Matthew Rose

CEO, Burlington Northern Santa Fe
There's a short-term issue and a long-term one. The short-term issue is really the definition around stimulus, and then the question is: Will there be further stimulus and how will stimulus take place? The plan that has been put in to shore up the banks is working and will continue to work. We're seeing that in the credit markets. But the biggest issue looming out there is keeping people in their houses and finding a way to help people through their mortgage issues on these resets. As there are more foreclosures, people who are losing their houses aren't going to go out and buy things. So I think that keeping people in their houses is the top issue, whether Congress will deal with that or that will take Presidential leadership is an unknown question.

It's really hard for the government to do it. What JP Morgan came out with over the weekend about helping to keep people in their homes, that is the model we hope will work. The government provides capital to these big banks and says: Go forth, and get money back into economy. This is an evolution that came from that injection of $25 billion. I hope other banks will take the lead from what JP Morgan is doing. Short-term, the stimulus, the injection of capital, has brought us back from the brink of the financial malaise we were in.

But thinking forward, it's much bigger than the stimulus. We're not going to grow our way out by giving a family $500 to spend money. That doesn't work. What works is when government creates a framework for companies, and their small companies, midsize companies, and big companies. Somehow the entire campaign has been around small business, good, big business, bad. Big business is not bad. Big business is a huge generator of societal value. It's a huge generator of jobs. It's a huge generator of wealth for all rungs of the ladder.

I have 35,000 people making somewhere between $45,000 to $100,000 a year for us. The better we do, the better they will do. The role of government has got to be to set a framework for businesses of all sizes to flourish in. And that's going to come back to tax policy, infrastructure, trade policy, it's going to come back to labor policy. At the end of the day, we'll look back on these policies, however they are changed, we'll look back and say: Did these policies and laws make the U.S. a more competitive nation, or did it put artificial cost into our ability to produce goods and compete worldwide? That will be the question of whether we continue to flourish and take the leadership position in growth and GDP or if we don't."


The second evolution of what I would say is post-transition as we go into 2009. I don't think we'll be in a much different place in January. So I think the various policies are still going to have to be brought with a lot of delicate maneuvering. When you think of some of the things that have been committed to on the campaign trail, like changing the tax structure, increasing capital gains, increasing corporate taxes, I just don't think that can be done while our economy is still very uncertain, and it will probably be uncertain through 2009. I don't see any big impetus that is going to change that. But I think that as people get elected and they have a plan, those plans will have to be altered given the reality of the business climate. I just don't think whoever is elected will want to do anything that will potentially damage capital gains in the short term.

In the longer term, I think there are some differences in how people believe. On the one hand, you could make the argument that we shouldn't have any capital gains on corporations. That corporations' real role is to provide jobs to people and then you tax at the consumption level. On the other hand, most companies do have a corporate capital gain. As long as we don't move too far, it has worked in the past and it will continue to work. What we have to watch out for is that we don't allow U.S. corporations to be relegated to be uncompetitive because of corporate taxes.

Longer term, I think it's a question of a tax policy, a regulatory policy, and an employment policy, what is going to drive commerce and drive growth in this economy? Both candidates have different plans. And time will tell which is more successful.


In terms of infrastructure, Obama has probably articulated more than McCain. He refers to an infrastructure bank. There's very little detail around that. There is still a raging debate among economists about the trickle-down effect of infrastructure projects. But as fiscally conservative as I am, I would probably make a bet on some infrastructure projects short-term into the new Administration for a couple of reasons. I do think it's stimulative. So I do think that the rising tide will lift all boats.

Second, we need it medium-term and long-term. We need this infrastructure to be built. Third, it's stuff that can actually happen short-term, especially if some of the regulatory issues around infrastructure are altered. I think the best example of that is the bridge that collapsed in Minneapolis. Under normal permitting procedures, given that there was some federal money, it probably would have taken three to four years just to get permits. But the entire bridge was built in one year with special contracting and permit processes. Not that we need to change all the regulatory and environmental permits, but to make stimulus work, you've got be able to fire some of these projects out. Infrastructure would be fair game to get some commerce moving and some jobs going on a relatively short term basis.

I think the theory of an infrastructure bank is a great idea. This campaign has not been about infrastructure. Infrastructure will never get the attention it deserves until it becomes a top five issue. I don't really believe until it becomes a top five issue, people will see it as an imperative, but I think that given the fact of where the economy is today and that people are wanting to stimulate the economy, and this intellectual argument of how best to do that, infrastructure investment is a very good idea.

When our infrastructure is evaluated, it's across the board that we need all and more of it. Whether it's highway or railroad or barges, I think we would stand to benefit from various types of infrastructure investment. When people have studied the U.S. infrastructure, they summarize it with a couple of thoughts. One is that historically it has been the greatest infrastructure of anywhere in the world, yet we also recognize that all of those investments were made by my grandfather. Not by my generation. It was in the 1950s and '60s when it was built up. When it was built, we had 200 million people in this country, and we benefited from it for literally four, five, six decades. Yet, we haven't had the big infrastructure plays in history outside the airport boom that occurred in the '70s and '80s.

So as we've expanded our population from 200 million to 300 million, we've taken the excess capacity out of all of this infrastructure. We know we haven't seen major expansion projects. More troubling, when the highway is evaluated, we're not keeping up with the normal state of good repair. So there are two areas that will need attention. One is bringing it up to a state of good repair. Two is the expansion of capacity. We sit here in the U.S., and we see all of these developing countries making massive infrastructure bets. As a percent of GDP, it's no surprise that developing countries are spending 5 to 10 times as much as we are, as a percentage of GDP. We're just in maintenance mode. But our maintenance dollars are inflating faster than our revenues. We're just not getting enough net dollars into infrastructure.

Once the economy recovers and we start to grow again, a good infrastructure, a strong infrastructure, has really been one of the drivers of why we have had such a good economy over the past several decades because it gives us good access to global markets. The majority of this stuff isn't flown in cargo planes. Most goods are transported to the ports on the highways and the railroads, so we need an efficient, fluid, and low-cost infrastructure.

Low Oil Prices

Given the economy, I think people will be slow to implement a cap on trade. A cap has not worked well anywhere else in the world. The bigger issue that we face is that as we go through the global demand slowdown, fuel has fallen back to $60 to $65 a barrel. The biggest crime in it all is that it takes the pressure off to do a number of things, whether it be to find more supply, to drill more, to conserve more, to look at alternative energies more. We could get back into this "don't worry, be happy" mode. We risk getting further sucked in more than we are today because oil prices are low. I don't care if oil falls to $40 or $50 a barrel, we have got to have leadership in energy policy. Just because people aren't hurting at the pump [right now], as developing countries start to develop, and more Chinese buy cars, there will be a global competition for world oil. We have 3% of the world's population, and we consume 25%. That's not a great position to be in. It's not good. Low prices are a head fake.

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