A hearing of the Subcommittee on Economic Growth, Tax and Capital previewed a key issue—unemployment—that President Barack Obama will discuss in his State of the Union address on Jan. 28, 2014.
The hearing could also foreshadow the 2014 congressional election campaigns, as candidates scramble to find answers to creating jobs and lowering the persistently high unemployment rates that plague rural areas throughout the United States.
Rep. Tom Rice, R-S.C., chairman of the subcommittee, met with business leaders and economists in Dillon, S.C., on Jan. 24, 2014, to discuss ideas on how to combat a jobless rate in the area that has consistently hovered 40 percent to 50 percent above the national average.
“Clearly we must do better to promote policies and ideas that create more jobs. One of those places where we need to do better is in our rural communities and with the stubbornly high levels of unemployment in those communities throughout our nation,” he said. “As a sector of the economy, rural areas, particularly right here in northeastern South Carolina, have significantly higher levels of unemployment when compared to urban areas.”
Obama is striving to reduce stubbornly high unemployment rates and has called 2014 the “year of action.” White House officials have indicated that the president is ready to use his executive powers as a way to jumpstart job creation initiatives that have stalled in Congress.
In 2013, Obama proposed creating innovation hubs to generate new jobs and business opportunities. He traveled to Raleigh, N.C., on Jan. 15, 2014, to announce the opening of a new innovation institute at North Carolina State University.
Obama also has touted ideas such as increasing the minimum wage and equal pay for women as ways to open the doors for economic prosperity.
Republican leaders have taken a different route, claiming that government regulations and corporate tax rates have stifled economic growth. The president’s and the GOP’s differing approaches could set the stage for the congressional elections in November 2014, according to sources familiar with the issue.
In his opening comments for the subcommittee hearing, Rice claimed that too many government regulations and high tax rates on employers have created economic hurdles and stifled business growth—especially in rural areas.
“Various studies conducted by organizations such as the United States Chamber of Commerce and the National Federation of Independent Business continually point to high levels of taxation, regulation, and a general uncertainty about where the economy is going as significant impediments to growth,” he said.
Rice then asked the witnesses if eliminating red tape and cutting taxes was the best way to spur economic growth. Richard Kaglic, senior regional economist at the Federal Reserve Bank of Richmond, told the congressman that businesses could easily deal with regulation and taxes, if they had time to plan and map out their business strategies. Uncertainty due to gridlock on Capitol Hill causes planning problems for business leaders, he added.
Kaglic testified that the economic outlook for 2014 would be a continuation of recent trends with the national GDP growth remaining near 2 percent “accompanied by modest improvements in payroll, employment and the unemployment rate.”
Other witnesses agreed with Kaglic’s economic forecast but said that there were ways to shake off the doldrums and create jobs and business opportunities for rural areas.
Ben Chastain, director of the Duke Energy Center for Innovation in Hartsville, S.C., touted the idea of collaborative projects among businesses, schools and local governments.
“I’m talking about leveraging the individuals and industry you currently have in your communities to bring together stakeholders who can put the power and energy into these efforts and work to find the capital to develop innovation centers which can be business incubators,” said Chastain.
In his testimony, Jeff McKay, executive director of the North Eastern Strategic Alliance, advocated developing mentoring opportunities and support systems that focus on helping entrepreneurs launch new businesses.
“Access to capital for small business and entrepreneurs in rural areas is vital to the economic health of our region,” he said. “Currently, regulations hinder the loan process for many small banks, leaving only the larger banks as a source for capital. New and innovative programs in rural areas could spur new business opportunities.”
Rice promised that he would continue the discussions on Capitol Hill and keep pushing for economic policies that made sense and would help small businesses. He again renewed his vow to reduce regulations and taxes that he believes are hobbling economic growth.
“Today’s hearing provided for a constructive discussion with economic leaders in South Carolina on job creation and the economy of rural communities, many of which have been left behind in our nation’s lukewarm recovery,” Rice concluded. “The testimony we heard today reaffirmed my belief that federal regulations and high taxes not only harm small businesses, but also place rural economies at a drastic disadvantage.”
Bill Leonard is senior writer for SHRM.