[Congressional Record Volume 140, Number 28 (Tuesday, March 15, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]
[Congressional Record: March 15, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]
RECESS
The PRESIDING OFFICER. Under the previous order, the Senate will now
stand in recess until the hour of 2:30 p.m.
Thereupon, at 12:43 p.m., the Senate recessed until 2:30 p.m.;
whereupon, the Senate reassembled when called to order by the Presiding
Officer (Mr. Kohl).
Mr. RIEGLE. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. MITCHELL. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Unanimous-Consent Agreement
Mr. MITCHELL. Mr. President, I ask unanimous consent that the Brown
Amendment No. 1496 be withdrawn and the 2:30 p.m. cloture vote be
vitiated; that it now be in order for Senator Hollings, in behalf of
himself and Senator Danforth, to modify the committee substitute to S.
4 with language which would reduce the substitute to a 2-year
authorization level of $1.9 billion; that Senator Danforth then be
recognized to offer an amendment to delete the venture capital
provision of the committee substitute to S. 4; that there be a
limitation of 90 minutes for debate on the amendment, with no
amendments in order thereto or to the language proposed to be stricken,
with the time equally divided and controlled in the usual form; that
when the time is used or yielded back, the Danforth amendment be laid
aside, with no other amendments in order, that there then be 60 minutes
remaining for debate on the bill and committee substitute, inclusive,
with the time equally divided and controlled between Senators Hollings
and Danforth or their designees; that at 9 a.m. on Wednesday, March 16,
the Senate then proceed to S. 1458, the Kassebaum general aviation
liability bill, under the provisions of a previous unanimous consent
agreement; that when the time is used or yielded back, S. 1458 be
temporarily laid aside and the Senate then resume consideration of S.
4; that upon resuming consideration of that bill and without
intervening action or debate, the Senate proceed to vote on the
Danforth amendment relating to the venture capital provision; that upon
disposition of the Danforth amendment, the committee substitute, as
amended, be agreed to and S. 4 be read a third time; that the Commerce
Committee then be discharged from further consideration of H.R. 820,
the House companion, and that the Senate then proceed to its immediate
consideration; that all after the enacting clause be stricken and the
text of S. 4, as amended, be inserted in lieu thereof; that the bill be
advanced to third reading, and without intervening action or debate,
the Senate vote on final passage of H.R. 820; that upon disposition of
H.R. 820, the Senate insist on its amendment, request a conference with
the House on the disagreeing votes of the two Houses, and that the
Chair be authorized to appoint conferees; that upon disposition of H.R.
820, and without intervening action or debate, the Senate resume
consideration of S. 1458 and then proceed to vote on final passage of
S. 1458, the general aviation liability bill.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
Mr. MITCHELL. Mr. President, I thank my colleagues.
Let me now say that, as a consequence of this agreement, there will
be no further rollcall votes today. The Senate will debate an amendment
by Senator Danforth to delete the provisions of the pending bill
relating to venture capital. It will then complete debate on the bill
itself. That will be the action today.
At 9 a.m. tomorrow, the Senate will take up S. 1458, the Kassebaum
general aviation liability bill. Under the agreement governing that
bill, there is 1 hour for debate equally divided. When that time is
either used or yielded back, that will be laid aside, and the Senate
will then vote first on the Danforth amendment to delete the venture
capital provision from S. 4 and then upon final passage of S. 4 itself,
and then upon S. 1458, the general aviation liability bill.
Under this provision, the vote on the first of those three votes will
occur some time between 9 a.m. and 10 a.m. It is not a certainty that
the vote will occur at 10 a.m. because the time, the 1 hour, may not be
used. So Senators should be aware that three votes will occur tomorrow
morning commencing at some time prior to or at 10 a.m.
Mr. President, I thank all of my colleagues for their cooperation to
permit us to go forward. This involves a very large number of Senators
and a very large number of issues, and I appreciate their cooperation.
I am pleased now to yield to the Republican leader.
Mr. DOLE. Mr. President, I understand, following disposition of these
matters, we move to the park concessions bill.
Mr. MITCHELL. Mr. President, I have not yet had an opportunity to
discuss the schedule request with the Republican leader. I would like
to do so. I made no decision in that regard. I want to discuss that
with him later in the day.
The PRESIDING OFFICER. Without objection, amendment No. 1496 is
withdrawn.
Mrs. MURRAY. Mr. President, I rise in strong support of S. 4, the
National Competitiveness Act.
In the Pacific Northwest I have met with many workers in industries
as diverse as timber, commercial fisheries, agriculture, aerospace
manufacturing, and computer technology. These workers have one
overriding concern--job security. Timber harvests have declined. Many
salmon stocks have been decimated. Workers in natural resource
industries are being advised to look elsewhere for employment. On the
shop floor of the giant aerospace manufacturing plants in my State,
workers talk about jobs moving abroad.
These concerns reach our children, who are dropping out of school in
record numbers. They no longer feel there is a reason to continue their
education.
During the next several months Congress will be considering
fundamental changes in Federal unemployment policy. I whole heartedly
agree with the administration's assessment that the current premise for
our unemployment system has outlived its purpose. Generally, workers
are no longer laid off only during periodic cycles. The Washington
State Employment Security Department estimates that about three-
quarters of laid off workers will not be rehired. These unemployed
workers must be trained in skills necessary for reemployment in good
jobs to replace the ones they lose.
Opponents of this scoff at a national policy to stimulate job
creation. I believe they just don't get it. This country is competing
in a global economy. Countries that actively develop and create the new
technologies will have winning companies in the international
marketplace. In order to succeed, the United States must create jobs.
The Department of Commerce estimates that by the year 2000, annual
worldwide sales in products based on 12 key emerging technologies may
total $1 trillion. According to the Department of Commerce, American
companies could capture about one-third of those sales.
So, how are we doing? The Department's report card, comparing the
United States with Japan, shows us losing badly in the following areas:
advanced materials, biotechnology, digital imaging technology, and
superconductors. Other areas where we are merely losing to Japan
include advanced semiconductor devices, high-density data storage,
high-performance computing, medical devices and diagnostics,
optoelectronics and sensor technology. It will take a concerted effort
to turn this situation around.
There are ways to reverse the United States' overall decline in
advanced technology. The National Competitiveness Act calls upon the
Department of Commerce through the National Institute of Standards and
Technology [NIST], to create manufacturing technology centers. These
centers assist States, local governments, and private business
organizations in training workers in the use of modern and advanced
manufacturing technologies and the creation of high-performance
manufacturing. These centers work.
NIST oversees the Washington Manufacturing Extension Center, in
Everett, WA. The center's initial goal is to provide technical
assistance and resources to approximately 2,000 local defense-
dependent, small manufacturers in the area. An owner of a small
aerospace company was quoted in a local newspaper recently saying his
23-person company does not have the time, energy, or background to do
the research, planning, and marketing to keep his company moving ahead.
He said his business needs the center's technical help to do much of
the footwork, the phone work, and the digging if it is to succeed.
The American Electronics Association is one of the founders of the
Everett manufacturing extension center. The partnership also includes
the Washington Department of Community Development, Washington State
University's Cooperative Extension and a matching $3.1 million, 2-year
grant by NIST. This center does not pick specific winners and losers.
The center's immediate goal is to focus on 2,000 small and medium-size
private, defense-related contractors in the area. Eventually, the
center wants to expand its mission to food processing and forest-
product firms. Technology centers, such as the Everett center, will
promote manufacturing activity on local and region levels.
The National Competitiveness Act also authorizes the Advanced
Technology Program. Under this program, the Department of Commerce
works with industrial groups to develop large-scale, industrial
consortia, similar to the Semiconductor Manufacturing Technology
Institute. As a leader in aerospace manufacturing, Washington State
appreciates the leading role that the Federal Government plays in
stimulating industry. Our international trading partners also
understand the important role of Government support.
The National Competitiveness Act should be a wake-up call for our
country. It serves as the foundation of a new activism by our
Government in job creation for our people. We cannot afford to wait any
longer for this type of initiative.
Mr. RIEGLE. Mr. President, I rise in support of S. 4, the National
Competitiveness Act. I am proud to be an original cosponsor of this
legislation. This bill reauthorizes and expands a number of important
technology programs, such as the Advanced Technology Program and the
manufacturing extension partnership.
We need to invest in advanced technology, especially in the
development of new technologies that are emerging as the industries of
the future. Millions of valuable new jobs can come from these vital
sectors if we wake-up and prevent their loss to aggressive foreign
competitors.
The provisions contained in this bill are especially important to
reinvigorating our manufacturing base.
Manufacturing is the heart of our economy; it keeps the lifeblood of
the economy flowing. Manufacturing is the key to maintaining middle-
class jobs that are the backbone of our Nation--jobs that pay middle-
class incomes with health care protection and pension benefits. These
are the jobs we are losing. The number of manufacturing jobs, after
growing on a fairly steady basis since the end of World War II, peaked
in 1979. Since then, we have lost almost 3 million manufacturing jobs.
In 1990, only 18 percent of the U.S. work force was in manufacturing.
In Japan, 24.1 percent work in manufacturing; in Germany the number is
31.5 percent.
This loss of jobs has resulted in a decline in earnings for working
Americans. In 1989, the number of jobs in retail trade surpassed those
in manufacturing. In retail trade, the average weekly gross earning is
about $200. In manufacturing, it is about $470. The average real weekly
earnings for production or nonsupervisory workers peaked in 1972. By
1991, it had dropped by almost 20 percent, reaching the lowest level
since the 1950's.
The result of this trend in wages is frightening. After declining
steadily since World War II, we are now seeing a dramatic increase in
the proportion of full-time workers working for wages that put them
below the poverty line. According to the Census Bureau, in 1990, 14.4
million. American workers with full-time jobs--18 percent of all full
time workers--made less than $12,195.
To reverse this trend, we must increase manufacturing productivity.
We need to increase the value-added of American production. Better
products, produced more quickly and at lower cost is way of adding
higher value. That mean it's not just the number of cars per hour we
produce that's important--it's also how well those cars are made. To
move to this higher value-added production requires increasing the
skills and knowledge of our workers. It also requires providing them
with the best equipment and infrastructure possible. In essence, it
means a shift to a strategy of creating high-skill, high-wage jobs
rather than competing with low skill, low-wage production.
The creation of high-skill, high-wage jobs must be the central goal
that drives our economic strategy for the future. High wage jobs
increase the standard of living and increase investment, which in turn
generates a new round of economic growth and even more jobs. This is
the cycle of growth we need to restart. By addressing the critical
areas of technology and manufacturing, this bill, the National
Competitiveness Act, is an important step toward our economic renewal.
Parts of this bill dealing with technology financing issues are of
particular interest to the Banking Committee, which I chair. I was an
original cosponsor of Senator Rockefeller's legislation which was the
basis for this provision. I believe that the technology financing pilot
program in this bill is an important step. This program will help fill
the technology financing gap between basic research and the
commercialization of a new product--a gap pointed out by the Reagan
administration in the early 1980's.
The pilot program created in this legislation is based on the
successful Small Business Investment Corporations [SBICs]. Under his
program, business will decide--not government--as some have claimed.
Whereas the SBICs focus on small business, often in the retail sector,
this pilot program focuses on investments in critical technologies--
investments that are vital for our future economic prosperity.
Mr. President, there are those on the other side of the aisle who
have called this bill industrial policy. I wish it was. I think we need
to have an industrial policy. We need a new Team America approach where
all of us--business, labor, government, and private individuals
acknowledge the problem and work together to ensure a strong economic
future.
We need strategies to strengthen the auto industry, the aerospace
industry, the chemical industry, computers and software,
pharmaceuticals, electrical components and equipment, machine tools,
telecommunications. These are the industries that are critical for us.
They provide hundreds of thousands--in the end, millions--of jobs in
our economy.
At some point, I hope the Senate will debate and pass a comprehensive
industrial policy. This bill is not that--it is simply a technology
policy. In fact, this bill is a continuation of a bi-partisan
technology policy crafted over the past decade. It is ironic that we
now see a Republican challenge toward programs that were supported by
previous Republican administrations and by Republicans in the Senate in
previous years.
I hope that we can move forward with these important programs and
pass this legislation quickly.
Mr. BAUCUS. Mr. President, I rise today to support S. 4, the National
Competitiveness Act of 1994.
government/industry partnerships
Not long ago, American manufactured products dominated world markets.
Our goods were synonymous with quality and technological leadership.
But over the past few decades we grew complacent. Others improved upon
our ideas and our products. By the middle of the 1980's, our basic
industries had clearly slipped into decline. Goods from Germany and
Japan replaced American products here at home and around the world.
Since then, our industries have done a great deal to raise their
productivity and the quality of their products. We in Government have
worked hard to reduce the budget deficit and thus give American firms a
larger and cheaper pool of capital. But we can, and we must, do more to
strengthen our manufacturing base.
The President's report on the economy finds that for every billion
dollars in increased manufacturing sales, we create more than 69,000
high skill, high wage jobs. And conversely, of course, when we let
manufacturing decline, we let jobs and international leadership slip
away. So while we have made progress in the past 10 years, we cannot
take our situation for granted. We must continue to look into the
future; to support the basic research that will let our industries
operate most efficiently and develop the best products.
a successful partnership
When Government and industry work in partnership, we succeed. One
clear example is the case of semiconductors. In the early 1980's,
collusion and dumping by Japanese semiconductor companies threatened to
drive the United States out of the semiconductor market entirely. We
recognized the problem, and took action by working with American
industry to create Sematech in 1987.
Sematech is a phenomenal success. Last week the chip industry
reported that the American share of the world semiconductor market rose
to 43 percent. For the first time since 1985, we have taken the largest
share of the world market. This turnaround in the market equates to
$3.4 billion more in yearly sales and the preservation of 16,500
American jobs. Because of this recovery, the American chip industry is
now building three new semiconductor plants costing about $1 billion
each. They will create 12,000 to 15,000 thousand new jobs.
the national competitiveness act
The National Competitiveness Act takes some of the lessons we have
learned in our experience with Sematech and our observation of
successful foreign industries and applies them on a wider scale.
Of particular importance, are provisions that will make it easier for
small companies to utilize the most advanced and commercially viable
technology. One of the most important is the establishment of numerous
manufacturing technology centers to disseminate knowledge and ideas.
The information made available may not always constitute a ground-
breaking innovation. But small companies simply do not have the
resources to seek out the incremental advances that together make a
product more durable, easier to operate, and easier to sell.
Today, Japan operates nearly a hundred manufacturing technology
centers, which allow small companies with limited manpower to get the
maximum benefit from technological advances. Here in the United States
we have a grand total of seven. Montana has none, but my State
understands how important they can be for our economic development.
Montana State University, for example, is trying to make up for the
present lack of Federal commitment with a University Technical
Assistance Program, which provides onsite engineering expertise to
local firms, helping them with everything from design to production.
The MSU Entrepreneurship Center directs many other programs to help
small business. The Agricultural Extension Service, which is something
of a model for this Act's manufacturing technology centers, serves
local farmers. Montana's economy benefits immensely from these
programs, but we will do even better with the help this bill will
provide.
The National Competitiveness Act also extends some of our most
successful Federal research and development efforts. It builds on the
Advanced Technology Program, to work with companies developing the most
promising new technologies and assist with basic research. And it will
help to build the information super-highway. And it will do all of this
without adding a cent to the deficit.
green buildings
Finally, I would like to call the Senate's attention to a provision
in this bill which I think is critical. That is the establishment of a
Federal environmentally sensitive construction program, more commonly
known as green buildings.
The use of ecologically sensitive construction procedures, materials,
and practices obviously has good environmental effects. But it also has
important economic effects. Recent studies point to natural
agricultural and wood products as promising sources of environmentally
sensitive construction materials. In Montana, that means we can add
value to our agricultural and timber products and develop innovative
ways to use them.
The bill creates a competitive process for its demonstration of
environmental technologies. And I am proud to say that Montana State
University is poised to compete in this process, with its proposal for
a green building at the Advanced Technology Park in Bozeman.
In Montana, we have some of the most wide-ranging temperatures the
widest ranges of temperature anywhere in the continental United States.
This variation calls for the most energy efficient technologies
available. Furthermore, Bozeman's abundant sunshine makes expanded use
of solar technologies logical.
Montana, in my completely objective and unbiased view, provides the
ideal climate in which to demonstrate the virtues of environmentally
sensitive construction and materials. But wherever we test these
technologies, be it Bozeman or Boston, the environment and the economy
stand to benefit.
environmental technology
The green buildings provision brings me to a larger point. The
National Competitiveness Act is a very good bill. It will help our
country. But no bill is enough in itself. As we embark upon this new
path to revitalize our manufacturing base, I think it is essential that
we consider the environment.
In the past, new industrial development often came with an
environmental cost. The factories we built in the 1950's brought jobs
and growth; but they also brought pollution, and left our generation
with a huge burden of avoidable health spending and cleanup costs. In
the past two decades, we have spent $1 trillion dollars on
environmental cleanup. We must not leave such a bill to the generation
that will follow us.
The new technologies which this bill will help develop must be
environmental technologies; technologies that reduce or reverse the
impact on the Earth while still boosting economic growth. The only way
we can do that is to consider the environment from the very beginning
design stages until the end of the live-cycle.
S. 978, a bill I have introduced and which the Environment and Public
Works Committee should send to the floor this year, uses the same
precompetitive approach as the National Competitiveness Act. However,
it focuses entirely on environmental technologies. It also makes sure
the new technologies developed by S. 4 consider the environment. It is
a partner and a complement to this bill.
The President has recently sent me a letter in support of S. 978,
which I now ask unanimous consent to include in the Record. It may not
be out of place here to mention that when I visited Japan last summer,
MITI's vice minister for international affairs told me he thought it
was precisely the kind of effort America needs to remain a
technological leader.
conclusion
With the end of the cold war, America and the world have entered a
new era. Like the pioneers who set out for California a hundred and
fifty years ago, we have scaled a mountain range, and emerged to find a
new world on the other side.
In the past decades we faced a challenge to our national security.
Today we face an economic challenge; the challenge of living and
leading in a highly competitive global economy. S. 4 will help our
country meet this challenge by making sure that American technology is
the best and the cleanest in the world. This is a good bill, it is
critical to our future, and I urge the Senate to move quickly to pass
it.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
The White House,
Washington, DC, March 4, 1994.
Hon. Max Baucus,
Chairman, Committee on Environment and Public Works, U.S.
Senate, Washington, DC.
Dear Mr. Chairman: Over the past months, the
Administration has worked with the Committee on Environment
and Public Works on S. 978, the National Environmental
Technology Act of 1993, which you introduced to promote
development and use of ``green'' technologies. I am pleased
that we have been able to work together with you and your
colleagues to refine the legislation, and understand that you
hope to take this revised version of the bill to the Senate
floor soon. I support your proposed substitute as a
legislative framework for the Environmental Protection
Agency's contribution to the Administration's overall
strategy for promoting environmental technologies. I look
forward to working with you and other Members of Congress
through the remainder of the legislative process to come to
agreement on environmental technologies legislation that can
be quickly enacted and implemented.
The development and deployment of environmental
technologies are an essential part of the Administration's
commitment to creating jobs and strengthening the economy
while restoring and protecting the environment. I want to
thank you and the other cosponsors of S. 978 for your
leadership in this area. Working together, I believe we can
achieve our common environmental and economic goals.
Sincerely,
Bill Clinton.
Mr. BURNS. Mr. President, I rise today to support this amendment
offered by the distinguished chairman of the Senate Commerce, Science,
and Transportation Committee to S. 4, the National Competitiveness Act.
Passage of this amendment allows this body to pass this important piece
of legislation.
This amendment is cosponsored by Senators Danforth, Rockefeller, and
myself.
The National Competitiveness Act is legislation I have cosponsored
since it was introduced on the first day of this Congress, January 21,
1993. This bill is one of the top five priorities for Senate Democrats
and I am the only Republican cosponsor. My support for this measure has
not been overlooked by my colleagues on this side of the aisle.
I worked closely with the distinguished chairman of the Senate
Commerce, Science, and Transportation Committee, Senator Hollings, to
improve this bill as it moved through the committee. Senator Hollings
indicated a willingness to work with all the members of the Commerce
Committee both Democrats and Republicans on this bill. In fact, there
were no Republicans on the Senate Commerce Committee who opposed the
bill when it passed the committee.
I am supporting this amendment because it cuts the authorization
level in this bill by over $900 million over 2 years. From $2.8 to
$1.9-billion for fiscal years 1995 and 1996.
By agreeing to do this we can save this important legislation that
moves Montana and our Nation forward in the high-technology world in
which we live and compete with other nations.
I think it is vital for our Nation to be the world's leader in
advanced technologies such as information, computers, electronics, and
new materials. This bill helps us accomplish that goal. It contains
provisions for research and development companies, universities and
tribal colleges in my State. It has a provision for needed research on
so-called green buildings for environmental sensitive construction
technologies to be developed.
For these reasons and many more I want the National Competitiveness
Act to pass the Senate. But I want to expand on an area I have been
working on since joining the Senate just 5 years ago.
With S. 4 the National Competitiveness Act, we are taking two
critically important steps in creating an advanced, state-of-the-art
national information infrastructure which will substantially improve
our economic and social welfare over the remainder of this decade and
on into the next century.
If, after reading or watching stories about the so-called information
superhighway over the last few months, the public is confused about the
Government's role in promoting a ubiquitous, state-of-the-art, feature-
rich high speed national telecommunications network, one should not be
surprised. I have included in this bill a number of answers to the
Government's role in the national information infrastructure.
With the assistance of Chairman Hollings, I was able to substantially
modify title VI of S. 4 when it passed the Commerce Committee. This
bill limits the role of the Government to three areas in building the
national information infrastructure:
First, funding basic research and development for high speed
networks:
Second, funding leading-edge applications in education, digital
libraries, health care, manufacturing, and Government information; and
Third, implementing interconnection standards and interoperability
protocols to ensure a seamless, ubiquitous network of networks.
I also included the addition of a NASA education program, funding for
training and access to network capabilities, digital libraries and
Government information applications, and other changes.
But most importantly and significantly, the new title VI contains
language I requested which states unequivocally a new policy that the
Government cannot expend funds to build, own or operate networks in
competition with those networks available in the commercial, private
sector. This has been a serious concern to all segments of the
telecommunications and information industries. This bill directly and
specifically address those concerns with a clear delineation and
demarcation of the respective roles of the Government and private
sectors in the building of America's national information
infrastructure.
Let me just conclude by strongly suggesting that we now move forward
with the next critical step in developing a national information
infrastructure--the creation of a rational, procompetitive,
proinvestment national telecommunications and information policy.
I believe that there is a consensus developing that Government has
become a problem and obstacle in completing a national information
infrastructure due to the morass of regulatory and legal restrictions
and barriers that segment and balkanize the information and
telecommunications industries into protective enclaves created for the
Old World order in which we had one monopoly telephone company and 3
broadcast networks. That system is under tremendous pressure and it's
time to change our national telecommunications policy in a
comprehensive, wholistic way.
I want to say to this body and our Nation that passage of this bill
with this amendment offer by Senator Hollings is vital to our Nation's
schools, hospitals, libraries, and small companies to hook up to a
national information infrastructure. It is also vital to my small
businesses in Montana and small business throughout the United States.
I urge my fellow colleagues on both sides of the aisle to vote for
this amendment. This amendment is a way to stop the bickering and to
move this bill forward.
I want to salute my good friend Senator Danforth, the ranking member
of the Commerce Committee, for his excellent debate and good faith
effort to resolve his differences with his colleagues on the other side
of the aisle.
If this competitiveness measure does not pass the Senate, my State
loses, our Nation loses, this body loses, we all lose.
modification to committee modification
(Purpose: To modify the committee modification)
Mr. HOLLINGS. Mr. President, I think the first order of business is
the modification which I send to the desk on behalf of the
distinguished Senator from Missouri, our ranking member, and myself and
ask the clerk to report.
The PRESIDING OFFICER. Under the previous order, the amendment is so
modified.
So the modification was agreed to, as follows:
At the end of the Committee, add the following new section:
SEC. . OVERALL AUTHORIZATION LIMIT.
Notwithstanding any other provision of this act, the total
amount authorized to be appropriated under this act shall not
exceed $1,900,000,000.
Mr. HOLLINGS. Mr. President, I move to reconsider the vote.
Mr. DANFORTH. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
The PRESIDING OFFICER. Under the previous order, there will now be 90
minutes of debate.
Mr. HOLLINGS. On the Danforth amendment, I yield 1 second to me.
I want to thank Senator Danforth and the majority leader and the
minority leader and friend, the Senator from West Virginia over here,
the chairman of our subcommittee, and the ranking member, Senator
Burns, over on the other side for their getting together here and
working this out.
I yield the floor so he can present that amendment.
Amendment No. 1522
(Purpose: To strike section 306)
Mr. DANFORTH. Mr. President, I send an amendment to the desk and ask
it be stated.
The PRESIDING OFFICER. The clerk will report the amendment.
The assistant legislative clerk read as follows:
The Senator from Missouri [Mr. Danforth] proposes an
amendment numbered 1522.
On page 58, line 19, of the committee modified substitute,
through page 68, line 24, strike everything.
Amend the last section of the committee modified substitute
by striking ``$1,900,000,000'' and inserting in lieu thereof
``$1,800,000,000''.
Mr. DANFORTH. Mr. President, I note the presence of the Senator from
West Virginia on the floor, and I know that the Senator from West
Virginia will have to be out of the Chamber for part of the afternoon
and he would like to speak in opposition to this amendment.
Mr. ROCKEFELLER. My dear friend, the distinguished Senator from
Missouri, is correct, but it is the Senator's amendment to strike. I
think in spite of his generosity it will be better for him to go ahead.
Mr. DANFORTH. All right.
The PRESIDING OFFICER (Mr. Robb). The Senator from Missouri.
Mr. DANFORTH. Mr. President, let me say that when the Senator from
West Virginia is ready to speak, if he would let me know, I will be
happy to accommodate him.
Mr. President, we have reached an agreement with respect to the bill
itself to reduce the authorization to $1.9 billion over a 2-year period
of time. The exact splitting up of how that will be done would be
worked out presumably in conference. But this does represent a very
major step forward, and it has required working together and
accommodation of a large number of Senators, as the majority leader has
pointed out, and I for one am glad that we have reached this point,
because now I think we are ready to go forward on a main issue which
should be brought to the attention of the Senate, and it is the venture
capital provision.
That is the substance of the amendment that has been sent to the
desk. If this amendment is agreed to, the effect of that would be to
delete the venture capital provision in this legislation and to reduce
the total amount of the authorization from $1.9 billion to $1.8 billion
over the 2-year period of time.
It is important to realize that this venture capital provision is one
that appears in the bill as an authorization of $50 million for each of
2 years. How that would be worked out with the change in the overall
figure remains to be seen. But just for analysis purposes, looking at
this as a $50 million program in each of 2 years, Senators may say,
``Well, $50 million a year, what is that? I mean, by Washington terms,
that does not appear to be much.''
However, I would call the Senate's attention to pages 20 and 21 of
the committee report that is on every Senator's desk. Because this
committee report, on pages 20 and 21, points out the fact that the loan
guarantee feature in this venture capital provision would allow the
Government to guarantee loans up to $300 million a year or a total of
$600 million.
So this is a major loan guarantee program for very high risk
businesses--$600 million, if we kept it at the $100 million figure,
$600 million of loan guarantees.
I would suggest to the Senate that these are loan guarantees for the
kinds of business opportunities that venture capitalists get into;
namely, high risk. And in all the literature put out by the Department
of Commerce in general support of the provisions of S. 4, it is clear
that it is the high-risk ventures that are the ventures that are to be
favored under this legislation.
So the Senate should understand that this is not $100 million, it is
a potential of $600 million in loan guarantees for high-risk business
ventures. And high-risk ventures are ventures that can go sour.
I would simply ask Members of the Senate, when these business
ventures go sour and we have voted to create a program to finance them
with loan guarantees, what then is the explanation that we make to our
constituents?
Reading from page 47 of the committee report, the committee report
says:
In order to encourage the formulation and growth of
civilian technology investment companies pursuant to this
section, the Secretary is authorized, when funds are
previously made available in appropriations Acts, to--
(A) purchase or guarantee the timely payment of up to 100
percent of the principle and interest as scheduled on,
debentures issued by such companies, on such terms and
conditions as the Secretary
That is the Secretary of Commerce.
deems appropriate pursuant to regulations issued under
subsection (e); and;
(B) purchase nonparticipating or participating, nonvoting
preferred securities and issue trust certificates
representing ownership of all or part of such preferred
securities.
So, Mr. President, we had an amendment that was offered by Senator
Brown today on the ATP program saying that there had to be at least 50
percent participation of the businesses that wanted the R&D grants.
This is to say that 100 percent of the debentures with no limitations,
100 percent of the debentures issued can be guaranteed as to principle
payments and interest payments, and that 100 percent of nonvoting stock
can be bought out of the taxpayers' funds. This is supposed to be
venture capital, risk capital, venture capitalists.
And under the provisions of this legislation, venture capitalists
would come to Washington and be licensed by the Federal Government--
licensed by a committee created by the Department of Commerce and the
Small Business Administration, a committee of five individuals to
license venture capital operations. But where is the venture and where
is the capital? There is no requirement that the capital be provided by
the venture capitalists. Maybe some of it would be; maybe some of it
would not be. One-hundred percent of the indebtedness can be guaranteed
by the Federal Government. One-hundred percent of the indebtedness of a
venture capital operation can be guaranteed by the Federal Government.
That is the program.
You talk about the Government getting into the world of business,
this is the Government taking the private sector for totally off the
hook. ``You do not have to assume any venture capital, venture
capitalist. Come to us and we will buy up to 100 percent of your
debentures and we will guarantee them 100 percent. We will buy up to
100 percent of nonvoting securities. We will guarantee the payment of
dividends.'' Where is the venture? Where is the capitalism? It is the
same as the Government making grants and taking risks and making
investments in the private sector.
There are people out there who are venture capitalists and if the
Government does not want to buy 100 percent of the venture capitalist's
operation--say, it takes 50 percent, 75 percent, whatever. What it is
saying is some venture capitalists apply to the Department of Commerce
licensure, they go away empty-handed. Other venture capitalists come
here and say we would like to apply for our license, and they get a
license. They are officially sanctioned venture capitalists and they
are venture capitalists under this scheme who would not be officially
sanctioned at all.
Talk about picking winners and losers. We are picking winning venture
capitalists and losing venture capitalists.
And then we get down to the particular programs that they are
venturing their capital on. We are saying that there are some business
enterprises that are going to receive the Federal subsidy and there are
some business enterprises that are not going to receive the Federal
subsidy. Ultimately, this committee of five individuals--three
appointed by the Secretary of Commerce and two by the Administrator of
the Small Business Administration--is going to make the judgments as to
what business enterprises get the subsidies and what business
enterprises do not.
I call that industrial policy. I call that very heavy Government
involvement in what should be marketplace decisions.
Mr. President, turning to the provisions of the bill, and this is
section 306 of the bill which we would delete, I would like to call the
attention of the Senate to various relevant positions.
Before I do that, I see the Senator from West Virginia, and I would
yield the floor. My understanding is that the time that he claims would
come out of those who oppose the amendment.
Mr. ROCKEFELLER. The Senator is correct.
The PRESIDING OFFICER. Who yields time?
Mr. ROCKEFELLER addressed the Chair.
The PRESIDING OFFICER. The Senator from West Virginia [Mr.
Rockefeller], is recognized.
Mr. ROCKEFELLER. Mr. President, what the Senator from Missouri has
just done is very gracious. He knows I have a 4 o'clock appointment
that I have to keep, and he is allowing me to speak. I want to say to
those who might be watching and listening to this debate that it is an
extremely important debate and that I will be back, hopefully, at about
5:15. I hope this debate is still going on so I can continue, because I
strongly believe in this amendment.
Mr. President, I want to respond to some of the issues that the
distinguished Senator from Missouri has already raised, and speak in
anticipation to other points. We are talking about a venture capital
financing initiative. The opposition seems to have a concern about
putting the Government in the business of assisting in the financing of
particular ventures. They have chosen a pilot program, which is what is
in S. 4--a pilot program--that lasts 2 years and then stops unless
continued, and is called Civilian Technologies Investment Program. They
have chosen this to make their point.
Critical technologies are about the 25 most important aspects of
advanced manufacturing--lasers, optic fibers, ceramics, composites,
computer chips, et cetera--that if we do not have and are not
manufacturing in the 21st century, we are going nowhere economically as
a country.
Opponents have questioned whether the Federal Government ever plays a
role in financing, or should. They have argued that the Government does
not have the ability or the skills to play a role in financing. They
argue the Government is destined to lose money.
Mr. President, let me just point out some of the implications of that
argument. If we concluded that that Civilian Technologies Investment
Program is an inappropriate use of Federal resources, then we had
better also conclude that a whole host of financing programs the
Government guarantees--subsidies and tax credits--are also an
inappropriate use of Federal funds.
We come here to a very critical, basic decision. As one of the
authors of this initiative, it is--and I say again--a pilot project. We
are not unleashing some gigantic series of aircraft carrier. This is a
2-year pilot project. That is all it is. Let me elaborate on what we
are proposing.
The Civilian Technologies Investment Program was modeled after the
Small Business Administration's SBIC, the Small Business Investment
Company Program, which has been very successful. It was created in
1958. I have no choice but to use the acronym for that program. SBIC is
what we call the SBA program because it is well known to people. SBIC
has a reputation for bringing high-risk products and services to the
market--and that is what this is all about--at a relatively low risk
and at a relatively low cost to the Government or the economy.
SBIC finance projects have been proven, they have spurred
innovations, advances in technologies, product development and, Mr.
President, that translates into what the only thing S. 4 is about,
which is economic growth, new job opportunities, and more
competitiveness for our country.
The SBIC Program was reauthorized and restructured under the
leadership of President George Bush and the SBA Administrator at that
time, Patricia Saiki. That leads me to this bill, S. 4, and its
provisions that the Senator from Missouri and I are now debating.
We followed the leadership of President Bush on this and designed the
Civilian Technologies Program after his model. Contrary to the
suggestions made, or that might be made by the opposition, SBIC's are
not run, and the critical technology investment companies will not be
run, by the Federal Government. They will be run by private-sector
venture capitalists, not Government bureaucrats. May I say that again?
They will be run by private-sector venture capitalists, not Government
bureaucrats. Additionally, the Government will not be writing checks to
these companies. We will be providing only a guarantee.
I want to stop at this moment because the distinguished Senator from
Missouri made a point, and if I were listening to that and did not have
the bill in front of me, it would be of concern to me because he
indicated and, in fact, read the other day the following:
Therefore, CBO estimates that the $50 million authorized
for this program in 1995 would permit the Government to make
or guarantee about $300 million in loans.
And then he stopped. So I would have to assume that Senators and
their staffs who were watching this debate would assume, ``Good grief,
we are about to spend $300 million.'' That is not correct.
The sentence preceding the sentence that the Senator from Missouri
read, reads as follows:
The bill would require that the subsidy rate for the loan
program not exceed 15 percent.
The point I am making is that there is no way that the Government
will spend more than $50 million. It will not happen. There is no way
that the default rate will exceed 15 percent. It cannot happen. And
Senator Hollings, as chairman of the Appropriations Subcommittee, will
be sitting and watching that very, very closely.
Mr. President, there was also a point raised with regard to the
budget of the program. I want to point out that the SBIC Program was
involved with the early financing of a few companies that I believe my
colleagues just may have heard about. One is called Apple. It makes
computers. Another is called Nike. I believe it makes sneakers. And the
other is called Federal Express, and they do a lot of things very
quickly.
I want to point out that these programs were financed by SBIC, and we
can pay the entire Government cost, going all the way back to 1958,
based just upon those three companies and what they have done alone in
terms of yields to the Federal Treasury.
I would like to point out that the tax revenues, again, generated by
just three companies have more than paid for the entirety of the SBIC
Programs since its inception in 1958.
Second, Mr. President, let me point out some other areas of financing
where the Government plays a role:
SBA Guaranteed Loan Program; Community Development Corporations;
Certified Development Corporation; section 503/504 loans. We are in
this business already. Export-Import Bank loan guarantees.
The Senator from Missouri is going to produce a letter from some
venture capitalists later in this debate which will say these companies
do not want to see this happen. They are very much like the companies
in the Export-Import Bank who are receiving money and do not want to
see more competition.
This plan in S. 4 is aimed at medium- and small-size industries, of
which there are many in Missouri, West Virginia, South Carolina and
other places.
But let me go on. The Export-Import Loan Guarantee Program,
guarantees for export revolving lines of credit--guaranteed loans by
the Government, Mr. President. We are doing it. We have been doing it.
It works. We are there already. This is nothing new.
Beyond these examples there is a whole level of programs where the
Government assists in creating a financing market. For example,
Government-sponsored enterprises: Fannie Mae; Freddie Mac; Sallie Mae.
Tax subsidies, Mortgage revenue bonds; industrial development bonds;
general obligation bonds; low-income housing tax credit.
Mr. President, I ask unanimous consent that this particular piece of
paper I am holding be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Guaranteed Lending Programs (partial list): Small Business
Lending Companies; Small Business Investment Companies;
Minority Small Business Investment Companies; Small Business
innovation Research; Small Business Guaranteed Loans; Export
Revolving Lines of Credit; Economic Development
Administration Revolving Loan Funds; Export Import Bank Loan
Guarantees; Overseas Private Investment Corporation; S.B.A.
Sec 503/504 Fixed Asset Loans; Rural Development
Administration Loans; Federal Home Loan Banks; Community
Development Corporations; Microloan Program; Multi-Family
Housing Program; Section 108 Loan Guarantees.
Government Sponsored Enterprises: Fannie Mae; Freddie Mac;
Sallie Mae.
Tax Subsidies (Partial List): Mortgage Revenue Bonds;
Industrial Development Bonds; General Obligation Bonds; Low
Income Housing Tax Credit.
Mr. ROCKEFELLER. There are numerous programs where the Government
assists in creating a financing market. We are doing it. For example,
is the opposition to this initiative suggesting--and I would think they
would have to be to be consistent philosophically--that we reevaluate
Fannie Mae; that we reevaluate Freddie Mac or Sallie Mae?
To take it a step further, Mr. President, we use the Tax Code to
promote financing all the time, and we know that a tax benefit has the
exact same economic effect as a direct subsidy--not even a loan in this
case, but a direct subsidy. We use that for certain purposes. The
Government has been doing it in many areas.
For example, if we follow the logic of the opposition, we might have
to eliminate mortgage revenue bonds, municipal bonds, industrial
development bonds, and the low-income housing tax credit. If we are not
going to be for one, and we are going to be consistent in philosophy,
then we should not be doing all these others we have been doing all
these years.
Furthermore, unlike any other program, under this program, the
Government can ``share in the up side.'' Not very elegant language, I
would agree, but it means that if the CTIP, which is this program we
are debating, does well, the Government can benefit, bringing dollars
into the Treasury and reducing the Federal deficit.
So, Mr. President, unless the opposition is suggesting that we
eliminate all programs that I have just listed and take the Government
completely out of the role of financing and creating markets for small
business in housing and economic development, we ought to get on with
this longstanding, bipartisan approach and support this section of S.
4.
I do not know of any other program than the one we are suggesting
here where we can get more ``bang for the buck''. For every $1 that the
public sector contributes to this, we are leveraging $6 of private
money. I think that is a good deal. The SBIC has gone on since 1958,
and they have had a default rate of only 4 percent. So then, you might
say, why do we put it at 15 percent? And here comes about my final
point, and again I thank the Senator from Missouri. We are talking
about venture capital in critical technology.
Mr. President, I would like to tell you that this country is full of
entrepreneurs and entrepreneurial financing sources which is simply
where we make funds available for smart ideas, particularly ones
involving critical technologies like ceramics, optic fibers,
composites, and all of the things the Presiding Officer knows very
well.
But we are now discussing more high-risk efforts than the SBIC funds.
The SBIC has experience with technology, but they have not had that
much experience with high technology, and certainly none with critical
technology types of programs. So that is the reason, even though the
SBIC default rate is only 4 percent, we chose to be more conservative.
My final point is simply this. The venture capital market has more or
less closed down except for the larger level, and when it comes to
high-risk, critical technologies, it really is not there.
If Thomas Edison wanted to invent the light bulb these days, Mr.
President, he would have to bring in Shea Stadium in his arms with all
the lights on to convince venture capital that the light bulb is an
idea which might be useful. It has just changed. The venture capital
market has dried up in the last several years because of the general
economic condition, because people are more cautious and more
conservative.
So I would in a sense almost challenge the Senator from Missouri, my
good friend, Senator Danforth, to come up with any other program of the
Government that gives you the same bang for the buck and at the same
time takes on what this Senator considers to be the single most
important manufacturing effort this country has to undertake. When the
year 2000 arrives, we are not only doing best basic and applied
research, but we are commercializing and taking to market the critical
technologies that will make us as an economic force in the future.
Mr. President, I yield the floor, once again thanking my friend from
the State of Missouri for his very clear and obvious courtesy.
The PRESIDING OFFICER. Who yields time?
Mr. HOLLINGS. Mr. President, one thing that should be emphasized is
the fact that this has been worked out with the Small Business
Administration. I cannot overemphasize that, because I happen to have a
particularly high regard for Erskine Bowles, the Administrator of the
Small Business Administration.
My particular association with it is that we handled the
appropriations last year. The SBA, as is emphasized now by the
distinguished Senator from West Virginia, has really been running out
of money. Everybody knows what the banks have been doing for the past
couple of years.
And in that light, we ran out of money for the loans, and we put in,
in April of last year, another extension, an emergency provision for
$750 million in small business loans.
Now, that was not directed to technology. That could go to
restaurants; it could go to clothing stores, or whatever else. But I
want you to know that this Senator does have a slight feel for the idea
of responsibility, not just a pilot program to be given to the
Secretary of Commerce burning a hole in his pocket.
The pilot program shall be operated under the direction of
the Department of Commerce Small Business Administration
Venture Capital Licensing Committee, and that committee shall
consist of three Department of Commerce designees appointed
by the Secretary, one of whom shall be the Under Secretary
for Technology.
Now, we really started off on the right foot there. I am sure the
Senator from Missouri will agree. That is Ms. Good, Under Secretary
Good, in charge of technology. She headed up the entire technological
and research effort for Allied. She was President Reagan's appointee as
Chairman of the Board of Directors of the National Science Foundation
Board back about 10 years ago--thoroughly experienced, thoroughly
reliable. So she serves as the Chairman of it.
Two of the Secretary's appointments shall be technology
experts, at least one of whom shall also be a finance and
investment expert.
So we have the credibility further enhanced with that particular
requirement. And then, of course, two Small Business Administration
designees appointed by the Administrator of the Small Business
Administration, who shall be finance and investment experts.
Now, that cannot be overemphasized, because the Senator from Arkansas
[Mr. Bumpers] the chairman of the committee, and the ranking member,
the Senator from South Dakota [Mr. Pressler] on our committee, had
immediate misgivings: Wait a minute; what are we doing here? We have
the SBIC. We have the loans; let us not start another one.
However, with the need here on technology, with the particular
emphasis that is the intent of S. 4 to emphasize technological loans,
then we wanted to at least institute this as a pilot program.
You say why? You have heard from two venture capitalists already with
differing views. But I try my best to listen and learn.
One thing just impresses this Senator who is outside the realm of
venture capitalism, and I quote from Alan Wolfe in his book on
``Improving United States Trade Policy'' back some 6 years ago. He
served as the Special Trade Representative's Assistant to the
Ambassador during the seventies. He has credibility on both sides of
the aisle and with experts in the field of trade all over the country.
I quote from page 563.
In 1990, a Wall Street analyst commented to a group of U.S.
semiconductor executives that ``The goal of people investing
in stocks is to make money. That is what capital is all
about. It is not a charity. I cannot tell my brokers, gee, I
am sorry about your client but investing in the semiconductor
industry is good for the country.'' While this individual was
stating a truth so obvious that it verges on the banal, he
was touching on a fundamental dilemma confronting U.S.
industry today. In light of the investment sentiment
expressed above, how is a company to maintain the level of
investment needed to remain competitive over the long run,
particularly if there is no prospect of a short run payoff or
if foreign competition has destroyed the prospect of earning
a return on the investment? A few U.S. firms, family-owned
and managed companies like Motorola and Corning, and some
very large firms like IBM and GE, have on occasion proven
capable of undertaking long-range strategic investment on a
regular basis, and in some cases meeting foreign below-cost
price offensives head-on for a sustained period. Moreover,
however, a company's internal investors, the executives who
allocate capital, have no choice but to invest in areas that
are likely to produce a high return on investment over the
short run. They know they are accountable to lenders and
shareholders who can simply redirect their investments
elsewhere if the firm persists in simply committing to areas
where returns are low or negative or are perceived to be
forthcoming only in the distant future.
Then there is a note to this particular section:
``The New York Times noted on February 6, 1987 that U.S.
venture capital investment, which had been an important
source of capital for U.S. high-technology industries, was
shifting away from high tech to areas where greater returns
were anticipated, such as leverage buyouts of existing
companies, pizza shops, athletic apparel concerns,
and on down as he lists them there.
That gives you a feel for the problem that S. 4 with this particular
provision is trying to address. Specifically, again President Bush's
Competitiveness Policy Council, I quote from it:
Entrepreneurs and small companies with exciting new
technologies often have trouble obtaining the financing
needed to commercialize products and grow their business, and
frequently end up licensing their technology to more patient
and deep-pocketed foreign companies.
I remember well the vice president of GE came into my office some
years back. We had a competition back in the 1970's for low-cost
housing on military bases. They had won the competition out at
Vandenberg. You could build at that particular time a house with three
bedrooms, a bath and a half, a dining room-kitchen combination, for
$17,500. But it had all the new things. It did not have copper gutters.
They were reinforced with fiber, Owens-Corning fiber, and the likes of
that. It had a special kind of roof with a 20-year guarantee.
They had won the competition. But then going around trying to sell
the production of it with all the zoning laws and regulations, they
just gave up and sold it to the Japanese, and went over and started
building the houses in Saudi Arabia. The GE vice president had his big
briefcases. We were good friends. He said, ``I am just going over to
the Saudis. We finally got it off, and the Japanese have picked it
up.''
So there is the problem, particularly for small companies. These are
the kinds of things that we are confronting in S. 4.
And we go to the track record of the small business-licensed
investment corporations.
Since 1958, the SBA-licensed SBIC's have invested more than
$9.7 billion in small businesses. Two features are central:
Most of the money is privately raised, and venture
capitalist--not Government--officials decide which small
business to invest in.
We will benefit from the objectivity and expertise of the Under
Secretary, Mary Lowe Good. She is not a partisan Democrat. She will not
be giving out moneys to California and grants willy-nilly. She is very
conscientious about her own credibility and she is going to be the
chairman of it. Other experts are involved from the SBA, and Mr. Bowles
will be watching it, and again on a merit basis, a peer-review basis.
You are going to have the Senator from Arkansas on our Appropriations
Subcommittee, Senator Bumpers, the chairman of the SBA Committee here
on the Senate side, and this particular Senator. We do not want to
start a boondoggle. We are going to watch this because I am selfish
about this. If this initial program were subject to abuse and
politicization, then the entire program would fall, the program that is
just getting started.
So I am just as concerned as the Senator from Missouri or anybody
else that this must not turn into pork barrel, we must not throw money
away. The multiplying effect is absolutely critical. That is the key in
all of these SBA loans.
So we are not giving out $600 million or $300 million. It is only a
$50 million pilot project that generates that $300 million in one year
we hope, and $300 million in the second year we hope, or $600 million.
But if we get to the $600 million, it would be a success story. That is
the whole thrust of this particular provision by the Senator from West
Virginia.
I yield the floor. I reserve the remainder of my time.
The PRESIDING OFFICER. Who yields time?
Mr. DANFORTH addressed the Chair.
The PRESIDING OFFICER. The Chair recognizes the Senator from
Missouri, Senator Danforth.
Mr. DANFORTH. Mr. President, as indicated by the Senator from West
Virginia, I have a letter from the National Venture Capital Association
signed by Allen Neece, their legislative counsel. Mr. Neece says for
the National Venture Capital Association:
This letter is to confirm that the National Venture Capital
Association is adamantly opposed to the venture capital
provision contained in section 306 of S. 4.
I ask unanimous consent that the letter be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
National Venture Capital Association,
Washington, DC, March 15, 1994.
Hon. John C. Danforth,
Russell Senate Office Building, Washington, DC.
Dear Senator Danforth: This letter is to confirm that the
National Venture Capital Association (NVCA) is adamantly
opposed to the venture capital provision contained in Section
306 of S. 4. As the President-Elect of NVCA, Patricia
Cloherty, stated in a letter dated last Friday, March 11, to
all of your colleagues, the creation of still another
government backed venture capital program is out of order.
Not only is it redundant of an almost identical program
authorized two years ago, but because of its emphasis on so-
called ``critical technologies,'' it smacks of a government
directed industrial investment policy. Similar attempts have
been made in the past going way back to the Eisenhower
Administration and all have ended in abject failure.
Section 306 is a no more enlightened program than its
predecessors; and we, therefore, recommend that this section
be struck, or failing that resolution, that Sectors vote
``nay'' on final passage.
Sincerely,
Allen Neece,
Legislative Counsel.
Mr. DANFORTH. Mr. President, I also have a letter from William
Sahlman, who is professor of business administration at Harvard
Business School. I would like to read just a couple of excerpts from
the memorandum to me from Professor Sahlman:
Recently, a number of legislative initiatives have been
launched that would have the government play an active role
in the creation of venture capital firms. The underlying
rationale is simple: There is, according to the sponsors, a
shortage of risk capital in the United States, particularly
capital aimed at early-stage ventures.
As evidence, people point to the decline in professional
venture capital commitments in the most recent 8 years.
I, personally, believe no such shortage exists. I have yet
to see a good idea and team not get funding, and I have seen
many bad ideas (and/or bad teams) get funding.
I should also note that all attempts by the Government to
direct investment have enriched the wrong people--lawyers,
accountants, and promoters. The record for State initiatives
in venture capital is disastrous. Loan guarantees are like
heroin: They give promoters the upside, leaving the taxpayer
holding the bag if the investment doesn't work out--not my
idea of a sensible policy.
I ask unanimous consent that the entire memorandum from Professor
Sahlman be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
To: Senator Danforth.
From: William A. Sahlman, professor of Business
Administration, Harvard Business School.
Subject: Government sponsorship of venture capital.
Date: March 15, 1994.
Recently, a number of legislative initiatives have been
launched that would have the government play an active role
in the creation of venture capital firms. The underlying
rationale is simple: there is, according to the sponsors, a
shortage of risk capital in the United States, particularly
capital aimed at early-stage ventures. As evidence, people
point to the decline in professional venture capital
commitments in the most recent eight years.
I personally believe no such shortage exists. I have yet to
see a good idea and team not get funding, and I have seen
many bad ideas (and/or bad teams) get funding. The level of
professional investment in early-stage ventures in the past
few years is a result of the fact that returns to venture
capital investing were meager during this period, approaching
0% per year. It wasn't a productive place to put capital to
work. One reason returns were low was that there were too
many companies being funded in each industry, which resulted
in competitive mayhem and poor fundamental results.
In the most recent period (1991 to the present), a
significant increase in early-stage investing has taken
place. Why? The fact that investors exited the business in
the late 80s and early 90s created an attractive opportunity
to invest. Lo and behold, venture capital investors came back
with a passion. In this regard, to the degree that government
policy creates artificial inducements to invest, it will
ultimately result in poor returns and exit from the business.
I should also note that all attempts by the government to
direct investment have enriched the wrong people--lawyers,
accountants and promoters. The record for state initiatives
in venture capital is disastrous. Loan guarantees are like
heroin: they give promoters the upside, leaving the taxpayer
holding the bag if the investment doesn't work out--not my
idea of a sensible policy.
I do believe that government policy has a big impact on the
high potential entrepreneurial sector. Right now, the trend
seems to be to move in the direction of a European social
system, which makes it costly and risky to employ people. We
are rapidly building a system that penalizes firms that
exceed fifty employees. We are trying to destroy Sub-S
companies that are successful.
I have appended an editorial I recently wrote on government
policy. I hope this is useful. This letter represents my
ideas, not necessarily those of my employer.
Mr. DANFORTH. Mr. President, turning to the loan guarantee provision
in this legislation, I will read from the committee report, and the
Senator from Missouri did not write the committee report. Let me just
read the relevant portion from it:
The bill would require that the subsidy rate for the loan
program not exceed 15 percent. Therefore, CBO estimates that
$50 million authorized for this program in 1995 would permit
the Government to make or guarantee about $300 million in
loans.
In other words, $50 million is 15 percent of $300 million, and
according to the way CBO scores this, a $50 million authorization
permits $300 million in loans. And it follows, as day and night, that
$50 million a year for 2 years, or a total of $100 million in
authorization, would yield $600 million in loans. That is the exposure
under this legislation. It is not $50 million or $100 million; it is
$300 million, or $600 million in loans. To whom? I intend to pursue
that in just a minute.
Mr. President, reading from some excerpts and commenting on them from
the section which my amendment would strike from the bill, this
provision in the legislation provides that a pilot program, as it is
called, shall be operated under the direction of the Department of
Commerce-Small Business Administration Venture Capital Licensing
Committee. That is the name of the new organization that is created--
the Department of Commerce Small Business Administration Venture
Capital Licensing Committee. It is referred to throughout the rest of
the bill as the licensing committee.
Then it says that the membership consists of three people appointed
by the Secretary, and they include, as the chairman pointed out, the
Under Secretary for Technology, and also two people appointed by the
Small Business Administrator, and an investment expert is supposed to
be included in that list from both Commerce and SBA.
In other words, here is a committee of five people that is the
licensing committee for venture capital operators. We say, well, please
do not worry about this licensing committee, because we absolutely
promise you that these are smart people. We do not have dummies here in
Washington. We do not have fools here in Washington. We have geniuses.
And we guarantee that the people who are going to do the licensing of
these venture capital operations are smart. So that is good news.
Then it goes on to say that the licensing committee may license
pursuant to joint regulations. So, obviously, we are going to have
regulations, and they are on the next page. But we have to have
regulations. How do we operate Government without regulations? And how
can we operate our licensure system for venture capitalists unless we
have regulations, joint regulations, by the Commerce Department and the
Small Business Administration for how we are going to go about the
business of licensing venture capitalists?
``Activities of licensees. Each civilian technology investment
company''--these are the venture capitalists who are the beneficiaries
of the largess of the taxpayers--``company licensed under this section
may provide venture capital and loans to eligible technology firms * *
*''
``Eligible'' is defined, incidentally, in this section.
``* * * and eligible joint ventures in such manner and under such
terms as the licensee may fix in accordance with''--hold onto your
hats--``joint regulations.''
Then it says that the type of financing to be provided ``shall be
determined by the licensing committee.'' ``Each civilian technology
investment company shall have authority to borrow money and to issue
its debentures.'' These are the joint venture operators.
So if you are licensed, if you are a civilian technology investment
company, a venture capital operator, then you have the authority to
issue debentures, promissory notes, securities and other obligations
under such general conditions and subject to such limitations and
regulations as prescribed in the joint regulations. This is called a
partnership. This is what we call a Government-business partnership. We
have the licensing committee --smart people--and we have regulations on
how it functions. We issue the licenses and tell them how they can
finance themselves.
The licensing committee is authorized to the extent the funds are
made available to the Department of Commerce in appropriations acts to
transfer such funds as may be necessary to the Small Business
Administration to purchase or guarantee the timely payment of all
principal, interest, and dividends, as scheduled on debentures or
participating, nonvoting preferred securities issued by such companies.
I repeat. The licensing committee has the authority to purchase or
guarantee the timely payment of--please note the following word--all
principal, interest, and dividends as scheduled on debentures or
participating, nonvoting preferred securities issued by such companies.
The Small Business Administration is also authorized in accordance
with sections 321 and 322 of the Small Business Investment Act of 1958
in regulations promulgated thereunder to issue and guarantee such trust
certificates as are necessary and appropriate to provide funding for
qualified civilian technology investment companies, that is an open-
ended authority to loan or guarantee the loans for up to 100 percent of
debentures to be issued.
Now, the licensing committee shall require that any civilian
technology investment company licensed and assisted under this section
shall--and there are several requirements:
3. Demonstrate to the licensing committee credible
procedures for ensuring that investments are made in critical
technology projects for which eligible technology firms
cannot obtain necessary financing solely through commercial
capital markets.
The Harvard professor says that if they are good ideas they can get
funded. This says if you cannot get funded, if you go into the
marketplace and you cannot get funded in the marketplace, then that is
a condition precedent to getting funded under this operation.
I think that means that if you have an idea which cannot hack it--you
have an idea out there, nobody likes it, you try to peddle it, you try
to get money, you try to get capital, you cannot hack it, you cannot
make it, the private sector does not want it, what do you do next?
Well, it turns out that that is good news not bad news. It is good
news that nobody likes your idea. Come to uncle. We like bad ideas. If
you have got a bad idea out there, we will fund it. In fact, if it is a
good idea we will not fund it. That is how I read that section.
Mr. President, I simply point out the fact that if we are going to
get in the business of trying to fund those good ideas in research and
development, I do not think that it should be something that is done by
Government. I think that is what the private sector is for.
The Harvard professor, whose memorandum I just submitted for the
Record, believes that there is not a shortage of venture capital money.
Some say that there was a decline. There was a decline--there is no
doubt about it--for a couple of years in the few years in the late
eighties and early nineties, and people have speculated why that is.
Some people believe that it is because in the mid 1980's there was a
excess of venture capital funds. Some believe it has to do with the
termination of the capital gains differential. I am not going to get
into that speculation or that debate. But I do believe that the current
state of affairs is that there is not a shortage of venture capital
from the private sector.
But even if there were, even if there were a shortage, that would
seem to me to be a marketplace matter, not something that we
pontificated on here in Washington. The availability of capital--the
money is out there in the marketplace in a capitalist system. That is
how the marketplace functions. If there are good ideas, there is
capital to fund good ideas. If the ideas are not any good, then capital
will not subsidize those ideas.
We are saying in this program we are going to have a licensing
scheme, we are going to have exposure for up to $600 million of
Government loans or loan guarantees for ideas that by definition cannot
make it in the marketplace. It seems to me, Mr. President, that this is
a direction in which we should not go.
The PRESIDING OFFICER (Mr. MATHEWS). Who yields time?
Mr. HOLLINGS. Mr. President, how much time do I have remaining?
The PRESIDING OFFICER. The Senator from South Carolina has 16 minutes
and 20 seconds.
Mr. HOLLINGS. And the other side?
The PRESIDING OFFICER. The Senator from Missouri has 17 minutes and
51 seconds.
Mr. HOLLINGS. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. BURNS. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Who yields time?
Mr. HOLLINGS. Mr. President, I yield to the distinguished Senator
from Montana.
Mr. BURNS. I thank the Senator very much.
Mr. DANFORTH. I was hoping to have the opportunity to yield to the
Senator.
The PRESIDING OFFICER. The Senator from Montana is recognized.
Mr. BURNS. Mr. President, the Senator from Missouri makes a very
valid point when we start talking about financing new ideas. That part
of this particular piece of legislation is designed for small
businesses. And I can probably cite as many situations on new ideas,
new technologies, and new products that have been designed, drafted and
thought about and really put together on America's farms.
One of them I think would be in the eastern part of North Dakota, by
a good friend of mine, and the idea was an excellent. It had to do with
clean air into diesel engines, how we filter that air. He just did not
have enough money to put that idea into a situation of research and
development. So when presented to another entity that did have the
money, the idea was no longer his.
So what we are talking about here is not the Government in
competition with other venture capitalists, because there is a specific
part of this bill that prevents that from happening. We are talking
about a situation that is designed sort of like the Small Business
Investment Company Program which was created way back in 1958 in
response to a lack of financing for small entrepreneurial businesses
there. This was just a rifle shot that would probably help facilitate
that idea and to get it off the ground. The SBIC programs were
responsible for getting, in the early stages of companies like Apple,
Nike, Federal Express, and those kind of companies, a new idea, a new
industry to allow it to flourish.
With the tax situation as it now is because we continue to tax and
tax and tax, for small business, Mr. President, it is pretty hard to
amass capital and to take that capital and to promote an idea and to
get it into the marketing place. If we are going to take, we have to
also, maybe, reinvest--maybe reinvest with the small idea that grows up
to be great ideas.
I can tell you my own kind of a situation in Montana. I can remember
when I had this silly idea about the radio business and television
business and trying to get started. But I had some options. I was cut
off from a couple of my options to prevent me from going into business,
because the people who owned the competitive business also owned the
vehicle with which my business had to travel. But I had another option
or two, and I took advantage of those options and went on from there to
be able to provide for me and my family as I thought I should, and do
what I enjoy doing and, of course, that was in the farm broadcast
business. I still look back on those days, wishing I was back in it.
Nonetheless, it is the time when, if we are not going to allow that
businessman to amass money, we are going to tax it, we are going to
have to help him in other ways.
A young man coming out of college, full of hope, believing in this
country, the fairness of this country, is going to find out that if his
idea is a good one, he is going to have a pretty darn hard time hanging
on to it and trying to develop it at the same time so that he can
improve his lot in life.
So unlike any other program under the CTIC Program, the Government
can share in the upside of the commerce of this country. In other
words, if the CTIC does well, the Government can benefit, bringing
dollars to the Treasury and also reducing a little bit of our deficit.
It has to be handled in a proper way.
So I would support this part of the bill and would not like to see it
weakened any more at a time when new ideas and new technologies are
abounding and should be allowed to flow.
Mr. President, I remind my colleagues that venture capitalists
participating in a program can supplement their own private investment
capital with this funding. They could be commingled, giving more market
power to whoever wants to invest.
So I oppose stripping this from this piece of legislation and I will
vote to do so.
Mr. President, I yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. HOLLINGS. How much time does this side have remaining?
The PRESIDING OFFICER. The Senator from South Carolina has 9 minutes
and 26 seconds.
Mr. HOLLINGS. I yield myself such time as is necessary.
Mr. President, I am trying to determine who belongs to the Venture
Capital Association. We are now in the sixth day of debate, and we
finally have located someone who opposes a feature of this particular
bill; whereas, we have on hand all of industry, all of technology, all
of education, all in strong support.
They support it because not only does it aim at developing our
technology, it would also move forward here with the Small Business
Administration, the SBIC, and others.
The argument is made by my distinguished colleague, the ranking
member on our committee, that the letter from the Venture Capital
Association is an argument against SBA, period, the Small Business
Administration. I am confident they do not like that. I am confident
they do not like the SBIC. They do not like any part of it. Because,
yes, their interest is to grab all the capital that comes to them and
they manage it.
But we have found that the private market is the wrong place to leave
these things because we would not have any of these businesses. Think
back over the long list of speeches in support of SBA and SBIC in this
body in the last 2 years.
The SBIC Program creates business and business ownership
opportunities. The SBIC financing has contributed to the creation of
thousands of new companies between 1959 and 1991. The SBIC has financed
70,000 small business concerns in approximately 100,000 financing
transactions, disbursing approximately $9.7 billion, of which $4.6
billion was private capital and $3.1 billion was funded by SBA through
debentures preferred stock. It is a generator. It creates jobs.
These SBIC finances have created jobs in a broad spectrum of small
businesses, from ice cream companies to computer companies. And there
have been some 570,000 jobs in the direct financing of the SBIC.
Now what we are trying to do is get over to the technology part. It
says that more than one-half billion dollars of direct taxes have been
paid by the SBIC's to the Federal Government. And the partnership and
corporate SBIC's are paid in excess of $800 million in dividends for
the owners. I could go down, on and on.
We have a real winner here.
But what comes? The Venture Capital Association. And I have been on
the budget end of this thing since we organized the Budget Committee
back in 1974. I have never seen a letter from the Venture Capital
Association saying, ``Please, Senator, pay your bill, because you have
the sharp elbows of Government out there financing your deficits and
debts, taking out from the market the venture capital, another $300
billion this year.''
I am not talking about a little, measly $50 million pilot program.
But we were getting up to $400 billion deficits. And we have been
running deficits again. Of course, they said the deficit was going down
to $176 billion next year. But then, add on another $100 billion that
we are using from the Social Security fund, the Highway fund, the
airport and airways fund, the Federal Finance Bank fund, the Medicare
Fund, and others, and you still are up around $275 billion.
Sharp elbows of Government kicking away at venture capital? I have
never seen that crowd write this Senator, working on the Budget
Committee, that we are taking away billions. We are taking away a
little mealy-mouthed $50 million in a pilot program, studied well,
conceived well, a well-audited, well-directed program. That is part of
this. That is the whole point.
We do need for the IBM's, the GE's, and the Motorola's to get into
technology. They can get governments to move, as we have just done with
the cellular radio. We have not been able to do anything with Japan.
But Motorola is powerful enough on just that one thing, cellular
radios, to move the Government of Japan. In the morning paper, it is
moving.
But the small businesses that generate the jobs in this country, that
really create the opportunity, these are real success stories that
should not be foregone in the adoption here now of S. 4. It is
fundamental. It is just a pilot program. It is well guarded against any
kind of abuses. We will be watching that.
It phases out in just a 2-year pilot here. So that would be the only
authorization, just for 2 years, to see how this can work.
It is really the best part of this entire bill, in our opinion, and
should not be stricken from the bill here because of the opposition of
this single group, the Venture Capital Association.
Heavens above, I would like to see the board of directors of that
crowd. I want to know if it includes executives of small business. But
all the businesses, the National Manufacturing Association, right on
down the list, endorse this bill with this particular provision.
I reserve the remainder of my time.
The PRESIDING OFFICER. Who yields time?
Mr. BRADLEY addressed the Chair.
Mr. DANFORTH. Mr. President, I yield such time as he requires to the
Senator from New Jersey.
The PRESIDING OFFICER. The Senator from New Jersey is recognized.
Mr. BRADLEY. Mr. President, I rise in support of the effort to strike
this provision from the bill. I do so because I think it is in the
interest of the American taxpayer and because it will reduce the budget
deficit if we eliminate this section of the bill.
We can have a legitimate debate over what the Government can and
cannot do well. Running a venture capital operation is, however,
something I am fairly sure that the Government cannot do well.
Before the Government steps into the marketplace, I think we have to
think there is some problem that the private sector cannot, on its own,
solve. There should be some market failure that we need to address.
My question is: What is the problem? What is the market failure here?
Before we go forward with this program, ask yourself just a couple of
questions: Would you put your own personal money in a Government-run
venture capital program? Would you risk your pension funds on the
ability of a technology licensing committee to find the right
technologies?
Would you risk your child's education bonds on the ability of
bureaucrats to outperform markets?
If you would not, then you should not be voting for this program. You
should not be wagering taxpayer money on an ill-advised effort at
industrial policy.
The goal of this program is ``to stimulate and expand the flow of
private capital to private companies.'' And the means of doing that is
a 100 percent guarantee of principal and interest --100 percent.
Let us be a little more serious about this. Profits stimulate and
expand the flow of private capital. A growing economy and low interest
rates stimulate the flow of private capital. The dreams and genius of
entrepreneurs stimulate the flow of private capital. Government
bureaucrats reading business plans and interviewing would-be Bill
Gateses will not stimulate or expand the flow of private capital. Given
a choice, I will stake my faith in markets and not in bureaucrats.
I simply do not believe that we should be attempting to direct the
flow of venture capital. Who is to make the decision on which
technologies, let alone which entrepreneurs, to back--Government
bureaucrats receiving applications? There are thousands of venture
capitalists around the Nation attempting to find the next Microsoft.
They are all over. They are looking, they are interviewing companies,
they are interviewing this guy in his garage, they are interviewing
that guy in this State or that State. They are trying to find the guy
where, if they invest in him, they will get the payoff. There are
millions of investors out there, and they are not limiting themselves
to any given set of technologies or industries. They are guided by one
thing: The profit motive, the best incentive yet we have found at job
creation.
Do we really think that Government is going to do a better job of
finding the next breakthrough industry or the next breakthrough product
or the next breakthrough idea than all these millions out there looking
to find it so that they can make a lot of money?
Mr. President, venture capital is risk-based capital. What does that
mean? It assumes that out of every 10 investments, 7 or 8 will go bad.
That is why it is risky. Seven or eight will go bad; two might make it.
My prediction is under this program such a number--two or three--
might be a tremendous success. But what about the seven or eight that
fail? The taxpayer is on the hook.
We are not going to eliminate the risk in the market. We should not
even try. What we are going to do is squander $50 million in loan
guarantees that could go to guarantee about $300 million in loans. I
think that that is too much. If we have these funds to spare, instead
of putting them in some bureaucracy to be loaned out to whomever can
get to the bureaucrats, I say we ought to reduce the budget deficit. It
is as simple as that.
With that said, Mr. President, I want to say I think I have an idea
where this program came from. Not the individual but an idea of the
mindset that generated this program. It came from, I think, well-
meaning people. It came from individuals with the highest motives. It
came from people who want to see America compete. It came from people
who believed that we should have every possible advantage in the
worldwide competitive marketplace. It came from people who are
patriotic and who want America to win.
But, Mr. President, what is the reality after this provision passes,
after it was written by those with the highest motives? Then it is
turned over to the lobbyists, to all the people who will flood the
department with various proposals. It will, of course, under the
provisions of the law, be judged on the highest meritorious basis,
according to X, Y, and Z criteria, designed by the following
subcommittees of the Technology Review Committee and advising it
pursuant to the seven sets of regulations that each one will have to
comply with.
The lobbyists, or those who have lobbyists, will have an advantage
because they will know how the system works. And the result is going to
be, I guarantee, if this passes: I think my New Jersey venture
capitalists are better than the venture capitalists of any other State,
and I am going to be knocking down the door of that technology
committee saying, give my New Jersey venture capitalists the money for
this great program.
Mr. President, every other Senator is going to be doing that. And to
think that this is going to be an allocation based solely--solely--on
the technological criteria, I think, is to live somewhere other than
Washington, DC.
Even during the course of this debate, I had a Senator come up to me
and say, ``This is an important bill. My State does very well under
it.''
I said, ``How do you know your State does very well under it?''
The answer was because that Senator's particular State is well enough
placed, well enough represented, effectively enough represented that
that Senator believed that an administration, a bureaucracy, could not
help but see the importance of that State politically.
So, Mr. President, I believe that this program should be rejected.
Research and development is enormously important. Venture capital is a
big industry in this country. But there is no shortage of venture
capital. Venture capital funds increase when the economy is good and
they decrease when the economy is bad.
In 1991, there was about $1.2 billion in venture capital in America
invested that year. We were in the middle of a deep recession. In 1993,
the recession ended; we were coming back out, robust growth. What
venture capital was available? About $2.5 billion. This is no mystery.
When the economy is well, there is more venture capital, and when the
economy is poor, there is less venture capital.
Then, of course, if we are looking for precedents, we will hear
Senators talk about, ``Well, if we had only done this and only done
that,'' as if there is some advantage for us trying to be like another
country.
My point is, why can we not just be America? Venture capital in
America is a unique phenomenon. They do not have it in Germany. The big
banks control it. They do not have it in Japan. The cartels and the
financial institutions and the Government control it. Why can we not
just allow the venture capital community of America to do what is does
so well, which is to find a new idea and fund it as opposed to the idea
of a Government bureaucracy in competition?
Sometimes it is good to argue from some analogy, and many Senators
have stood and argued the importance of this kind of thing because
other countries have had it. Primarily they point to Japan, although
Russia--no, it is not that bad. Japan.
Well, indeed, a couple years ago we had the big debate over HDTV.
Remember that debate, Mr. President? HDTV. Why was not the United
States Government subsidizing the development of HDTV that was going to
be taken over by the Japanese. The Japanese had the Government in there
subsidizing it and they had the technology of the future and they were
going to take over the whole television industry because of this
technology with Government support and Government leadership.
Well, I wish I had the videotape of the press conference just a short
while ago where the Japanese Government essentially admitted that the
United States private sector wiped them out, wiped out the subsidized
consortium. There was the Japanese Government admitting failure,
announcing the end of the subsidies, and admitting that they were
lobbied by the firms that received them and that they were caving into
those firms. You want to see a picture of this endeavor; if it were
written into law, I simply ask you to get the videotape of the Japanese
Government officials admitting failure in the HDTV.
So, Mr. President, I urge support of the amendment to strike this
provision from the bill. I think that the venture capital industry in
the United States is the most robust and creative. Government
bureaucrats should not be in competition. The result is going to be a
politically biased allocation that is not going to produce winners. We
ought to save the money and reduce the budget deficit by the equivalent
amount.
The PRESIDING OFFICER. Who yields time?
Mr. HOLLINGS. Mr. President, I yield such time as necessary to the
distinguished Senator from Connecticut.
Mr. LIEBERMAN. I thank the Chair, and I thank my friend and colleague
from South Carolina.
I am proud to rise and support him in opposition to this amendment
which would strike from S. 4 this Civilian Technology Investment
Program. I wish to respond in part to the comments made by my friend,
the Senator from New Jersey, because I think there is a fundamental
difference of understanding about what we are trying to do here and the
way in which it is done.
In my opinion, this section of this bill, the Civilian Technology
Investment Program, a new program, responds to a clear need in our
economy today, and it does it in a manner that is tried and true,
widely accepted, not controlled by Government bureaucrats but led and
driven by the marketplace. So I have a fundamentally different
perception of what this program is all about than my friend, the
Senator from New Jersey.
Let me deal first with the problem. I cite and quote John Hodgeman,
president of the Massachusetts Technology Development Corp., speaking a
year ago, a little more, February 16, 1993.
There is a chronic capital gap with respect to early
technology companies.
John Carruthers, director of research at the Intel Corp., speaking on
behalf of the American Electronics Association, composed of companies
that have been critical in bringing America back to economic strength
and creating new jobs, said:
Since the mid-1980's, our Nation has failed to produce a
new generation of technology companies for a variety of
reasons. Chief among them has been the alarming and growing
inability of American entrepreneurs to obtain seed and
venture funding.
That is the problem. The money is not out there to help the genius,
the entrepreneur, with the bright idea in an area of critical
technology, that is, a technology that we know is going to be critical
to economic growth and job creation around the globe. The money has not
been out there.
Now there are a lot of reasons people give for that. For instance,
some say it is----
The PRESIDING OFFICER. If the Senator will suspend, all time of the
Senator from South Carolina has expired.
Mr. HOLLINGS. Mr. President, I ask unanimous consent that I yield
time on the bill itself--I think under the unanimous-consent agreement
we have 60 minutes, 30 minutes to a side--if there is no objection.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. LIEBERMAN. I again thank the Chair and thank the Senator from
South Carolina.
There are some who will say that this problem of a lack of
availability of funding results from the fact that individuals are
putting more money today into mutual funds. Those assets have increased
dramatically. And they are displacing banks and venture capital as
major sources of investment capital, and that creates a problem, which
is mutual funds have shorter time horizons. They have to show a quick
return, and as a result, they invest primarily in publicly traded
securities instead of taking that chance that at an early stage of
development will produce the very successful critical technology
company of the future.
So that is the problem, and it is a problem that we have seen over
the years. We have suffered from it. Some of the great American
universities and research laboratories have been and remain the best in
the world. And this is a litany that has been said over and over on
this floor, which I will repeat briefly, and it is a perception that is
generally shared.
Too often, in the past--happening less today--the great idea of
American laboratories and research facilities has been converted into a
commercial product in another country, particularly in Asia--Japan,
Taiwan--because they have taken the funds and invested them at that
early stage of development in trying to take the bright idea and
convert it to a commercial success. And we also cite here the VCR, the
fax machine. Those are very powerful examples of exactly what we are
talking about and why we have said repeatedly on this floor anytime
technology comes along that can lead to the fax machine or the VCR, we
want it commercialized in America, and we want it built by Americans.
That is what this section of this bill attempts to make happen, to
find those bright ideas at an early stage before they are ready to take
off and make sure that there is enough venture capital out there which
the market has not provided to bring them along.
So in that sense--and I think it is important to say this--this
section of this bill actually responds to a market failure. Because of
the short-term incentives in the system, short-term profits, because of
the somewhat higher risk involved, there is a market failure. There is
not enough capital being put into those bright ideas to convert them to
the commercial products that will create the thousands of jobs to
reemploy Americans who have lost their jobs in this recession.
It is that market failure that this section of this bill attempts
to--I hesitate to say cure but at least make better, to lighten the
consequences of that failure. It adopts an idea, a program that has
worked in countless ways, put into effect: loan guarantees--have the
power of the Federal Government stand behind guarantees; the issuance
of some kind of paper to raise money to put out there in an area that
is normally limited by statute that this Congress has deemed to be
important to the well-being of our country and our future; small
business lending companies limited to small business, the same as small
business investment companies. It is the SBIC's, the small business
investment companies, that this program is most clearly directly
patterned after.
It has been said before, and I will say it again in one sentence, it
is the SBIC's that presented the capital that made it possible for
Nike, Apple Computer, and Federal Express to be born and to grow. And I
know the occupant of the chair knows the benefits of at least one of
those great companies through Federal Express. Minority small business
investment companies, there we use this guarantee power to encourage
the movement of capital toward minority small businesses limited by
statute, small business innovation research, export revolving loans.
Even Fannie Mae, Freddie Mac, Sallie Mae, those are all governmental
institutions that guarantee the flow of money to programs that we
consider socially, societally, and economically productive, housing or
student loans, whatever it happens to be in the particular case.
So we have the need, which is the absence of capital. We then adopt
this tried and true system of meeting that need. But what I want to
stress now is that S. 4 does it in a way, in this section of this bill
brought out of the Commerce Committee, that is not governmentally
controlled and governmentally operated.
The kinds of fears expressed here about politicians going to the
Federal Government to make a case to put pressure on to give money to
this particular company in their home State to increase the funding for
it, the Government, under this program as proposed in this bill, does
not have the capacity to do that.
Basically this $50 million program leverages on private capital put
out by private venture capital firms that are licensed, but only
because they have shown their qualifications, and that they have
committed their operations to achieve the program objectives which are
to support critical technologies that will create the jobs of the
future.
In other words, you have some venture capitalists who come together.
The first thing they have to do is put up some money of their own. That
is a response to the market. That is why this program is market driven.
The Government does not get involved until these private venture
capitalists say, ``We are going to put some money on the table.'' It is
at that point, after the Government determines the qualifications
commitment to the program objectives to create these new critical
technologies and commercialize them, that the Government can agree to
give the guarantee authority to this venture capital firm to expand the
money it has to put into critical technologies. Fifty million dollars,
as has been said over and over again, multiplies into $300 million
because of the economics and accounting systems of the Federal
Government, the so-called default rate.
What I want to stress here, Mr. President, is that you create this
venture capital firm called the Civilian Technology Investment Co. It
has to have private capital at risk to participate in the program.
Never does a private company that has an idea for a new technology that
it wants to commercialize come to Federal Government, to any Federal
bureaucrat, or to their Senator or Congressman to say, ``Help me get
this Federal bureaucrat to give me money.'' The entrepreneur, the
genius with the bright idea that will become tomorrow's fax machine or
VCR goes to this Civilian Technology Investment Co., a private venture
capital firm. They never come to the Government. And that private
venture capital investment firm which we have licensed, which has put
its private capital at risk, makes the decision as to whether to invest
in this company.
Here is the Federal Government over here licensing the venture
capital firm willing to extend our guarantee. Here is the entrepreneur
and the genius with the bright idea. That person only comes to the
private venture capital firm to make the market-based decision as to
whether that is a good program to put money into.
So I think we have the need, we have a tried and true mechanism, and
we have a structure here built on the SBIC model that is market driven,
that is not Government-controlled. CTIP's, as they are called, are
designed to fill an early funding gap. CTIP'S are flexible.
Again, the only funding by the Government is through a guarantee.
Venture capitalists participating in the program can supplement their
own private investment capital with Government financing. That is not a
direct investment. The private sector must put up part of the funding
and share the risk, and unlike any other program under this critical
technologies investment program the Government can share in the upshot.
In other words, if the CTIP does well, the Government can benefit
bringing some dollars into the Treasury, and in that sense reducing the
deficit.
I think this is a superb program. Just as the other parts of this
underlying bill, S. 4 do, it responds to this gnawing problem that we
have in our society today, our country today, and we certainly have it
in the State of Connecticut. A national recovery recurring by the
economic statistics--and you can fool a lot of Americans out there as
to whether they feel there is an economic recovery. They do not. They
have lost their jobs in the recession; downsizing; able, qualified,
hardworking people. We are setting up programs to retrain them. The
question is always asked, and it is the right question: ``Retraining
for what?'' If there is no job there, the retraining is not going to
mean anything.
It is through these measured investments of this kind of Civilian
Technology Investment Program that we answer the question, ``Retraining
for what?'' Retraining for the jobs that will be created by the
breakthrough, high-tech, critical technology businesses that will be
allowed to grow as a result of this program.
It has been an interesting and a substantive and a thoughtful debate.
I am glad it is made in the context of an understanding that the
underlying bill will go forward.
I appreciate very much the sense of accommodation between the
chairman of the committee, Senator Hollings, who has been such an
extraordinary leader in this effort, and to our friend and colleague
from Missouri, Senator Danforth, whose support now will make the
underlying bill possible.
So I rise to support the Civilian Technology Investment Program,
hoping that the amendment of the Senator from Missouri will be
defeated, but thanking him nonetheless for enabling and joining with us
in making sure that the underlying program will go forward. I thank the
Chair. I yield the floor.
Mr. HOLLINGS. Mr. President, the bill itself--on my time--let me
thank the distinguished Senator from Connecticut. He has chaired the
economic leadership group within the U.S. Senate over the past several
years. He has been a wonderful adviser and has motivated this
particular piece of legislation; the overall thrust to get America back
into technology development, and the commercialization of our
technology. I want to thank him. It is a wonderful contribution. We
appreciate his leadership on this score.
How much time do I have on the bill?
The PRESIDING OFFICER. The Senator from South Carolina has 16 minutes
and 8 seconds remaining.
Mr. HOLLINGS. I reserve the remainder of my time.
The PRESIDING OFFICER. The Senator from Missouri has 4 minutes and 45
seconds remaining on the amendment, and then the full time on the bill.
Mr. DANFORTH. Mr. President, first, I would like to express my
appreciation to both Senator Burns and Senator Bradley because I think
what they have done is to create a sense of bipartisanship and focus on
the issue before us. Clearly, we were pretty well divided on a party
basis. But Senator Burns, supporting the chairman, and Senator Bradley,
supporting me, in this amendment has created a sense of bipartisanship
on the issue that is now before us.
I think one of the points that was made by Senator Bradley deserves
special attention; that is, the way the marketplace works is that
people invest in good ideas, and if the ideas do not turn out to be
good, they withdraw their investment. That is the efficient way of the
market's operation. Bad ideas are not pursued. Good ideas are.
That is one of the problems that is created when the Federal
Government gets into the venture capital business because, while true
venture capitalists have real money at risk, they are going to lose
something if they lose out. Those of us who are in Government are not
really investing our own money. We are investing the taxpayers' money,
or what is worse, we are investing borrowed money. We do not sense any
personal risk. That is the difference between the Government
participating in the economy, and the private sector participating in
the economy.
Now we are told that on a pilot project basis the Government should
participate in the business of venture capitalism. To what extent?
``Well, we really have not worked out the numbers yet because that will
await conference.'' But in the bill that came to the floor of the
Senate, it was $100 million for this venture capital program.
Now the Congressional Budget Office in its analysis, and its
computation for a loan guarantee program, says that an authorization is
the same as 15 percent of a loan program.
So in other words, when CBO computes the exposure of the government
in loans, the authorization equals 15 percent of the total amount of
exposure in the loan. In other words, we now have, in this legislation,
the potential of $600 million of exposure in loans and loan guarantees.
That is what we are talking about--whether we are going to get that
heavily into this venture capital.
As I say, a true venture capitalist with real money at risk pulls the
plug on bad ideas. That is not the nature of government. One of the
things that a lot of people say about government is that we do not
terminate programs. We do not tend to terminate programs. We tend, in
government, not to want to admit mistakes. People in the bureaucracy do
not want to admit mistakes, and we in Congress do not want to admit
mistakes. Our tendency is to throw good money after bad. It is the
opposite of how a venture capitalist functions. So it is more likely
that what we will do is to pick losers, because the winners will be
privately funded, and because one of the conditions of receiving money
under this program is that you cannot get it in the private sector. So
we are more likely to fund losers than the private sector, and then
once we have funded them, we are less likely to cut our losses. That is
the way government works.
So my contention is that government is not a good venture capitalist;
government is a bad venture capitalist. Senator Bradley says, well, we
can save money--he said $100 million; I say $600 million--from the
Federal deficit. That is right, in assuming what the appropriations
would be; but that is correct, the deficits involved here. But what is
involved also is just a bad idea. This is not the way to fund research,
to provide funds, nor to provide loan guarantees for people who cannot
get money in the private sector, when we do not tend to pull the plug
on bad ideas, but tend to send good money following after bad money. I
think that is a very important point. It is a point that is not new to
Senator Bradley, and it is not new to me.
There was a piece by Alvin H. Meltzer in the Wall Street Journal last
May. The title is ``Why Governments Make Bad Venture Capitalists.'' I
would like to read just a portion of that:
The U.S. could learn from the experience of other
countries. In Korea and much of Latin America, governments
have acted as venture capitalists, often subsidizing loans to
favored firms and burying their losses in the banking system.
Professor Elwyn Young has compared the Singapore Government's
policy of managing investment with the free market policy of
Hong Kong. His analysis shows that government direction is
inefficient. Singapore invests much more but does not get
more growth.
Why? In general, is government less efficient? One reason is that
products and companies do not leap from the drawing board with
``winner'' or ``loser'' stamped on their blueprints. Someone has to
decide to make additional investments in companies that appear to have
good prospects, thereby putting more money at risk, or to shut down
companies that no longer appear promising. Government is more likely to
delay closing the failures and more likely to pump in additional money
to try to cover mistakes or misjudgments.
That is what Alvin Meltzer, a professor at Carnegie Mellon
University, has written about the Government as venture capitalists. I
believe, Mr. President, that that follows as the night to day.
Senator Lieberman says there has been a failure in the market system.
I doubt that. I doubt that we in the Senate are in a position to say
that there has been a failure in the market. I think what happened--
this is my understanding, and I do not pretend to be an economist or
business person. My understanding is that in the midsixties, there was
really a glut of venture capital money. It was the thing to do. As
people have written, there was a lot of money chasing too few good
ideas. And venture capital became less profitable, less good of an
investment and, therefore, the amount of the investment went down. Now
it is going back up again. I think that is the way the market system
works.
If we in the Senate do not believe the market system works
sufficiently, then this is exactly the kind of program we would like.
Let us substitute for the market. Let us substitute for the capitalist
system. Let us become capitalists, venture capitalists, by creating a
licensing committee--three members appointed by the Secretary of
Commerce and two by the Small Business Administration--and that
licensing committee receives applications pursuant to regulations
established by the departments of government. The applications come in
and the licensing committee says, ``Yes, we will license you,'' or
``No, we will not,'' depending on what you intend to spend your money
on. Then the licensing company decides how to finance the applicants if
they are licensed. That can be by loans and loan guarantees, with
tremendous exposure.
It is certainly not the free market system, Mr. President. It is
something else. It is a statement that we really do not believe the
market system works. We really do not believe that the free market
system works. We want to do something else. We want to try something
else. Government to the rescue. Licensing of venture capitalists.
Licensing companies established in the Department of Commerce and the
Small Business Administration. Licensing and financing, and the
purchase of stock and venture capitalists, and loans and loan
guarantees, loans that can be guaranteed to 100 percent.
I do not see any limitation in the legislation. I do not see any
requirement that the entrepreneur has to come up with 50 percent of his
money. My reading of it is that there is no such requirement. That was
in the advanced technology program we were debating this morning. That
was the Brown amendment that applied to the advanced technology
program. This, as I read it, can be 100 percent.
In fact, in the committee report, it says just that. Here is the
committee report, page 47:
The Secretary is authorized, when funds are previously made
available in appropriations, to purchase or guarantee the
timely payment of up to 100 percent of principal and interest
as scheduled on debentures issued by such companies, and (b)
purchase nonparticipating or participating nonvoting
preferred securities and issued trust certificates
representing ownership of all or part of such preferred
security.
All or part of such preferred security.
I do not see any requirement that private money be put at stake, and
I also do not see any requirement that this be small businesses that
are the beneficiaries.
I think big businesses can. Maybe I will be corrected on that. Maybe
I have not read it correctly. I am sure that is the reason the SBA is
part of it, to try at least to weight it to small businesses. But I do
not see any requirement that it could be small businesses. I think it
could be big businesses. I think they can have very little risk
themselves, the so-called venture capitalists. I think it is just
putting money into some people's pockets, to put money into someone
else's pockets, on the theory that is how to support research and
development; that is how to do it.
Someone around here has that kind of genius, and we say: Well, we are
going to have a committee of five people, but please do not worry. The
American people should not worry. They should understand that these are
really bright people. We are going to have five really smart people.
And there are smart people here in Washington. So there is a failure in
the marketplace because people in the marketplace do not know what they
are doing. People in the marketplace really do not know what they are
doing. So there is a failure of the marketplace, we have been told
today, but help is on the way. Smart people in a licensing committee
are going to find venture capitalists to license. And then they are
going to finance them, and the money will be available to people who
cannot get money in the marketplace.
I reserve the remainder of my time.
Mr. HOLLINGS. Again, please, Mr. President, what is the time
remaining on either side?
The PRESIDING OFFICER. The time remaining to the Senator from South
Carolina is 16 minutes and 9 seconds, and the Senator from Missouri has
26 minutes and 48 seconds.
Mr. HOLLINGS. Mr. President, I ask unanimous consent that the Senator
from Montana [Mr. Burns], be added as a cosponsor of our modification
reducing the amount authorized.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. HOLLINGS. Mr. President, quite quickly, we had a report card at
the end of the year entitled ``Learning to Change, Opportunities to
Improve the Performance of Smaller Manufacturers.'' This report card
was issued by the National Academy of Engineering, the Committee to
Assess Barriers and Opportunities to Improve Manufacturing at Small-
and Medium-Sized Companies, at the end of last year.
I ask unanimous consent the entire report be printed in the Record at
this point.
There being no objection, the report was ordered to be printed in the
Record, as follows:
Learning To Change--Opportunities To Improve the Performance of Smaller
Manufacturers
(Issued by the Committee To Assess Barriers and Opportunities To
Improve Manufacturing at Small and Medium-Sized Companies of the
Manufacturing Studies Board, Commission on Engineering and Technical
Systems National Research Council)
problems and challenges for smaller manufacturing companies
Smaller companies confront major problems in responding to
increased global competition. These problems encompass a
broad range of issues, only some of which relate directly to
technology. Inadequate resources--people, money, expertise,
information--and insufficient time are reasons that many
smaller firms are not improving their manufacturing
performance. The idiosyncracies that come from the genesis of
entrepreneurial companies are also contributing factors in
their resistance to change and slow adoption of more advanced
technologies and new organizational structures.
Five fundamental barriers to manufacturing performance
improvement in smaller firms were identified and discussed
during the workshops hosted by the committee. The barriers
are well corroborated in the extensive literature about
conditions in smaller companies. The means for helping firms
adequately deal with the problems include a combination of
approaches undertaken by MTCs, various state assistance
programs, and several private sector service providers. A
comprehensive response to most of the barriers will require a
combination of the approaches discussed.
Barrier 1: Disproportionate Impact of Regulation
The regulatory environment creates a disproportionate
burden for smaller firms. National, state, and local
initiatives and decisions concerning trade, the environment,
employment, work place safety, health care, and liability
have a direct impact on the competitiveness of manufacturing
companies. Despite efforts to lessen the impact of regulatory
actions on small businesses, the amount of time and effort
required to comply with complex regulations has become a
disproportionate hardship for smaller organizations. One
result is that the economic impact of regulatory compliance
is much greater as a percentage of capital investment than it
is for larger businesses.
Opportunities for improving the ability of smaller
manufacturers to cope with regulatory actions include:
Improved dialogue between regulators and smaller
manufacturers; one means for improving dialogue between
regulators and smaller businesses would be to provide
assistance in identifying and filing appropriate forms and
documents required by regulatory agencies; timely information
to manufacturers about new or modified regulations; and
reorientation of the strategies of regulatory agencies
towards ``compliance assistance'' rather than ``adversarial
and punitive.''
Barrier 2: Lack of Awareness
Smaller manufacturers are often unfamiliar with changing
technology, production techniques, and business management
practices. The staff and senior managers of smaller
manufacturing companies must devote most of their time and
energies to managing the day-to-day operations of the firm.
As a consequence those companies are less likely to be aware
of the best manufacturing practices, innovative application
of new technologies, and fresh approaches to improved
production efficiency. With less relevant experience and
expertise, their expectations for successfully selecting and
effectively assimilating new technology are not high, and so
they are less likely to risk investment in new ways of doing
things or in major changes to the management structure and
relationships within the business.
Opportunities for increasing the awareness of manufacturers
to new technologies and best manufacturing practices include
providing: National benchmarking data for smaller firms, and
illustrative cases of best manufacturing practices; greater
access to video tape libraries that illustrate technologies
and implementation problems; local and regional forums and
workshops; low-cost seminars and formal courses on selection,
adoption, and management of specific technologies; and
expanded mechanisms to provide access to equipment for ``try
before you buy.''
Barrier 3: Isolation
Smaller manufacturers are generally isolated and have too
few opportunities for interaction with other companies in
similar situations. Interaction with other firms is essential
to continuous improvement. These associations seem to be most
productive when they occur among companies of similar size
and with larger organizations that might be role models
for smaller firms. The chance for suppliers to interact
with major customers, to benefit from membership in a
supplier improvement program or keiretsu-like
confederation of companies, can significantly increase the
chances for smaller firms to improve their performance.
Opportunities for increasing the interaction and exchange
of information with other manufacturers in like circumstances
include: Workshops, meetings, site visits, focus groups,
forums, and roundtable discussions; television and video
programs to expose manufacturers to specific problems and the
solutions adopted by other firms; construction and operation
of networks of companies with similar interests and needs to
share costs; encouraging professional and trade associations
to be more active in determining needs and developing
appropriate programs for their membership; and electronic
networks that provide bulletin boards for direct exchange of
information and sharing of approaches to common problems.
Barrier 4: Where to Seek Advice
It is difficult for owners and managers of smaller
companies to find high-quality, unbiased information, advice,
and assistance. When companies need help with technical
problems, when they want to replace production or design
equipment, or when they want to upgrade the skills and
talents of their work force, they are often at a loss for
sources of assistance. Searching for help in the public
sector often reveals a confusing uncoordinated array of
services--universities, economic development groups,
technical schools, government agencies--``competing'' for
clients. Inappropriate choices can waste precious resources
and time, a waste that smaller firms cannot afford.
Opportunities for helping smaller manufacturers acquire
necessary information and unbiased advice include: Databases
of consultants with relevant references and qualifications,
toll-free numbers to provide firms with a single contact for
assistance, and electronic bulletin boards to notify service
providers of opportunities in the manufacturing community;
field engineers that provide small companies a strategic
perspective on how they compare to competitors and what
changes they need to make to remain competitive in the long
term; and interpreters and catalysts to communicate the needs
of smaller manufacturers to vendors, suppliers, academic
institutions, federal laboratories, and government agencies.
Barrier 5: Scarcity of Capital
Operating capital and investment funds for modernization
are difficult for small- and medium-sized manufacturing firms
to obtain. The financial community does not readily
understand manufacturing and often perceives loans for new
equipment as unattractively high risks. Smaller firms are
unlikely to have the capabilities needed to put together
proposals for funds in the format familiar to lending
officers. The consolidation of banks, with some exceptions,
has removed much of the decision making from the communities
where many loan officers have traditionally relied on the
``known character'' of management and owners of the companies
in lieu of collateral.
Opportunities for improving access to capital and
understanding the requirements of the financial community
include: Local and regional forums and workshops for bankers,
regulators, and others who work with manufacturers;
assistance developing justification for capital improvements
in the format and language understood by the financial
community; and creation of mutual loan guarantee networks
among peer companies.
sources of assistance
Fortunately, the efforts of many assistance organizations,
educational institutions, and businesses have demonstrated
ways to help companies successfully contend with most of
these obstacles. With some regional variation, assistance is
available in both the private and public sectors.
The private sector offers a number of resources that
manufacturers can buy to solve problems, to modernize their
production operations, and to upgrade the skills of their
workers. Among these are consultants, suppliers of
technology, trade associations and professional societies,
and other miscellaneous service providers. The backgrounds
and expertise of many consultants are, however, primarily
founded on principles relevant to larger corporations;
they often fail to appreciate subtle but important
differences in smaller organizations. And though many
suppliers will provide fairly substantial ``proposal
engineering'' services while competing for a sale, fewer
are able to follow through with sustained support and
service after a sale to a relatively small customer. There
are no precise data available on the number of smaller
companies buying private sector assistance.
Numerous initiatives have been undertaken at the federal,
regional, state, and local levels to help manufacturers and
business in general. For the most part, these initiatives
have become overlapping uncoordinated programs, and the
effectiveness of many programs has yet to be systematically
evaluated or demonstrated. The programs typically operate on
fragile financial underpinnings and often compete for funds
to support assistance efforts. The availability of public
assistance, which is usually dependent on funding by state
and local government, tends to vary with the perceived
contribution of smaller manufacturing firms to the well-being
of the local economy, and the best state programs are unable
to help more than a few hundred firms per year.
Until 1989, the federal role in providing assistance to
small manufacturers was primarily through the Small Business
Administration and various defense programs. Beginning in
1989, however, the National Institute of Standards and
Technology (NIST) has funded the Manufacturing Technology
Centers (MTCs), seven of which are now operating. The MTC
program is the primary federal activity in industrial
extension providing matching grants for creating centers to
enhance ``productivity and technological performance in U.S.
manufacturing through the transfer of manufacturing
technology and techniques * * *'' (U.S. Congress, 1988).
effectiveness of manufacturing technology centers
To understand the challenges facing smaller manufacturers
and to determine the nature and effectiveness of MTC
activities, the committee held eight workshops throughout the
United States, six of them at MTCs. The conclusions of the
committee concerning the effectiveness of the organizations
are based on workshop discussions with smaller manufacturers
and company representatives who had some experience working
with the Manufacturing Technology Centers, as well as
conversations with MTC staff and other service providers.
A majority of the committee has concluded that the MTCs are
well placed to provide many of the services needed to improve
the performance of smaller manufacturers. However, the
committee found that the legislative ``sunset provisions,''
which eliminate NIST funding after six years, and the present
metrics (cash flow, number of clients, length of engagements,
attendance at manufacturing meetings) tend to adversely
dominate the missions, attitudes, and behaviors of the MTCs
that have been operational for two or more years. While there
is an extensive range of services that can be offered by
MTCs, the typical long-term strategies to fill the funding
gap and comply with performance measures place increasing
emphasis on fee-for-service activities.
Many of the needs and opportunities identified by the
manufacturers attending the workshops were not project-
oriented kinds of assistance but were, instead, concerned
with improving access to information and building stronger
networks among companies, suppliers, technology developers,
regulators, and financiers. These ``soft'' services were
noted repeatedly as some of the most useful and important
contributions that could be made by the MTCs as neutral
parties. Such services, however, are not easily converted
into fees, and their contribution to the accomplishment of
the MTC mission is difficult to measure. All of the MTCs
provide these kinds of ``soft'' services to a greater or
lesser degree, but they should receive more emphasis despite
the lack of clear metrics on which to judge their value. The
committee can foresee a situation emerging in which MTCs fail
to provide services that would be most useful and effective
to smaller firms because the fee income is insufficient,
while at the same time competing more with the private sector
service providers for the business of larger firms.
Each of the MTCs continues to learn how best to serve its
customer base and is flexible enough to adapt. The local
infrastructure and industrial economy determine to a great
degree the characteristics of the MTC organization and its
chosen position in the spectrum of support needed by
manufacturers in its region. This drives each MTC to develop
a unique combination of services targeted at local industrial
conditions, and subsequently each evolves a relatively unique
relationship with other providers of services and assistance.
They are learning how to serve as a hub of information and
facilitator of cooperation in their local industrial
communities, and how to amalgamate a range of programs into a
core set of useful services. Each MTC, therefore, can be
viewed as an experiment or prototype in how to integrate
federal efforts in manufacturing assistance with existing
private and public assistance resources to meet the
demands of very diverse local manufacturing communities.
conclusions
The investigations and deliberations of the committee have
led to the development of opposing sets of conclusions
concerning the appropriateness of a federally funded national
system of manufacturing assistance. The majority opinion and
recommendations are presented followed by the minority
opinion.
majority opinion
Based on the committee's discussions with smaller
manufacturers and with staff at the MTCs and other industrial
assistance programs, a majority of the committee has
concluded that a national industrial assistance system is
justified. The committee majority has concluded that barriers
to manufacturing performance improvement in smaller firms and
the opportunities to overcome those barriers, as described by
manufacturers in the committee's workshops, define roles for
public sector assistance programs.
The majority assessment of the current MTCs is that the
MTCs are well-placed to address many of the challenges
confronting smaller manufacturers. Within the fragmented
network of assistance sources, the MTCs have begun to carve a
niche that, at least within their geographic regions, has
brought some degree of order to the community and has raised
the awareness of smaller companies that useful help is
available. The MTCs are still experimenting with different
mechanisms for marketing, ensuring responsiveness to the
local customer base, working with other sources of
assistance, and building the intercompany networks and
information resources that many smaller firms need. This
process of experimentation and learning should be encouraged
and the lessons broadly disseminated. This is the only way to
increase effectiveness in a necessarily diverse environment
and to keep expectations realistic as the MTC program is
expanded and other initiatives begin in the context of a
national manufacturing assistance system.
committee to assess barriers and opportunities to improve manufacturing
at small and medium-sized companies
Gary Markovits, Chairman, President, Gary Markovits &
Associates, Inc., Wappingers Falls, New York.
Winston J. Brill, President, Winston J. Brill & Associates,
Madison, Wisconsin.
Jay P. Cooper, Director (Retired), Materiel Policy and
Socio-Economic Business Program, Northrop Corporation,
Hawthorne, California.
Irwin Feller, Director, Graduate School of Public Policy
and Administration and Professor of Economics, Pennsylvania
State University, University Park.
Barbara M. Fossum, Associate Director, Manufacturing
Systems Center, University of Texas, Austin.
Sara P. Garretson, Director, NYC Industrial Technical
Assistance Corporation, New York, New York.
Harold G. Hall, President, Hall Industries, Inc.,
Pittsburgh, Pennsylvania.
Bruce E. Hamilton, Vice President, Operations, United
Electric Controls, Company, Watertown, Massachusetts.
Anne L. Heald, Executive Director, Center for Learning and
Competitiveness, School of Public Affairs, University of
Maryland, College Park.
Dundar F. Kocaoglu, Professor and Director, Engineering
Management Program, Portland State University, Oregon.
Joe H. Mize, Regents Professor, School of Industrial
Engineering and Management, Oklahoma State University,
Stillwater.
R. David Nelson, Vice President, Purchasing, Honda of
America Manufacturing, Inc., Marysville, Ohio.
Robert A. Pritzker, President and CEO, The Marmon Group,
Inc., Chicago, Illinois.
Paul D. Rimington, President, Diemasters, Manufacturing,
Inc., Elmhurst, Illinois.
William B. Rouse, Chief Executive Officer, Search
Technology, Inc., Norcross, Georgia.
William E. Ruxton, Vice President, National Tooling &
Machining Association, Fort Washington, Maryland.
Charles F. Sabel, Ford International Professor of Social
Science, Massachusetts Institute of Technology, Cambridge,
Massachusetts.
Philip P. Shapira, Assistant Professor, School of Public
Policy, Georgia Institute of Technology, Atlanta, Georgia.
John B. Woodard, President, Institute of Advanced
Manufacturing Sciences, Inc., Cincinnati, Ohio.
Staff:
Thomas C. Mahoney, Director, Manufacturing Studies Board.
Joseph A. Heim, Senior Program Officer and Study Director.
Lucy V. Fusco, Staff Assistant.
Mr. HOLLINGS. Mr. President, we had such outstanding individuals as
Irwin Feller of the Pennsylvania State University, Graduate School of
Public Policy and Administration and professor of economics; Bruce
Hamilton from United Electric Controls Co., Watertown, MA; Robert
Pritzker, president and CEO, The Marmon Group; William Ruxton, vice
president, National Tooling & Machining Association; Charles Sabel,
Ford International, professor of social science of MIT; Philip Shapira,
assistant professor, School of Public Policy at Georgia Tech; and John
Woodard, president of the Institute of Advanced Manufacturing, amongst
others.
What happens is, and I quote just a few sentences here from the
report itself:
Smaller companies confront major problems in responding to
increased global competition.
There are five reasons, they said.
First:
The regulatory environment creates a disproportionate
burden for smaller firms.
Second:
Smaller manufacturers are often unfamiliar with changing
technology, production techniques, and business management
practices.
Third:
Smaller manufacturers are generally isolated and have too
few opportunities for interaction with other companies in
similar situations.
Fourth:
It is difficult for owners and managers of smaller
companies to find high-quality, unbiased information, advice,
and assistance. When companies need help with technical
problems, when they want to replace production or design
equipment, or when they want to upgrade the skills and
talents of their work force, they are often at a loss for
sources of assistance. Searching for help in the public
sector often reveals a confusing, uncoordinated array of
services--universities, economic development groups,
technical schools, government agencies--``competing'' for
clients. Inappropriate choices can waste precious resources
and time, a waste that smaller firms cannot afford;
And fifth:
Operating capital and investment funds for modernization
are difficult for small and medium-sized manufacturing firms
to obtain. The financial community does not readily
understand manufacturing and often perceives loans for new
equipment as unattractively high risks. Smaller firms are
unlikely to have the capabilities needed to put together
proposals for funds in the format familiar to lending
officers. The consolidation of banks, with some exceptions,
has removed much of the decisionmaking from the communities
where many loan officers have traditionally relied on the
``known character'' of management and owners of the companies
in lieu of collateral.
That is something that we are having a debate about with respect to
interstate banking and otherwise with these mergers.
This particular study group of the National Academy of Engineering
held eight workshops throughout the United States, and as a result, the
bottom line is, and I quote:
* * * a national industrial assistance system is justified.
These are some of the smart people, if we want to talk about smart
people, who studied this.
Additionally, rather than fail in the marketplace, Mr. President, in
the limited time I have left, let me include in the Record these
particular enclosures of endorsement of S. 4, which include, of course,
the small business provision and otherwise.
I ask unanimous consent to have that printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Advanced Technology Coalition,
February 9, 1994.
Hon. Ernest F. Hollings,
U.S. Senate, Russell Senate Office Building, Washington, DC.
Dear Senator Hollings: On behalf of the Advanced Technology
Coalition, we want to express our strong support for the
Senate version of the National Competitiveness Act, S. 4.
We believe that the bill deserves bipartisan support. We
ask that you vote for the bill when it reaches the floor in
the very near future. Its passage is essential to
strengthening the ability of our companies and members to
compete in the international marketplace; in short, S. 4
means jobs and will contribute to our nation's long-term
economic health.
Combined, the Advanced Technology Coalition represents 5
million U.S. workers, 3,500 electronics firms, 329,000
engineers, and 13,500 companies in the manufacturing sector.
The Coalition is a diverse group of high-tech companies,
traditional manufacturing industries, labor, professional
societies, universities and research consortia that have a
common goal of ensuring America's industrial and
technological leadership.
The members of the Advanced Technology Coalition have
invested an enormous amount of time working with both the
House and the Senate in developing and refining the National
Competitiveness Act. The Coalition believes that its views
have been heard by Congress and reflected in the bill.
In short, we believe that S. 4 will promote American
competitiveness and enhance the ability of the private sector
to create jobs in this country. We hope that you will play a
leadership role in ensuring its passage. We would be happy to
sit down with you or your staff to discuss the bill in
greater detail.
Sincerely,
American Electronics Association (AEA).
National Association of Manufacturers (NAM).
The Modernization Forum.
Microelectronics and Computer Technology Corporation (MCC).
Honeywell, Inc.
National Society of Professional Engineers.
Business Executives for National Security.
IEEE-USA.
Semiconductor Equipment and Materials International (SEMI).
Institute for Interconnecting and Packaging Electronics
Circuits (IPC).
Wilson and Wilson.
American Society for Training and Development.
Catapult Communications Corporation.
Dover Technologies.
Texas Instruments, Inc.
Columbia University.
Motorola.
Intel Corporation.
Cray Research.
Electron Transfer Technologies.
Electronic Data Systems (EDS).
American Society for Engineering Education.
U.S. West, Incorporated.
Electronic Industries Association.
Tera Computer Company.
Southwest Manufacturing Technology Center.
Convex Computer Corporation.
Association for Manufacturing Technology.
Semiconductor Research Corporation.
American Society of Engineering Societies.
AT&T.
Hoya Micro Mask, Inc.
The National Coalition for
Advanced Manufacturing,
February 8, 1994.
Hon. Ernest F. Hollings,
U.S. Senate, Russell Senate Office Building, Washington, DC
Dear Senator Hollings: On behalf of the National Coalition
for Advanced Manufacturing [NACFAM], I want to express our
strong support for the Senate version of the National
Competitiveness Act, S.4.
We believe that the bill deserves bipartisan support and
ask that you join many of your colleagues in supporting the
bill when it reaches the floor. Its passage will enhance the
ability of U.S. manufacturing companies to compete in the
international marketplace. S.4 would also help to expand the
pool of high skill, high wage jobs for the American
workforce.
NACFAM especially supports the manufacturing provisions of
the bill (Title II) which, among other things, will develop a
national system of manufacturing extension centers and
technical services. This system will improve the ability of
the nation's 360,000 small and medium-sized manufacturers to
modernize through the adoption of advanced manufacturing
technology and related processes critical to increasing their
productivity, product quality, and competitiveness.
These small- and medium-sized manufacturers are the
backbone of our domestic industrial base. Manufacturing
establishments with fewer than 500 employees represent 98% of
the nation's total, employ two-thirds of the manufacturing
workforce, and produce nearly half of the nation's value
added in manufacturing.
NACFAM, a non-partisan, non-profit, industry-led coalition,
has worked as a catalyst for public-private cooperation in
modernizing America's industrial base for over 5 years.
NACFAM's rapidly growing membership includes 65 corporations,
175 manufacturing technology centers (Making NACFAM the
largest association of such centers) and 27 national trade
and technical associations (representing between them over
80,000 companies and thousands of technical education
institutions).
Thanking you in advance for your kind consideration of S.4,
I remain,
Leo Reddy,
President.
____
Council on Competitiveness,
March 7, 1994.
Hon. Ernest F. Hollings,
U.S. Senate, Washington, DC.
Dear Senator Hollings: On behalf of the Council on
Competitiveness--a coalition of chief executives from U.S.
industry, higher education and labor--I would like to express
my support for S. 4, the National Competitiveness Act.
As a leading bi-partisan private-sector voice on U.S.
competitiveness, the Council is dedicated to helping make
America more competitive in the global marketplace and more
prosperous at home. We believe that S. 4, through its support
for civilian technology and manufacturing, is an important
step towards these ends. The Council is on record as
supporting several programs, in particular:
Significantly expand the Advanced Technology Program (ATP).
S. 4 increases funding for ATP to $567 million in FY 1996 and
requires that the Department of Commerce develop a long-term
plan for the program. These provisions will promote increased
private-sector investment in critical enabling technologies
and allow ATP to have a more strategic impact on U.S.
industrial competitiveness.
Support development and diffusion of technology, especially
to small and medium-sized manufacturers. S. 4 directs the
Department of Commerce to work with industry to develop new
generic advanced manufacturing technologies and consolidates
existing NIST quality programs into a NIST National Quality
Laboratory. It also combines existing federal and state
extension programs into an integrated Manufacturing Extension
Partnership (MEP) to help small and medium-sized
manufacturers in all geographic regions adopt modern
manufacturing technologies and create high performance
workplaces. These initiatives will enhance U.S. industry's
ability to develop and manufacture competitive products and
promote long-term economic growth.
Stimulate investment in high performance computing and
communications applications. S. 4 authorizes over $350
million in FY 1995 and FY 1996 for a coordinated interagency
program to support research, technology development and pilot
projects for computing applications in health care, education
and manufacturing. These applications will help translate the
potential of a 21st century information infrastructure into
tangible economic and social benefits for the American
people.
We commend your continued support for these initiatives and
urge you to play a leadership role in their implementation
through timely passage of S. 4.
Sincerely,
Paul Allaire,
Council Chairman, Chairman and CEO,
Xerox Corporation.
____
Computer Systems Policy Project,
February 23, 1994.
Hon. Ernest F. Hollings,
Chairman, Senate Committee on Commerce, Science, and
Transportation, Russell Senate Office Building,
Washington, DC.
Dear Chairman Hollings: I am writing on behalf of the
Computer Systems Policy Project (CSPP) in support of your
efforts to enact legislation to establish an information
applications technology component of the High Performance
Computing Act, Title VI of S. 4.
CSPP strongly believes that the research framework
established by Title VI of S. 4 will complement efforts by
the private sector to develop applications for an enhanced
national information infrastructure (NII). Title VI
authorizes funds for precommercial research that will
stimulate the development by the private sector of new
applications in education, health care, access to government
information and services, and digital libraries. These
applications have the potential to create new products,
services, and jobs and to improve the quality of life for all
Americans by bringing the benefits of the information age to
everyone.
The United States is currently the world leader in
computing and communications technologies. An enhanced
national information infrastructure will not only help us
maintain that lead, but will put our information technology
advantage to work for all Americans. CSPP believes that
initiatives such as those authorized by Title VI of S. 4 will
contribute significantly to successful and rapid evolution of
the NII.
Sincerely,
Lewis E. Platt,
Chairman and CEO, Hewlett-Packard Company, Chairman, CSPP
Working Group on Information Infrastructure.
____
Business Executives for
National Security, Inc.,
March 4, 1994.
Hon. William S. Cohen,
U.S. Senate, Hart Senate Office Building, Washington, DC.
Dear Senator Cohen: My organization, Business Executives
for National Security (BENS), has worked for many years, as
you have, to help promote American competitiveness and
revitalize the American industrial base.
We have made much progress in promoting these goals, and we
now have an opportunity to solidify these advances through S.
4, the National Competitiveness Act of 1993. Programs such as
the Advanced Technology Program, manufacturing extension
centers, and the newly proposed foreign technology monitoring
office will all make important contributions to future
economic strength of American industry.
While these programs enhance competitiveness, BENS also
recognizes that these initiatives are critical to America's
military security. The ATP and other programs are critical to
the future success of the DoD's efforts to create an
integrated industrial base to supply future military systems.
These programs also play an important role in our efforts to
promote defense conversion and to create the new military
technologies of the future. Finally, the foreign technology
monitoring office can serve as an early warning system of
potential industrial weaknesses that might cause dangerous
vulnerabilities in future conflicts.
When S. 4 comes to the Senate floor next week, we urge you
to support these initiatives which are so critical to
America's economic and military security. If we can provide
you with any additional information, please do not hesitate
to contact me. I look forward to working together.
Sincerely,
Tyrus W. Cobb,
President.
____
American Industrial
Extension Alliance,
February 14, 1994
Dear Senator Hollings, The Senate will soon be considering
Senate File 4, a bill that will directly impact the ability
of American industry to compete in world markets. This
important bill contains a section on manufacturing extension
that is designed to provide the United States with an
effective system of assisting industry in modernizing
technical, management and processing systems. There is
preponderance of evidence that our industries lag in
utilizing modern equipment and systems, and this federal
effort will bring cohesion to the disparate systems now in
existence.
The members of the American Industrial Extension Alliance
are firmly behind efforts to strengthen this countries
technical assistance programs and bring this needed service
to all the states. The alliance members represent most of the
industrial extension programs that now exist, but we are well
aware of the size of the problem is beyond the capabilities
of these few programs. We support the position of the
National Coalition for Advanced Manufacturing and the
expanding Manufacturing Extension partnership at NIST.
Your support in strengthening American manufacturing firms
by the passage of Senate File 4 will be appreciated.
Sincerely,
David H. Swanson,
President.
____
American Society for Training
and Development,
February 4, 1994.
Re S.4, The National Competitiveness Act of 1993.
Member,
U.S. Senate,
Washington, DC.
Dear Senator: The American Society for Training and
Development (ASTD), on behalf of more than 55,000 corporate-
based human resources development specialists, urges your
support for S.4, the ``National Competitiveness Act of
1993,'' when it is considered on the floor in the coming
days.
The ``National Competitiveness Act of 1993'' establishes
key underpinnings of a national technology policy based on
outreach to the private sector, the targeting of assistance
to small and medium-size companies, and the integration of
worker training with technology assistance.
ASTD specifically supports provisions to create
Manufacturing Outreach Centers and expand the activities of
the existing Manufacturing Technology Centers. Enactment of
these provisions will help companies gain increased access to
manufacturing assistance, implement the best manufacturing
technology and processes at least cost, and train workers in
maximum utilization of technology and productions systems.
ASTD is the world's largest association dedicated to
advancing workforce training in conjunction with
technological progress and the creation of high performance
workplaces. We look forward to swift passage of this
important initiative during the 2nd session of the 103rd
Congress as a critical step to improve U.S. competitiveness.
Sincerely,
Curtis E. Plott,
President and CEO.
____
The American Society of
Mechanical Engineers,
Washington, DC, February 7, 1994.
Hon. Bob Dole,
Hart Building,
Washington, DC.
Dear Senator Dole: On behalf of the Technology Policy Group
of the American Society of Mechanical Engineers (ASME), I
urge you to support S. 4, the ``National Competitiveness Act
of 1993,'' which is scheduled to be brought to the Senate
floor this week.
This important legislation will provide the underpinning
for a realistic national technology policy. It includes
provisions that support the development and use of
manufacturing technologies which are essential for continued
U.S. gains in productivity and industrial competitiveness.
The bill also calls for industry participation in the
development of advanced manufacturing program strategies
through the use of an advisory committee to assure that the
infrastructure and new knowledge gained from the program will
be effectively utilized by U.S. manufacturers.
ASME has accorded competitiveness a high priority in our
1994 public policy agenda. This letter is written on behalf
of the Technology Policy Group, a group of ASME members with
expertise in the field of competitiveness, and reflects it
views, rather than an official position of ASME.
Again, I urge your support of this legislation to further
the nation's industrial competitiveness.
Sincerely,
John Parker,
Vice President, Government Relations.
____
United States Activities,
March 4, 1994.
U.S. Senate,
Washington, DC.
Dear Senator: On behalf of the 240,000 members of the
Institute of Electrical and Electronics Engineers, United
States Activities, I am writing to express our strong support
for passage of S. 4, the National Competitiveness Act.
The programs and provisions contained in S. 4 are bi-
partisan, and industry endorsed. The bill expands civilian
technology initiatives like the Advanced Technology Program,
started under the Bush Administration, that have the support
of the business community because they are industry-led,
cost-shared, and merit-based.
In supporting passage of S. 4, we join a multitude of
electronics firms, manufacturing companies, and professional
societies that believe its provisions will help make U.S.
industry more competitive.
Thank you for considering our views on this important piece
of legislation.
Sincerely,
Charles Alexander,
Vice President, Professional Activities, and Chairman,
United States Activities Board.
____
Honeywell Inc.,
Minneapolis, MN, February 7, 1994.
Hon. Robert Dole,
U.S. Senate, Hart Senate Office Building, Washington, DC.
Dear Senator Dole: S. 4, The National Competitiveness Act
of 1994, will be coming to the Senate floor for a vote at any
time. As you know from our previous correspondence on this
legislation, Honeywell very strongly supports the bill. We
again urge you to vote for its passage as reported out of the
Senate Commerce Committee.
Honeywell has been actively supporting the development and
passage of this legislation for over two years. We have
welcomed the leadership which the Congress has demonstrated
on measures to support US technology and manufacturing
competitiveness, and have been gratified that the
Administration and the Congress have been able to cooperate
effectively in the past year on this effort. These efforts by
Congress and the Administration have also gained a strong
consensus of support within the technology and manufacturing
community.
Passage of the National Competitiveness Act represents a
vital and strategic investment by the US government in our
national competitiveness. As a high technology manufacturing
company, Honeywell has had direct and positive experiences
with the existing Commerce Department programs, such as the
Advanced Technology Program, which S. 4 seeks to strengthen.
We also see value in those measures in the bill which will be
of benefit to our small and medium-sized customers and
suppliers, such as Title II, which provides for a
Manufacturing Extension Program, among other initiatives.
We sincerely hope the Senate will recognize and appreciate
the interests and strong support for the Competitiveness Act
which have been expressed by companies such as Honeywell
throughout this deliberative process, and will act decisively
to approve S. 4.
If you would like further information concerning
Honeywell's views on specific elements of the legislation,
please do not hesitate to contact Susan Rochford, Director,
International and Technology Affairs, in our Washington
Office (202) 872-0495.
Thank you for your kind consideration of our views.
Sincerely,
Carl L. Vignali.
____
Optoelectronics Industry
Development Association,
March 7, 1994.
Hon. Ernest F. Hollings,
U.S. Senate,
Washington, DC.
Dear Senator Hollings: I am writing to express the support
of the Optoelectronics Industry Development Association
(OIDA) for S. 4 the National Competitiveness Act. OIDA was
formed in 1991 to improve American competitiveness in
optoelectronics, which includes fiber optic communications
systems, flat panel computer displays, optical storage (e.g.
CDs), and laser printers and scanners. These are key enabling
technologies for the nation's information infrastructure and
are critical technologies for the nation's defense.
OIDA has conducted a major study of the technology needs of
the optoelectronics industry for the coming decade, and many
of the programs authorized by S. 4, support the highest
priorities of the industry. In particular:
The Advanced Technology Program in the National Institute
of Standards and Technology (NIST) is an effective mechanism
for supporting industry-driven optoelectronics research and
development and is already having a significant impact.
NIST intramural research supports key measurement
technologies that the optoelectronics industry needs.
The Information Technology Applications Research Program
can help to expand the use of optoelectronics in hospitals,
schools, factories, libraries, and other organizations. This
will expand the markets for optoelectronics and will
stimulate greater private sector investment.
We believe that this legislation is important for the
competitiveness of the U.S. optoelectronics industry--and the
nation--and support its passage. If you would like additional
information, please do not hesitate to call either me at the
above number or OIDA President Arpad Bergh at (201) 829-4938.
Sincerely,
David W. Cheney,
Executive Director.
Mr. HOLLINGS. Mr. President, addressing these on February 9, the
Advanced Technology Coalition endorsed S. 4. Smart people, using the
expression of our distinguished colleague, not failures in the
marketplace:
The American Electronics Association, successes in the marketplace;
the National Association of Manufacturers; the Modernization Forum;
Microelectronics and Computer Technology Corp.; Honeywell; National
Society of Professional Engineers; Business Executives for National
Security--going down--Texas Instruments; Columbia University; Motorola;
Intel; Cray Research; Electron Transfer Technologies; American Society
for Engineering Education; Southeast Manufacturing Technology Center;
Convex; Semiconductor Research; American Society of Engineering
Societies; AT&T--all smart people. Smart people these are and
successes, not failures in the marketplace--the National Coalition for
Advanced Manufacturing--all smart people--the Council on
Competitiveness--all smart people; not failures, but all successes. The
chairman of that group is Paul Allaire, the chairman and CEO of Xerox;
the Computer Systems Policy Project, Lewis E. Platt, chairman and CEO
of Hewlett Packard--a smart individual, not a failure; a success in the
marketplace.
We go on down the list. The Business Executives for National
Security, Tyrus W. Cobb, president, dated March 4; the AIEA, the
American Industrial Extension Alliance, David H. Swanson, Ph.D.,
president--not dumb, a smart fellow, a smart fellow here; ASTD, the
American Society for Training and Development, Curtis E. Plott,
president and CEO--not dumb, a smart fellow; a success in the
marketplace.
All of these, successes in the marketplace, have endorsed S. 4.
The American Society of Mechanical Engineers, John Parker, vice
president; the United States Activities of the Institute of Electrical
and Electronics Engineers, the IEEE, Charles Alexander, Dr. Charles
Alexander, chairman of the United States Activities Boards; next, the
Honeywell Corp., Carl L. Vignali, the senior vice president in charge
of operations.
We go right on down the list. The Optoelectronics Industry
Development Association, David W. Cheney, executive director; the
chairman being William Braun of Motorola. The president is Arpad Bergh.
The treasurer is Roland Haitz of Hewlett Packard.
I cannot get a more distinguished group than all of these particular
endorsements, which we have now entered in the Record.
So it is not politicians. It is the market force operating through
the industry itself; it is the market force operating through the peer
review and the merit selection and the actual individuals that we have
in charge.
I do not know of a better, more well-considered success story than as
a result here of the report card that we have just gotten from the
National Academy of Engineers.
I reserve the remainder of my time.
The PRESIDING OFFICER. Let the Chair correct himself. The Chair was
in error in stating the time of the Senator from Missouri. It is 20
minutes, rather than 27 minutes.
Who yields time?
Mr. DANFORTH. Mr. President, I do not know of any other speakers on
my side. I do want to speak briefly if for no other reason than to give
people the opportunity to call in if they do want to speak. If I hear
from nobody, I intend to propose that we might consider yielding back
the remainder of our time, but not quite yet. I would like to make just
one comment.
Mr. President, I think that it would be no surprise to many people in
the Senate for me to say that this last week has not exactly been my
favorite week in the Senate. But, Senator Hollings and I have had a
very good relationship over the years and we have much work to do in
the 7 months between now and when the Senate adjourns. We have
telecommunications legislation, which I think is as important as any
legislation that will be before the Senate. I think it is as important
as the health care legislation. We are working on it and will continue
to do so.
And so the difficulties of last week are really behind us and I am
glad we could work out an arrangement by which we bring this matter to
a conclusion on the floor of the Senate.
I think, though, for all the difficulty of the last week, it served a
very useful purpose, because I think what it has done is to heighten
the recognition in the Senate that there really is a serious issue out
there, and it is an issue that I for sure have tended to bury on my
list of priorities and I think maybe other Senators have as well. And
the issue does have to do with how the Government relates to research
and development. How do we feel about it? Do we believe that the
Government should be directly involved, and, if so, how?
Most of us think that, with respect to basic research, the Government
should be directly involved, and it is; in NIH, for example. Most of us
believe that when Government has a direct result that it needs--for
example, national defense--the Government is going to be involved and
that it should be involved.
What we are talking about here is somewhere in between basic research
and buying things for the needs of the Federal Government. We are
talking about the business sector, the private sector of our economy,
and how it functions and how products are developed and how products
are manufactured and how products are brought into the marketplace. And
that really is the issue.
Some people believe that there is a very definite role for the
Government to play in subsidizing research and development, in
subsidizing it directly, in subsidizing it through venture capital
operations; that the Government really should be doing more; that the
marketplace has failed; that somehow the private sector is
underinvesting. Other people feel that the Government really is not the
answer, that the Government is not going to do it well.
It is not just a matter of wasting money; that the Government is
going to tend to invest in those things that do not make it in the
marketplace. That is the justification for the program in the first
place. And the Government is going to tend to continue investing in
failed ideas in the future because of the propensity of those of us in
Government not to give up on things as somebody with real money at
stake would give up. So it is a very real issue and I think it is going
to be a recurring issue about the role of Government in financing
research and development.
I happen to be the ranking member of the Trade Subcommittee of the
Finance Committee. International trade has been an interest of mine
ever since 1978. I was the chairman of the Trade Subcommittee when our
party was in the majority. I was very active in every trade bill that
has come before the Senate since the Trade Act of 1979. I have followed
the negotiations that went on in Geneva and the agreement that has been
initialed.
What really hit me and what elevated this whole matter in my own mind
was the change in the subsidies code which was pushed by this
administration to provide that henceforth governmental subsidies for
research and development would no longer be subject to countervailing
duties up to a certain amount. I thought that that was and do believe
that that was a major loophole in the subsidy code.
I am concerned that Airbus is to be the model for the future,
internationally and with this legislation here at home. So I do see a
connection between S. 4 and what was done with respect to the
negotiations of the GATT agreement. I think it is bad policy. I think
it is a bad approach.
I think that we are going to lose out if this is the way that other
countries are going to operate. And I think if this is the way our
country is going to operate, it may be necessary, in order to meet
foreign subsidies, but that it is a real departure from the market
system. When we depart from the market system, I think it is to the
detriment of our economy and to the ultimate detriment of our people.
That has been what this whole debate has been about.
I think the debate, particularly this afternoon, has been a good one.
I am very, very pleased especially that Senator Bradley and Senator
Lieberman participated in it in their characteristically very well-
informed and articulate ways, because I think that they brought to the
floor of the Senate, both Democrats in that case, two different views
of the relationship between Government and the private sector in the
doing of research.
I hope that it is a matter that will continue to be debated, not only
here on the floor of the Senate but in the media and by the American
people.
So, while it has been a very difficult 6 or 7 days--there is no
question about that at all--I think that it served a useful purpose.
The PRESIDING OFFICER (Mrs. Feinstein). Who yields time?
Mr. HOLLINGS addressed the Chair.
The Senator from South Carolina.
Mr. HOLLINGS. Madam President, there is a fundamental difference
between the distinguished Senator and myself about relief for that
marketplace.
I could almost go back to the founding days--``We the People . . .,
in Order to form a more perfect Union.'' In part those efforts were
directed against abuses of the marketplace. We found long since that if
we allowed the marketplace to operate as it sees fit, we would have
child labor. So we passed laws against child labor.
This Government did it. Politicians did it. In a totally unfettered
marketplace, we found out that big business would constitute all kinds
of monopolies, so we passed our Robinson-Patman and the Sherman
Antitrust Act against monopolies. We found the marketplace would not
pay a decent, living wage--there is no question about it. So we
continually, Republican and Democrat, look at it and say, instead of
that marketplace just determining it, we invade that marketplace as a
matter of public policy by creating a minimum wage.
We go into health care, where the majority of the money--it is in the
billions that we are talking about--is a Government program now, right
this minute, with Medicare and Medicaid and medical research and all
the other attendant parts of it. It has been well conceived. The
trouble is just that the marketplace is gobbling us alive with the 11-
to 12-percent increase in the cost each year, way over and above any
kind of inflation. Marketplace is the problem for this Congress, right
now, when we are talking about health care reform.
We have the matter of safety. We legislated requirements for safe
machinery and a safe working place under OSHA. We intervened to protect
the environment. We did not depend on the marketplace to protect the
environment. Heavens above, we would all be dead and gone the way they
would pollute. We intervened in the marketplace with plant closing
notice, parental leave, and many, many other things.
At the beginning of our Republic, when we were largely a rural,
agricultural nation, the British said, ``You go ahead as a fledgling
colony, you have freedom, you produce what you can best and we in
contrast will produce what we can best, and trade along those lines, no
tariffs, no barriers.''
Alexander Hamilton responded in his ``Report on Manufactures.'' He
said, in effect, ``Bug off; we are not going to remain your colony.''
And the very first substantive bill that passed the first Congress on
July 4, 1789, invaded the marketplace with tariffs. And with those
tariffs of 50 percent on 30 different articles: iron, textiles, going
down the list, we started building up our productive capacity. We did
not leave it to the marketplace. In fact, we did not leave the rural
market alone. We came in with agricultural subsidies way back in 1862,
132 years ago.
So we started with land-grant colleges, then continued to the
enormously successful Agriculture Research and Extension Services;
these are the models for the current bill. That is exactly what we have
sought to accomplish for manufacturing, for technology, for the
commercialization of our technology. And we did this some 6 years ago,
in 1988. And it is working. We have gotten our report card in the form
of glowing endorsements from all the technological industries and the
leaders of America's industry, coming forth saying this is not a
runaway grab bag. If it were anything akin to that, the Chamber of
Commerce and other business groups would be in here opposing it.
So the debate on the marketplace has been going on for many, many
years. We found out we have to come in, not only on agriculture, not
only on the aerospace industry, not only on the energy industry, not
only on the semiconductor industry--because we put in multimillion
dollar, billion dollar programs along these lines, that have worked--
but we have come along now with technology. We are saying, look at our
competition in the global economy, the global competition. We are
really behind the curve. We have to get out there in front and start
playing catchup ball in a studied, deliberate, peer-reviewed, industry-
initiated manner. That is what S. 4 does and it does a wonderful thing
to this marketplace. It generates all these jobs, the backbone of
manufacture that has gone from 32 percent down to 16 percent, half of
our GDP. And we claim to be the only remaining superpower in the world?
Come on.
We have this country, its national security, its foreign policy, can
be compared to a three-legged stool. We have the one leg consisting of
the values of our country, which are very strong. The second leg
consists of military prowess and power. But the third leg--the leg of
economic strength--has been fractured. All the reports say so and they
have been saying so for 15 years around this country. So we finally
started moving on a trade bill and now this technology bill.
S. 4 moves in the right direction. I implore our colleagues, look at
it as you have before. You have systematically done it. You have had
hearings on it. You unanimously passed it out of the Commerce Committee
back 2 years ago; passed it unanimously through this body in a
bipartisan way. We did not wait. I do appreciate the two Senators
referred to getting back to bipartisanship again. But there has been
bipartisanship throughout. It was bipartisan again last year when we
reported it.
So here it is. There has been some differences with the other side of
the aisle, but we have moved on. I do say to the Senator from Missouri,
it is a pleasure to work with him. The differences we have had are
past. We will be working together constructively and cooperatively on
S. 1822, the Communications Act of 1994. We will have a good
relationship. It is for his good, my good, the good of the Senate and
the country that we do that, and I am glad to do it.
But let us not talk of S. 4 as a new venture or new departure. We
debated 26 amendments on everything from aircraft and pesticides and
paperwork. But we did not get to the heart of this bill.
Now we are getting, finally, to our debate on one particular issue. I
was glad for that debate.
The PRESIDING OFFICER. The time of the Senator has expired.
Mr. HOLLINGS. I thank the Chair.
The PRESIDING OFFICER. Who yields time?
Mr. ROCKEFELLER addressed the Chair.
The PRESIDING OFFICER. The Senator from West Virginia.
Mr. ROCKEFELLER. I apologize to the Chair. I am a little bit out of
sense of what my rights are, or lack of rights are, or what I should
do. I would like to say a couple of things, but my time I am sure is
gone.
The PRESIDING OFFICER. The Senator from Missouri controls the time
for the Senator from West Virginia, and there is 12 minutes and 31
seconds remaining.
Mr. HOLLINGS. We are out of time.
Mr. DANFORTH. How much time does my colleague want, 5 minutes?
Mr. ROCKEFELLER. If Senator Danforth will give me 5 minutes, I will
take it.
Mr. DANFORTH. I yield 5 minutes to the Senator from West Virginia.
Mr. ROCKEFELLER. I do not want people to be swayed by his personal
generosity in terms of their votes, Madam President. But it is just a
very generous thing.
Dr. John Carruthers, the head of Intel, testifying on behalf of the
American Electronics Association, said:
The early and mid-1980's were the age of startup, a period
when investments in high technology flourished. * * *
But then he said:
But for more than 5 years now, our Nation has failed to
produce a new generation of such companies. The reasons for
this precipitous decline are many, but chief among them has
been the alarming and growing inability of American
entrepreneurs to obtain seed and venture funding.
The Civilian Technology Investment Program, which the Senator from
Missouri wants to strike from this bill, which I hope will fail, is
based upon the SBA's small investment program. It was created in 1958.
It has worked. This program, if we are to defeat the amendment of the
Senator from Missouri, would give us, for every $1 of Federal money put
in, $6 of private sector money. We cannot under any conditions spend
more than $50 million, if that is the final amount that is in the bill.
Private venture capitalists have focused up to this point on what is
called mezzanine financing, which is second stage--not startup, that
the Intel focused on--types of money. Exactly what this program is
designed to fill is that early funding when people have a good idea,
small, medium businesses, but they cannot get the venture capital.
Which is a fact. They cannot do it these days. That is what this bill
is for and this section of the bill.
The bill is flexible. The private sector must put up part of the
money and share the risk. Under the Civilian Technology Investment
Program the Government can share in the up side--which means they can
get some money, and they will--and that can help to reduce the deficit.
It seems to me one of the most obvious things that is good that needs
to happen to our country, Madam President. I do not consider it
controversial. I grew up in a Republican family that was not unknown
for business entrepreneurship. I cannot imagine my great grandfather
saying, ``Gee, this is a terrible idea.'' I think he would have thought
this is a good idea.
It seems to me American business is saying this is a good idea. They
are saying that unanimously, with the exception of one group which
represents more or less high-level venture capital people who do not
have to worry about startup money.
So I hope either the motion to table the amendment of the Senator
from Missouri will succeed or, if it is an up-or-down vote, that the
amendment of the Senator from Missouri will not succeed.
I thank the Chair and I thank the Senator from Missouri. Of course, I
thank the chairman, Senator Hollings, from South Carolina.
Mr. DANFORTH addressed the Chair.
The PRESIDING OFFICER. The Senator from Missouri.
Mr. DANFORTH. Madam President, the committee report--and I am now
speaking about the underlying bill--speaks of ``an era of strong
international economic competition.''
Then on page 3 of committee report it concludes that ``the Department
of Commerce has a leadership role to play in this new era.''
This whole debate is about whether or not we really believe the
Department of Commerce has a leadership role to play in this new era.
It is the judgment of this Senator that if we are relying on the
Department of Commerce to lead us into a new era, we are going to be
led in exactly the opposite direction.
Madam President, seeing no other Senator who wishes to speak, I yield
back the remainder of my time.
The PRESIDING OFFICER. All time has either been yielded back or
expired.
Mr. HOLLINGS. Madam President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. HOLLINGS. Madam President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
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