Corporate CEOs apparently aren't too impressed with the economy.
A Business Roundtable survey of 135 of its member CEOs, conducted last month, shows they expect GDP growth of only 2.4 percent for 2014, despite a 4.2 percent expansion in the second quarter.
Plans for capital expenditures, hiring and sales all declined this quarter from the second quarter.
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"While some economic indicators are improving moderately, the results seem to reflect an underperforming U.S. economy held back by policy uncertainty and growing conflicts around the world," Randall Stephenson, chairman of Business Roundtable and CEO of AT&T, said in a statement. Overseas conflicts in the Ukraine and Middle East have weighed on executives' optimism.
"The U.S. economy continues to perform below its potential. . . . We believe Congress and the administration must focus on policies that drive economic growth, including tax reform, immigration reform, trade expansion and long-term fiscal stability."
Nearly 90 percent of the CEOs said that tax reform — including a corporate rate of 25 percent and a competitive territorial tax system — would encourage additional investment or cause them to expand their U.S. operations.
Stephenson said a key reason for increasing pessimism about capital spending and hiring was concerns among the CEOs that Congress may not extend a series of temporary tax breaks, including credits related to research and development, Reuters reported.
"Most of us are not terribly optimistic that the tax extender packages are going to happen ... and as a result people are adjusting their outlook on capital spending," Stephenson said on a conference call with reporters.
Stephenson also said that a rash of U.S. companies moving offshore to avoid U.S. taxes through a process known as "inversion" has been prompted by the nation's relatively high corporate tax rate. Business groups have been pushing the Obama administration and Congress to cut the rate as part of broader corporate tax reform, though little progress has been made so far, the Associated Press reported.
"To the extent that U.S. businesses anticipated meaningful tax reform, these inversions would taper off very rapidly," Stephenson said during the conference call.
Harvard economist Larry Summers is concerned about sub-par economic growth too.
"The economy continues to operate way below any estimate of its potential made before the onset of financial crisis in 2007," he wrote in the
Financial Times.
So how do we reverse that trend?
"Structural reform is essential to increase the productivity of both workers and capital, and to increase growth in the number of people able and willing to work productively," the former Treasury secretary said.
That includes increased infrastructure investment, immigration reform, policies that promote family-friendly work, support for energy production and business tax reform.
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