Stanford later in the spring. So he has put himself on the record on behalf of the kinds of things that matter so much to us, and we are really delighted to have him here to engage in this dialogue and hear a little bit about some of the conclusions we came to and -- and discussion we had this morning.
I’ll say very briefly a few things that we focused on. I think from the outset we saw that the partnership between universities and industry is absolutely critical, that we need to understand how to frame the conversation to emphasize what it is that we share and that we see as so central to the future of this country from the kinds of innovations that we, together, can create.
The students that we train who become the leaders of tomorrow and the innovators of tomorrow, the discoveries that we advance and then discoveries that are also embraced and carried further by industry and also by research and industry itself.
We focused on three areas this morning. The first was immigration and the absolutely critical role that friendly immigration plays for all of us. We agree that we must make the case better and make the case by telling the stories of why this is good for people in the United States and why it’s imperative for United States competitiveness to bring the talent to the United States that is necessary for its future.
The second set of issues we focused on were about research and development. We acknowledge that it’s a very small part of the federal budget overall, and yet one that is so critical for our future as a nation because it has exponential impact for the kinds of discoveries that come from it and for the -- the real seed corn of the generation of scientists to come who want to know that there will be the support for their science and for all of our institutions, both as industrial partners, building on that research and also universities generating that research.
The third subject of our focus was patent reform and the recent bill which everyone applauded. And one of the questions we asked ourselves was how did that coalition get created, how were we successful in bringing that forward, and what lessons can we learn from that experience about the ways we frame the issues and the ways we -- we made partnerships to advance the issues.
“Partnerships” was a constant theme of everything we did -- our own partnership as universities and industry, but our partnerships with our communities, our partnerships with others across the political spectrum to make sure that these essential issues are brought together by a coalition.
So with that, Governor, let me let you answer.
JOHN ENGLER: It’s -- first of all you did a great job, Leader Cantor, it’s summing everything up and I don’t mean to add very much to it, I think there was great appreciation for the House, you know, process in getting this the -- the intellectual property patent reform bill to the president’s desk and getting it signed and certainly the hopes then that the funding from the private sector follows through the office so that we really start to whittle away on that backlog and that that’s all part of a strategy to have an innovation economy which I think overarching everything was the importance of innovation to economic growth and the importance of economic growth to dealing with this terrible jobs situation we’ve got.
So we’ve heard from the president’s science adviser today and also the head of the patent office, a little bit of a conversation with Ellen Kullman including about the president’s jobs commission what they’re talking about but they thought the idea that you put forward a jobs agenda, you’ve been a leader on innovation and have been committed to that and so -- so just the opportunity to talk to some leaders from the roundtable and from the -- through most importantly, the universities. We welcome you.
ERIC CANTOR: Well thank you and I -- I appreciate very much the -- the honor of being here and, Madam President, thank you, thanks for hosting us in Cambridge and we were in Palo Alto and looked forward to visiting even more because I would say, governor, President Faust is right, I do think that the future of our country lies in your hands and we want to work with you to -- to provide the engine for growth, and that engine is innovation.
So I think that the -- the emphasis in this discussion is right on, you know, we’ve obviously got a lot going on in the country right now, a lot of troubles. But if we step back just a second, it is the growth that comes from innovation that can be the key to a lot of sort of the problems that we’re dealing with.
And in my mind, it really has to do with whether we all have the courage in this town to do the things necessary to be that country that leads as an innovator. And we have in the country enjoyed a lead, we know the competition is very fierce at this point, but with the jewels of the higher education institutions that you all represent and together partnering with industry, we have an unbeatable -- an unbeatable formula if we could just see our way clear to a path forward.
And, you know, I think that where we need to start is sort of some self-examination here in Washington about what Washington is doing, frankly to raise the price of risk because if you think about it, innovation is something that is -- is furthered by individuals willing to take a risk, willing to engage in -- in growth and in activities that don’t guarantee any kind of outcome, and we all have to sort of I think look from a policy-making standpoint that we’re not making it more difficult in Washington for those risk-takers. I happen to think that we are.
And, you know, we’ve said when we were in Cambridge and in Palo Alto and other places: From innovation comes jobs. And we in this country have done it better than anybody, and that is take ideas that come from your institutions and bring them to market, and once you bring them to market, we go to manufacturing and the jobs and the wealth begins to grow among the middle class of this country and is shared. That should be the goal. And I think that on any -- either side of the political aisle and any part of the philosophical spectrum, I think there is some general agreement on that. And the question is: How are we going to get there?
And obviously in this town we are dealing with in the country two extremely difficult crises: The first is the federal debt crisis and deficit, which has been obviously growing for decades; no -- no one has a monopoly on blame here. But we also have a -- a real growth and innovation crisis, I believe, as well, an innovation deficit that is -- is caused very much by I think what some of the actions and inactions of this town are about. And so I applaud the effort of trying to come together and see where we have been successful in -- in patent reform and others, and see if we can replicate it to go forward so we can begin to bring about more of the kind of activity that we’d like to see.
And you know, it -- it is clear to me that there is a real divide on how to approach some of the issues on the table in Washington. We -- we have clearly divide with both parties on how to address entitlements, which as we know is the main driver of the debt situation. And if we can’t get that straight, we’re going to have a continued push and pull as to what priorities are and how much money we can commit to basic science research so that your institutions can be the incubators of this innovation ideas.
But we do have a divide on that, and we also have an urgency in a political realm that keeps too many people out of work in this country and, with that, adds to the lack of confidence and turns over into investors and the rest. So if you look at sort of where we’d all like to go, I think we’d like to fix both crises right now and so we can get on about the good things, which is to promote more innovation. That’s not so simple.
So instead of trying to continue to hammer away at a proposal that is just not going to go anywhere -- such as, you know, raising taxes on an economy right now -- we -- we just honestly believe, and a majority in the House of Representatives believes, that now is not a good time to raise taxes if you want to see economic growth. And I know it’s very politically expedient for the president, the majority leader in the Senate and others to say, “Well, we can just tax the millionaires because they’re convenient, there’s a pile of money and that’s enough and we can address the problem and go forward.” It’s just not that simple. We know that. And although politically expedient, that’s not going to happen and we don’t believe that’s the right policy.
So if we know that that’s a divide, then let’s set that aside, OK? So where do we go from here? Well, there are some things that we can agree on together. The -- the -- the president talked about things that will help regain some confidence in the small business arena. Well, small business has a lot to do with innovation, a lot of the start-ups, especially in the bio area and others, are small, small businesses. Well, they’ve got difficulty accessing capital. Well, we can do some things. Both sides, I think, are in agreement; there’s some bipartisan bills moving through the Financial Services Committee in the House that will allow for more access to capital.
We -- we can do some things like make sure that this promise of a 3 percent withholding on contractors dealing with the government is taken away, and I’ve actually been contacted by some of the public universities in my district in Virginia saying, “Hey, wait a minute, you know if we’re going to be tied to that requirement, we’re going to be having to see an increase in price for us because the vendors are going to do nothing but pass that price along because that may represent some of the margin in their contract.” So the president indicated in his speech he wanted to do that; I think we can get that done.
Free trade agreements -- free trade agreements are good for manufacturing in this country, because it allows our manufacturers to access foreign markets. And we’re looking to make sure that we deliver on that promise next week so we can get the Colombia, Panama and South Korea free trade agreements done finally. It’s been a long time in coming, and unfortunately, for all reasons obvious, it has not happened and we’re hopeful that next week it will happen.
But again, I think it is important for us to remember: We - - we want to do the kinds of things that make us competitive. We need a competitive strategy in this -- in this country. I think patent reform is a piece of it. Republicans put that in our job creators agenda last spring. It is because we said it is important to attract capital to this country and investor confidence and the -- the -- the certainty that can come from reform in the -- in the patent office, I think, is absolutely additive to that end.
We can also do some things when it comes to the FDA. You know, much of the research that is going on in your institutions has to do with approvals by the FDA, and there is much uncertainty connected with that process. Again, what that does is it raises the price of risk for people willing to commit the capital, and we can’t continue to raise that price of risk because at some point we become not competitive at all versus our counterparts in the globe. And we’ve got to do that and we have an opportunity with two bills, Perdue (ph) for the Prescription Drug User Fee Act and the Medical Device User Fee Act to actually effect some reforms in the FDA approval process.
You know, there are some other things that we can do from the regulatory standpoint, whether it’s again from the aftermath of Dodd-Frank, which we believe has gone too far in trying to correct that so small businesses and individuals can access capital. But we can also do some things when it comes to manufacturing. Some of the EPA proposed regs are extremely restrictive, and the anecdotes and evidence that we have found across this country demonstrate that we’re not going to see continued investment to expand manufacturing here if we don’t knock some sense back into the regulatory arena.
So all -- all I can say is we -- we do need an economic development competitive strategy mindset to return to Washington, because I think it helps all of us.
I can look to my state, in Virginia, and we’ve actually been relatively successful -- and a lot more so than most states -- in attracting economic growth. And frankly, I think, from a bipartisan standpoint, we’ve been able to put up the sign saying we’re open for business. We’ve got a positive tax environment, which we need desperately to address here at the federal level. We don’t chase away the kind of investment capital that we want to see come to Virginia by -- by dangling out there the promise that we’re going to tax investors and capital gains, and we have a more sensible regulatory environment. That’s the kind of attitude that I think we need here in Washington and dial back on some of the things that we can’t agree on right away, put some wins on the board like the free trade agreements, like the patent reform and others that we can agree to, and regain some confidence in this country.
So again, I thank you for having me, Governor, President, and delighted to engage in discussion.
UNIDENTIFIED FEMALE: Great.
HRABOWSKI: Freeman Hrabowski from -- from Baltimore, Maryland, at UMBC. We continue to attract the best talent to this country, to American higher education, everybody knows, the best graduate schools. What’s your sense about the general thinking, not just in the public but among elected officials about the need to make sure that we are able to retain some of that talent, as those people have many opportunities back in their home countries and other places?
CANTOR: Well, also part of the House majority job creators’ agenda is an attempt to address the antiquated visa laws in this country and I think, as you point out, as did Dr. Faust, we have an alarming rate of -- of exodus, if you will, of foreign nationals in this country who come here to attend your universities and then find it too difficult to stay here and, given the rise in the standard of living elsewhere, can just as easily go home.
I do still think that America is the beacon of freedom and opportunity. We could very easily lose that if we don’t get back on our game. So we intend to try and address that and to make it easier for the folks who are in our graduate programs, especially in the STEM areas, to stay, because they’re the innovators, they’re the ones who can create jobs and who can ultimately, I think, remain here so we can see innovation and growth return. But right now it’s entirely too difficult, and you ask me what the attitude is in the general public and members of Congress -- I think that there is a general sense that that we want to do.
Now it’s not unanimous. I mean, legal immigration is what this country has always been about, and most of us in America have found ourselves here because our families, most of us, our families that voluntarily come to seek that opportunity. That’s what we need to be about again, and need to be sure that the legal structure is in place and is predictable and is certain.
Now, that does not address the illegal situation that we have to address, but I think we can be -- we can be of -- of benefit if we address the legal side when you’re talking about the need for continued innovation.
JOHN LECHLEITER: Mr. Leader, good to see you again.
CANTOR: Thank you, John.
JOHN LECHLEITER: Is -- is corporate -- fundamental corporate tax reform caught up in -- in -- in the deficit -- is it -- is it sort of now back further in line in terms of something that can be considered absent, a solution from the supercommittee? And -- and I tag on with that, this R&D tax credit, we talked about that today, you know, is that -- is that going to be held hostage as a constant to making that permanent, which we think makes a lot of sense? Now we play this every-year, every-two-year game right to the end of the session almost, is it going to get renewed or not, another element of uncertainty that raises the prices of risk. What -- what, you know, all -- all of us I think can sit here and agree that corporate -- the corporate tax system in this country needs attention. It’s out of step, there’s -- it’s not -- it’s not territorial, it’s global, it’s all kinds of things, highest marginal rate. But where do you think that -- where do you think that -- that’s another important, obviously driver of innovation?
CANTOR: Right. Simplifying the code, bringing down rates, adding some certainty so that we don’t continue to have sunsets and cliffs as far as tax provisions is -- is I -- I think an essential element to lowering the price of risk for innovation and investment.
As far as the supercommittee is concerned, they’re, if you look at it, there’s not a lot of time for resolution on issues of import. The supercommittee’s first mission is to look to the $1.2 trillion in savings needed to effect the increase in the credit limit of the country by the end of the year. And unfortunately, when you’re looking at the issue of comprehensive tax reform, although we can agree on the basics, what we’ve seen over the last or the earlier part of the year, there’s not agreement on how you do that. And -- and especially there is an insistence by the White House and the president himself saying that we have to add a lot of money to the baseline, which means raising taxes.
So, John, I would say there’s not a unanimous sense that we should have revenue-neutral tax reform to simplify the code from the base, fix the territorial issue, there’s -- there’s not unanimity on how you do it, because unfortunately we’re still reeling from a desire on the part of some to raise taxes right now because of the dire situation of the fiscal outlook.
But again, we just don’t believe you do that right now. You raise taxes when you’re trying to promote interest and investment and so, I would say the supercommittee will likely not be able to accomplish the kind of comprehensive reform that some of us think is badly needed. I’m -- I’m hopeful they can lay the groundwork, though, and point the direction with some kind of directive.
JOHN HENNESSY: Leader Cantor, what -- I think all of us in the higher education community are concerned that over this difficult budget crisis and that the sort of default situation will lead to significantly more cuts on the discretionary spending piece especially, which includes basic research funding that you alluded to as well as Pell grants and other things that support higher education and are critical to our long-term growth. How much confidence do you have that we will get to an agreement that doesn’t head in that default direction?
CANTOR: I -- I think our Speaker has said that failure’s not an option here, that we need an outcome and I share his view on that. He appointed me to the so-called Biden talks last spring and in those talks, we actually, to the vice-president’s credit, were able to produce a blueprint to accomplish what the joint select committee’s mission is. And it doesn’t get to the comprehensive nature of entitlement reform that all of us would like to see, or at least some of us. It doesn’t get to the comprehensive tax reform, again, but it goes back to the fact that there’s just a difference of agreement and you agree to disagree on those things, but we provided a blueprint for success. And I’m hopeful that what we’ll see is the joint select committee in the end deliver on that.
TIM SOLSO: Tim Solso from Cummins, and I can’t applaud enough that the free trade agreements that I -- I hope this goes through and also general systems and preferences, but I’m very, very concerned about the action against China around the -- the currency and I -- I think there could be a lot of unintended consequences for companies that do a lot of business in China, so I’d be interested in hearing your comments about that.
CANTOR: Tim, I -- I share the concern about unintended consequences of a -- a new trade war, of impact on consumers in this country at a time in which people are having a rough time.
Obviously, there’s a great political upside to beating up on a competitor. That doesn’t -- that doesn’t -- we shouldn’t go without saying that our manufacturers in this country and our small businesses, small manufacturers are having a lot of trouble, and China’s coming in with what appears to be with an uneven playing field and an upper hand, and we’ve got to address that.
What I’ve said is I’d like to hear from the administration, from the trade rep, as to what their position is. Typically on a bill like that, you will have a staff that’s issued, the administration, the president will say what their position is on the bill. That has not been forthcoming, to my knowledge. And since they’re on the frontlines of this relationship, I think they understand the same thing.And I would like to hear from them about the prospects of unintended consequences.
We -- we’ve got a situation in this country where our manufacturing sector needs a jump-start. We have some success stories out there that we can talk about, as you demonstrate, and we can compete. My -- my sense is we can compete, especially in the advance -- in the advanced manufacturing area because that comes directly from the kind of work and research that’s done at these institutions.
But we need a cheerleader, we need somebody who can stand up for American industry who can say, you know what, we’ve got plenty of work to do here at home to create an environment for you to grow. So I -- I’m not -- I’m not so sure that with our economy three times as big as China that the only thing that we can go do is put on the floor a -- a bill like Senator Schumer’s that does have with it a lot of unintended consequences, I believe.
JAMES GOODNIGHT: I have one suggestion on the H1-B visa: Leave the 85,000 cap where it is and just increase the master cap from 20 to maybe 25 or 30, because we really do want to capture more of those master’s and Ph.D. students. I think a lot of the -- the regular H1-B visas are -- are being (inaudible) programs are being brought in from India, which I don’t care much about, so if you could increase, just leave the 85 where it is, increase the 20 up to 25 or 30 thousand for the master cap, that should be fairly painless.
CANTOR: That -- that seems to be a fairly painless kind of tweak, and we’ll take a look at that.
You know, there’s also some -- there’s -- there’s been some indication that some of these other type of visas, like the EB-5 that is sort of an investor type of visa, but if someone’s willing to commit a sizable sum of capital in this country can also gain admittance if they’re going to go and create jobs. These are the kinds of things I think have been demonstrated to work, and the problem is, it’s almost as if Washington’s speaking out of both sides of its mouth when we say welcome to those who want to come here to learn, to invest, while on the other hand we’re saying anybody who is investing we’re going to increase the costs of that investment by raising your taxes. I mean, that doesn’t make sense, it’s time for us to stop this yin and the yang and start getting focused on the priority, which is growth and jobs.
So I appreciate the suggestion.
ENGLER: (Inaudible) I was -- I was just going to follow up a little bit on -- on Tim’s question on China because Chairman Gant came into the Business Roundtable, one of the things he talked about was a hearing that was going to be held -- held in the House side -- sort of inquire if that’s still sort of in the works where they wanted to look at -- at the whole relationship with China, sort of the indigenous innovation strategies of China, the protection of intellectual property in China, a number of -- it wasn’t just the currency question, but it was a broader sort of review of the status of -- and I don’t know if that was still sort of the thinking of the leadership in the House.
CANTOR: Absolutely. We know that we have an intellectual property challenge with China and we -- we know that again, our manufacturers are feeling it that -- that somehow we’re not playing with a -- with a fair -- a fair hand here and we have to -- have to look at it. I mean there’s no question that our constituents and the companies that look to us to do the right thing are expecting us to do that, and from a trade relationship, obviously the increasing import of China, we ought to be doing that.
But I -- I would just underscore, Governor, that we’ve got a lot to do here at home to straighten out the environment. And again, there have been many, many pieces written lately today is no exception whether people and business are saying, “I couldn’t do what I did 15, 20 years ago because it’s so difficult now to do it.” Now there’s no excuse for that. We -- we should get straight and stop the ideological chase and get back to common sense here so we can start to see entrepreneurs grow again.
UNIDENTIFIED FEMALE: (Inaudible). Go ahead.
UNIDENTIFIED MALE: (Inaudible) you go ahead.
LINDA KATEHI: First of all, I wanted to thank you for being here today and I wanted to say I’m -- I’m one of those who came to study in this country and decide to stay. But I would like to go back to what John said about basic research and how critical it is in the innovation ecosystem. One of the problems we have away from the level of the funding is the uncertainty we have from one year to another. In the last 10 years or so, I don’t believe we had a budget on time, and even when we had a plan for a budget, we were never sure that that would materialize. As you are thinking forward about a more stable process, for the budget in general but also for basic research, have you through about doing a multi-year type of a thing instead of every year revisiting it?
CANTOR: Yeah, I -- I am certainly one who has -- who has had the experience coming from a state legislature that had a biannual budget process. It does lend itself to certainty. Again, that’s one of the things that’s seeming to be a common-sense direction, but it is a big change in this town for some reason. And what you’re seeing right now in all the rancor that comes out of Washington is the result of, I think, people who’ve come here in -- in a new way to effect real change.
So I -- I agree it is -- the goal is certainty for the positive. I don’t agree with those who say, just get something done, good or bad, because negative certainty is not good. But positive growth oriented certainty that can create an environment for risk-taking entrepreneurs -- innovation. of course -- is something that we want to do.
And I think, John, to your point before, you know on the tax credit is -- is the ancillary to that because if -- if the private sector can’t rely upon the -- the certainty in the tax code that the advantage will be there, then there’s a question. And so if there’s a question then the price goes up for taking that action.
Again making the case for the simplification and/or certainty for these provisions, but it goes hand in hand with your question about research budgets. And I -- I don’t think there’s any question, we ought to put a priority on research in this country. Washington does a lot of things that perhaps we ought to reexamine and say it ought not be doing anymore, but one thing that I think the country expects is leadership in research, because it has a huge leverage effect in our quality of life, in what we can do in productivity.
UNIDENTIFIED MALE: President Hockfield.
SUSAN HOCKFIELD: (Inaudible) and on that point, you just underscored it. I want to thank you for being here and thank you for the message you’re carrying.And, you know, I can’t tell you how much predictability is important when we’re doing very long-cycle things like basic research, we’re doing very long-cycle things like starting the kinds of companies and industries that will attack the really hard problems, like the cost of health care and whether we’re going to create a sustainable energy system, these -- these require investments of decades, not months -- and so predictability is important, and whatever policies that we put in place to encourage patient capital. One of the things that really scares me is seeing the capital investments in start-up companies going, you know, toward short-term thing, you know fast-cycle enterprises, rather than having the right kind of incentives for people to invest in the decade or two that it takes to bring a some of the more complicated technologies to -- to the marketplace.
So, you know, I applaud what you’re saying and (inaudible) the kind of -- from the outside looks like either bipartisanship or chaos in Capitol Hill (inaudible) just end with something a little bit more philosophical: that as we watch countries around the world evolving into new kinds of government, it is really a shame that the U.S. government does not stand as a model that other countries want to follow. And so, as much as you can encourage your colleagues to demonstrate the intelligence, the wisdom, the efficiency of the American system, it will be all to the good for the world.
ENGLER: Thank you very much, Leader Cantor, this is great of you to take time. You’re awfully busy (inaudible) we appreciate it.
CANTOR: Thank you, thank you very much.