[Congressional Record Volume 140, Number 12 (Wednesday, February 9, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: February 9, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                 IMPROVING THE INDUSTRIAL POLICY DEBATE

                                 ______


                          HON. LEE H. HAMILTON

                               of indiana

                    in the house of representatives

                      Wednesday, February 9, 1994

  Mr. HAMILTON. Mr. Speaker, I would like to insert my Washington 
Report for Wednesday, December 22, 1993, into the Congressional Record:

              [From Washington Report, December 22, 1993]

                 Improving The Industrial Policy Debate

       A major issue facing policymakers as they try to improve 
     the long-term economic outlook for our country is the extent 
     to which the federal government should be involved in helping 
     specific industries or sectors of the economy. In recent 
     years several important American industries were losing 
     ground to Japan and Europe, and there was a concern that 
     government had no role to play and basically did not care 
     whether the U.S. made computer chips or potato chips.
       Clinton Efforts: In contrast to the reluctance of the 
     Reagan and Bush administrations to publicly support 
     industrial policy, the Clinton administration has announced 
     fairly ambitious new programs of federal investment and 
     assistance to specific industries. In recent months, 
     President Clinton has announced efforts to help automakers 
     produce clean cars, to help develop an information 
     superhighway, to assist the shipbuilding industry, to provide 
     new tax breaks for the oil and gas industry, and to fund 
     research into advanced technologies such as flat-panel 
     displays or new materials. The interest in industrial policy 
     is driven by the fact that we are in a tough competitive 
     climate, and are losing out in some areas and are losing good 
     paying jobs. Policymakers are looking for ways to make our 
     economy more competitive and improve our ability to sell more 
     goods.
       Supporters of such efforts argue that it is appropriate for 
     the federal government to assist basic industries with the 
     potential to support high-wage jobs in this country into the 
     next century. The argue that U.S. industries are falling 
     behind in many of the key technologies of the future, and 
     point to the major success that countries like Japan have had 
     with their policies of targeting particularly important 
     industries for development. They say that it is better to 
     risk supporting an industry incorrectly thought to be 
     strategic than to allow the collapse of others incorrectly 
     thought not to be. They point to polls indicating growing 
     support among key U.S. industrial leaders for government-
     industry partnerships.
       Critics: Critics, on the other hand, do not want the 
     federal government involved in picking industry winners and 
     losers, saying that the free market chooses better than 
     bureaucrats. They point to the failures of government pouring 
     large sums of money into supersonic transport, synthetic 
     fuels development, and breeder reactors, and say that Japan's 
     industrial planners often made mistakes and had a mixed 
     record overall. They also say that Members of Congress will 
     push mainly for the development of industries in their own 
     districts or states, and that subsidies will go to the 
     politically connected. Such critics argue that the most 
     important thing the federal government can do is to work on 
     improving the overall health of the U.S. economy and 
     providing a climate under which businesses can flourish.
       The Clinton administration responds that some of these 
     problems in picking winners and losers can be lessened by 
     having private sector companies involved in picking which 
     technologies to help develop and by making the private sector 
     pay for a large share of the cost. The administration also 
     agrees that the primary federal concern should be improving 
     the overall economic climate, but says that some of these 
     industrial policy steps can also be of some help, and should 
     not be summarily dismissed.
       Improving the Policy Debate: My sense is that, whatever the 
     drawbacks, industrial policy is something that we will be 
     hearing more about in the months and years ahead because of 
     the competitive pressures our nation faces.
       Yet I believe that as this debate unfolds, we need to get a 
     much clearer sense of overall U.S. industrial policy. Many 
     people view industrial policy as having the federal 
     government choose winners and losers between exotic 
     technologies such as optoelectronics and advanced robotics. 
     But as many have pointed out, the U.S. already has an 
     extensive de facto industrial policy--with all the spending 
     and tax programs it has that assist the agricultural sector, 
     the housing industry, the health care industry, and so on. 
     Industrial policy basically means government support for some 
     particular sectors or economic activities over others, and 
     the federal government has been doing that for a long time in 
     a variety of ways--primarily direct spending and tax 
     subsidies but also trade policy and regulatory relief. For 
     example, more than a half century ago the government put U.S. 
     farmers on the cutting edge of agricultural knowledge with 
     federally-funded research, land-grant colleges, experiment 
     stations, and extension service agents in every county. 
     Several such federal efforts have had significant success: 
     the research and extension system has helped make U.S. 
     agriculture among the most productive in the world; our 
     aerospace and computer industries owe their origins to 
     federal programs; our federally supported medical technology 
     is among the best in the world. Indeed, some of our most 
     successful industries are ones that have had considerable 
     federal backing and support.
       Yet the problem is that the way the federal government 
     helps these major industries is often not looked at in a 
     coherent way, and when it is, much of the policy does not 
     make a lot of sense--such as the minuscule amount we spend on 
     manufacturing extension compared to agriculture extension, or 
     that advanced electronics has benefitted less from federal 
     assistance than commercial construction.
       Thus I believe it would be helpful to require the 
     Administration to put together periodically a brief listing 
     of the main sectors of the economy and a description of how 
     and to what extent the federal government helps them out. 
     Such assistance probably totals hundreds of billions of 
     dollars each year in direct spending and tax breaks. Some 
     industries receive significant government support, while 
     others which may be much more important to our nation's long-
     term competitiveness may receive very little. It is difficult 
     to have an informed public debate if we do not know whether 
     the federal government currently provides more assistance to 
     oil producers or agriculture or condominium developers or 
     software companies or biotechnology or the aerospace 
     industry.
       The basic goal would simply be to help bring about a more 
     informed debate on industrial policy: to get a broad sense of 
     what our industrial policy priorities already are, to see if 
     the current allocation of federal assistance makes sense, to 
     see if the assistance is being provided to correct a problem 
     or simply because it has been provided in the past, to see 
     what results we have gotten from the assistance, and to see 
     if some sectors need more support and others need less in 
     light of overall national goals and future challenges. Since 
     we will likely be debating industrial policy more in the 
     future, we should at least be doing it in a more informed 
     context.

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