[Congressional Record Volume 140, Number 99 (Tuesday, July 26, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: July 26, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
              THE ECONOMY AND WHERE OUR COUNTRY IS HEADED

  The SPEAKER pro tempore (Mr. Long). Under the Speaker's announced 
policy of February 11, 1994, and June 10, 1994, the gentleman from 
Oregon [Mr. Wyden] is recognized for 60 minutes as the designee of the 
majority leader.
  Mr. WYDEN. Madam Speaker, thank you very much for this opportunity to 
address the economy and where our country is headed.
  I have had the good fortune of being able to serve on the Joint 
Economic Committee in the Congress. As a member of this committee, I 
have a chance to listen to a wide variety of economists. Many of them 
come to the committee and talk about the virtues of Keynesian 
economics. They may talk about supply-side economics. They talk about a 
wide variety of economic theories.
  But as I listen to many of these specialists who come before our 
committee, the longer I listen, the more convinced I am that what 
really matters is the sense of economics of the person on the street. 
If folks on Main Street in America believe things are getting better, 
they make a wide variety of investment decisions, and then things do 
get better.
  On the contrary, if they think that things are not headed in the 
right direction, they might sit on their hands. They may hold off on 
making an investment, and things do deteriorate.
  So what I would like to do tonight for just a few minutes is to talk 
about economics as it is seen from the person on the street, as it is 
seen from Americans on Main Street in America and across our country, 
and the economy that they are facing.
  I am going to start with a number of charts, in particular focusing 
on the last 18 months, because in the last 18 months the economy has 
gained 208,000 private-sector jobs each month, compared to a mere 
27,000 per month during the period of 1988 to 1992. That breaks down to 
nearly 7,000 new jobs every single day of the Clinton administration.
  And Americans eager about new economic opportunities have gone out 
and invested in new equipment at a very dramatic rate. The next chart 
that I will show illustrates the rate of growth in business investment 
and equipment, which is 18.4 percent per year, almost nine times the 
rate of growth during the period between 1988 and 1992, and this 
additional investment means higher productivity, more jobs, and more 
growth in our economy.
  Now, the millions of new jobs and billions of dollars of new 
investment are also helping to encourage consumers to be more active in 
the marketplace. As the third chart shows, consumer confidence is at 
its highest level in 5 years, nearly 15.5 points higher than in the 
last year of the Bush administration.
  So what we have is more jobs, faster investment, and increased 
consumer confidence, the unassailable signs of an economy that is 
healthier, unassailable signs to Americans who are practicing the 
economics of Main Street America that our economy is getting better.
  How did the President and the Congress working together accomplish 
this? In short, it was not accomplished by pumping trillions of dollars 
of borrowed money into the economy as was done during the early 1980's. 
It was not accomplished by smoke and mirrors. The President and the 
Congress working together helped make our economy healthier by focusing 
on basic economic fundamentals, economic policies that have made it 
possible for the private sector, not the Government, to create jobs and 
economic growth.
  The Government does not create jobs. The private sector creates jobs. 
But what the Government has done in the last 18 months is created a 
healthier climate for the private sector to grow and to create jobs for 
our citizens.
  I would like to turn now for a moment to the matter of the deficit. 
The deficit in our country is going down as opposed to the 1980's when 
it increased so dramatically. Next year will be the third straight year 
of reductions in the Federal deficit, for the first time since the 
Truman administration over 40 years ago.
  More important, the deficit as a percentage of gross domestic product 
will be cut in half in just 3 years from 4.9 percent in 1992 to 2.4 
percent in 1995.
  Moreover, deficit reduction will go down almost $700 billion from the 
national debt by 1998.
  Let me turn briefly to the matter of Federal spending. As this chart 
shows, by 1999, Federal employment will be cut by over 270,000 workers, 
reaching the lowest level since the days of the Kennedy administration. 
These are reductions that are tough. They are reductions that are hard 
politically for Members on both sides of the aisle, but making those 
reductions in the Federal work force is going to make a difference for 
our country in the years ahead by making Government leaner and by 
saving the taxpayers money.

                             {time}   1910

  Now, the next chart shows that Federal spending will be lower during 
this administration than during either the Bush or Reagan 
administrations. I think it is important for the country to put this 
into context because we heard a lot of rhetoric during the 1980's about 
cutting spending. But the fact is that Federal spending is going to be 
lower during this administration than during either the Bush or the 
Reagan administrations. These are real cuts in the Federal deficit, 
real cuts in Federal workers, real cuts in Federal spending that I come 
to the House to discuss tonight; not sleight-of-hand but the real 
thing.
  The cuts in the deficit are important because they go right to the 
heart of creating the kind of healthy private sector business climate 
that I have mentioned is critical to encouraging investment in growth 
and job creation.
  The next chart that I will discuss focuses on inflation. At 2.7 
percent, inflation is now near a 30-year low. This low inflation helps 
our businesses plan for the future and encourages them to invest.
  Nothing is more damaging to economic health than high inflation and 
nothing is more conducive to growth than low inflation.
  The next chart that I would like to bring before the body, Madam 
Speaker, deals with interest rates as a factor in our historical 
economic performance.
  The low interest rates we have now make it cheaper for business to 
invest, grow and create jobs. They make it easier for consumers to buy 
homes and cars, they make it cheaper for students to be able to pay for 
college. And certainly, by historical standards, inflation rates are 
down and the economy is better for it.
  Inflation is down and interest rates are down because the deficit is 
down and Federal spending is down.
  Now that the President and the Congress have helped get the economy 
back on its feet, as we have been able to see through the progress 
illustrated on these charts, it seems to me that we have an opportunity 
to break yet additional new ground by focusing on the small business 
sector.
  The small business sector is historically the engine of job creation 
and the backbone of our economy. But smaller companies still face 
special challenges as they attempt to prosper.
  Although United States exports have grown rapidly and are a key 
ingredient to our economic recovery, smaller companies especially have 
difficulty making their way into the lucrative foreign markets.
  In fact, just 50 very large companies account for about 43 percent of 
all U.S. exports, and just 15 percent of all exporting firms account 
for about 85 percent of all of the U.S. exports.
  Smaller companies, particularly those in the high-technology field, 
are cash strapped in many instances as they try to get off the ground 
and have a hard time competing for top-notch workers and others they 
need to grow their business.
  Smaller companies, particularly those that are not located near 
financial centers, have an especially hard time attracting the 
investment capital they need to grow. Too many small companies die on 
the vine after they get too big to be financed internally but not yet 
big enough to qualify for bank lending.
  Madam Speaker, as chairman of the Subcommittee on Regulation, 
Business Opportunities, and Technology of the Committee on Small 
Business, I plan to introduce a package of legislation that can help 
our small businesses expand. It will make it easier for small companies 
to export, make it easier for these companies to attract high-quality 
workers and make more investment capital available to the small 
business sector. I hope that Congress will be able to move forward on 
this package early because it is solid commonsense legislation that 
Members on both sides of the aisle can support because it will provide 
a real shot in the arm in the small business sector.
  Madam Speaker, I am going to spend just a few minutes describing some 
of the details, beginning with the effort to develop a more 
entrepreneurial trade policy.
  Now, our Federal Government at present spends a lot of money 
promoting exports, but the record shows the services have not had 
particularly promising results in the small business sector. The main 
reason for this is that Federal programs are not especially accessible 
and useful to smaller companies. In fact, the average small business 
seeking export assistance will probably end up frustrated after trying 
to find the way through a maze of about 100 different offices providing 
export services. Many of these services are overlapping, some in fact 
directly contradictory.
  Now, in contrast, many of the trade offices located in our States and 
business trade associations are far better positioned to give good 
export assistance to the small business sector. These State trade 
offices and local trade groups are closer, they are easier to access, 
they have better knowledge of local companies and their particular 
exporting needs; they are better positioned to do crucial outreach, 
which is needed for small business to grow.
  What these offices lack is initial resources. While the Federal 
Government spends $3.7 billion on export assistance and still only 10 
percent of all U.S. firms export, the offices at the State and local 
levels that can best help small companies get into the export market 
are sorely lacking in funds.
  Madam Speaker, it seems to me that the role of the State trade 
offices and trade associations can be enhanced significantly without 
adding one penny to the Federal deficit. The smaller companies are 
given an opportunity to increase their sales through exports and create 
new jobs by securing help at the local level rather than having to 
traipse their way through the maze in Washington, DC.
  The package I will introduce this fall will turn export assistance 
program on its head so that the smaller companies can get the vital 
practical, hands-on assistance they need to break into foreign markets 
at the local level without having to make those companies journey to 
Washington, DC, and endeavor to find their way through the Federal maze 
of exporting agencies.
  The second area that I will be promoting, Madam Speaker, is the 
concept of partnership pay. Now, we know that the structure of our 
economy is changing rapidly, and obviously the Tax Code needs to change 
with it.
  Depite today's healthier economy, many believe we must take steps now 
to boost our productivity, pump up long-term growth, enhance our 
standard of living. One way of improving the quality of firms is to 
give employees a stake in the success of their firms, in effect to make 
the employees partners in both the risks and the rewards of the company 
they work for.
  Now, many companies are already eliminating layers of management, 
flattening hierarchies, opening up information, and giving employees 
more independence and discretion. In fact, the line between managers 
and workers is blurring, and increasingly all employees of successful 
companies are becoming partners in the firm's enterprise.
  In that kind of business environment it makes sense for the financial 
incentives to reflect the growing reality of partnership. In fact, many 
people believe that instituting a system of partnership pay under which 
a portion of a worker's total compensation would be tied to the 
performance of the company would be a strong boost to overall corporate 
productivity.

                              {time}  1920

  In addition, by increasing companies' flexibility partnership pay 
should encourage firms to hire more workers. Unfortunately, in many 
companies, the prevalent culture among both management and labor weighs 
against this innovative concept of partnership pay. Management is 
frequently concerned that shareholders will look unfavorably on systems 
that empower employees. Workers frequently do not trust management to 
give them a fair shake and a partnership pay program and would prefer 
to rely on the certainty of a fixed pay check even if that meant that 
their total compensation would be less than it would be under 
partnership pay. My sense is that the emphasis on simply fixing a pay 
check may be limiting our productivity and putting cash-strapped small 
companies at a disadvantage in attracting workers.
  Partnership pay can be a new way for small companies to offer workers 
a deal, share in the bounty when all succeed. Small companies can be 
put on firmer ground relative to their large competitors in attracting 
the high-quality workers that they need to survive. It is entirely 
possible that cultural problems that make it difficult for small 
business could be overcome in time. But unfortunately the Federal 
Government is worsening the problem by discouraging firms from 
instituting partnership pay that boosts productivity and hire more 
workers.
  Now the Government is discouraging the partnership pay effort in two 
ways. First, $2 billion each year goes to tax incentives to encourage 
companies to buy equipment, but it does nothing to encourage firms to 
hire workers. In effect the Government through our tax policy is 
encouraging companies to replace workers with machines.
  Second, the Government spends billions of dollars more on tax 
incentives for company contributions to employee deferred compensation 
plans, essentially pension contributions. These contributions are 
certainly valuable. No one should in any way try to eliminate them. But 
they do little to boost productivity and really nothing to encourage 
firms to hire additional workers.
  So, what we ought to be trying to do is look at new incentives for 
approaches like partnership pay that will make it possible for 
companies to want to bring on additional workers and create incentives 
for productivity.
  My legislation will not mandate companies to do anything. It 
certainly will not affect current profit-sharing programs. But what my 
legislation will do will make it possible so that companies that wish 
to adopt partnership pay will be able to do so without being steered 
away from this approach by the current Federal policies now on the 
books.
  Finally, Madam Speaker, I will be proposing a new approach to 
encourage investment in small companies that is modeled after what our 
country has used successfully to encourage home ownership. Most 
Americans are familiar with what is done when you sell a home. In 
effect, if you take the proceeds from the sale of that home and invest 
them in another home, the Government has made the judgement that 
because we wish to encourage home ownership there will be no tax bite 
when an individual takes the proceeds from the sale of their first home 
and invests them in a new home. I will be proposing that essentially 
the same thing be done in the small business sector as a way to recycle 
the successful small businesses of our country and the entrepreneurs 
that run them.
  So, for example, if one is operating a small business in Portland, 
OR, my home town, and they have been successful, and make a decision 
that they want to sell that small business, under what I will propose, 
if they are willing to take a significant portion of the proceeds from 
that small business and go out and invest in another small business, 
thereby keeping dollars in the small business sector of our economy, my 
bill will ensure that they are treated favorably from a tax standpoint.

  In effect, we can increase the flow of capital to small, growing 
companies this way, and we can do it through a model that we know 
works, which is the model used for home ownership in our country.
  Madam Speaker, I intend to push these proposals, proposals for an 
export policy that focuses more on the small exporter, for new policies 
that reward partnership pay so that all workers and not just those at 
the top of upper management have incentives to be productive, and, 
finally, the idea of the small business rollover to make it easier for 
small businesses to have the capital they need to grow. These proposals 
I will introduce in the fall, and I am introducing them because I think 
they give us an opportunity to build on the progress that the President 
and the Congress have made together. The very time to push for new 
policies to encourage the growth of small- and medium-sized businesses 
is a time like now when inflation is down and interest rates are down.
  So, I would ask, as I wrap up this special order on where our country 
is headed economically and particularly what all this means to the 
person on the street, an American on Main Street America who is 
thinking about making investment decisions, looking at growing a small 
business, that those who are listening in have the opportunity to look 
at the final chart that I bring before the body. This final chart shows 
that between 1988 and 1992, economic growth averaged about 1.5 percent. 
During the last 18 months, economic growth has averaged 3.2 percent, 
more than twice as high. So what we ought to do is build on the 
progress that has been made in the last 18 months. What we ought to do 
is take the progress that we have seen over this last 18 months, 
progress achieved by the President and the Congress working together, 
and look to build on it through approaches that will take new steps to 
make it possible for small business to export, new steps that will 
reward workers for productivity, new steps that can pump more capital 
into the small business sector.
  I hope the House on both sides of the aisle will support this effort 
and allow us to build on the very substantial economic progress that 
our country has made in the last 18 months.

                          ____________________