[Congressional Record Volume 140, Number 131 (Monday, September 19, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: September 19, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
             ``WE'VE MET THE ECONOMIC ENEMY, AND HE IS US''

 Mr. SIMON. Mr. President, one of the more thoughtful writers 
on the American economic scene in the Nation today is Hobart Rowen of 
the Washington Post.
  Recently, he had an article entitled, ``We've Met the Economic Enemy, 
and He Is Us'' with a subtitle ``30 Years of Mismanagement and Betrayal 
in Washington Have Eroded America's Global Edge.''
  Unfortunately, the headings convey the truth. We have been unwilling 
to face up to our fiscal realities, and we are headed in the direction, 
eventually, of monetizing our debt, unless something dramatic forces us 
to change our path.
  And there I differ with Hobart Rowen in believing that the only thing 
that is going to change us from the present path is a constitutional 
amendment. It is simply too easy, politically, to continue to be 
irresponsible.
  He makes another point that we need to look at, and that is the need 
for investment through the public sector.
  We are talking a great deal these days about welfare reform and 
crime. If we were to have a WPA-type of jobs program that guaranteed 
every American the opportunity for a job, it would cost some money, but 
it would do much more to reduce crime than anything we had in the crime 
bill; and it would gradually move us away from our present welfare 
dependency, particularly, if we required those who get the public 
sector jobs to be screened for literacy and job skills and provide 
them, if they do not have those qualifications.
  In any event, the Hobart Rowen comments are worth reflecting upon by 
those of us who hold public office, and I ask that it be entered into 
the Record at this point.
  The article follows:

              [From the Washington Post, Sept. 11, 1994.]

               We've Met the Economic Enemy, and He Is Us


   30 years of Mismanagement and Betrayal in Washington Have Eroded 
                         America's Global Edge

                           (By Hobart Rowen)

       When I began in journalism more than 50 years ago, the 
     United States was struggling to survive the hardships of the 
     Great Depression and soon would face the privations of World 
     War II. Ironically, both experiences would leave the nation 
     more prosperous than ever before. The United States emerged 
     in the late 1940s with the most powerful economy in the 
     world, and for several decades it was able to maintain its 
     unrivaled position.
       Today, the United States is the world's largest debtor 
     nation, and many critics insist that we have become a second-
     class power. Our decline in self-esteem puzzles both our 
     allies and rivals. Many of us search for a scapegoat to blame 
     for our manifold ills. But the bitter truth is that we have 
     no one to blame for our condition but ourselves.
       For the wounds to our economic health and to our national 
     pride have been largely self-inflicted. Our recent economic 
     history is a story of blunder, mismanagement, stupidity, and 
     irresponsibility by officials whose obligation to govern the 
     nation was betrayed by their embrace of policies misconceived 
     and ineptly applied.
       It is a story that begins during the mid-1960s, with 
     President Lyndon B. Johnson's inheritance of a level of 
     prosperity--with good jobs and without significant 
     inflation--that had never been achieved in the nation's 
     history.
       But Johnson's embrace of a forlorn and unwinnable war in 
     Vietnam--and his insistence that the country could have, in 
     the phrase of the time, both ``guns and butter''--put this 
     country on a course from which it has yet to recover. The 
     buildup in Vietnam, which occurred without regard to its 
     cost, destroyed the delicate social fabric that had been 
     woven during the Eisenhower and Kennedy years and by 
     Johnson's own Great Society. Johnson faced two unpalatable 
     choices: Either to cut other government spending to match 
     the new costs of his escalating war, or to raise 
     additional taxes to pay for it.
       Unhappily, Johnson did neither. In his hubris, he thought 
     he could have it all, and so let the inflation genie out of 
     the bottle, touching off a devastating spiral that, 
     ultimately, the Federal Reserve Board was forced to battle by 
     imposing higher interest rates. Johnson's decision, indulged 
     by a spineless Congress, helped to generate a flight from the 
     dollar. His gamble was that an economy already overheated by 
     a business boom could somehow absorb the costs of an 
     increasingly bloody war--and still escape inflationary price 
     increases.
       The United States was thereby set on a course that slowly 
     debiltated its fundamental economic health. Six presidents--
     two Democrats and four Republicans--would fail, at critical 
     times, to make the right decisions that would have ensured 
     the nation's prosperity as it struggled to survive a period 
     of extraordinary technological change and fierce competition 
     from allies formerly prostrate but now straining and eager, 
     quite literally, to give us a run for our money.
       We have been the victims over the past 30 years of an 
     almost sublime mismanagement in Washington. We have stumbled 
     through an era of greed and malfeasance, from LBJ's failure 
     to finance the Vietnam War through the multiple failures of 
     Reaganomics. In between, we have suffered the duplicity of 
     Richard Nixon, the ineptitude of the well-meaning but 
     bumbling Gerald Ford, the notorious malaise of Jimmy Carter. 
     And throughout, we have seen a futile chase for dollar 
     stability after the Bretton Woods system collapsed in the 
     1970s and trade imbalances mounted. And at no time was any 
     American president willing or able to combat the menace of 
     the oil cartel, the swindlers on Wall Street or the 
     industrial assault on the environment.
       The self-inflicted wounds that are the most recent--and 
     therefore perhaps the most vivid--are those that resulted 
     from Ronald Reagan's counterrevolution.
       The sad legacy of the Reagan years was that they widened 
     the gap between the nation's rich and poor. Henry Reuss, a 
     liberal congressman from Wisconsin and one of the few to see 
     Reaganism for what it was, pointed out that the 
     combination of huge tax cuts at the top of the income 
     scale, coupled with higher Social Security taxes and 
     reductions in social programs, would further skew income 
     distribution from the bottom 60 percent of taxpayers to 
     the top 10 percent. In addition, the major increase in 
     military budgets would attract investment in the booming, 
     capital-intensive arms industries in the Sun Belt, while 
     hard-hit blue-collar areas in the Midwest likely would 
     suffer further.
       Reaganomics put the New Deal and the Great Society in 
     reverse gear. With George Bush's help, it stayed that way for 
     12 years, until Bill Clinton's budget and tax package forced 
     a mild redistribution, with higher taxes on upper-income 
     families and a larger ``earned income credit'' for wage 
     earners under $27,000 a year.
       Yet, on balance, the Clinton package was not, as Time 
     magazine argued, a total reversal of Reaganomics: Upper-
     bracket earners had enjoyed huge accumulations of wealth over 
     the 12-year reigns of Reagan and Bush. The Clinton budget of 
     1993, with a modestly more progressive tax system, was only a 
     small step in redressing the balance.
       At the end of his two terms. Reagan left a weakened United 
     States to George Bush, who, choosing to ignore a 
     deteriorating economy at home, had to pass the tin cup to the 
     nation's allies to support the war in the Persian Gulf in 
     1991 against Saddam Hussein.
       His own presidency having done little to resolve the 
     nation's multiple economic problems, Bush bequeathed to 
     Clinton the complex assignment of restoring some sense of 
     fiscal balance by reducing the federal budget deficit. This 
     required Clinton to opt for substantial increases in taxes 
     across the board while attempting to reform the health 
     insurance system.
       Our international economic policy has been wounded, too. 
     During the late 1980s, Bush administration officials James 
     Baker and Richard Darman had carefully crafted a system of 
     international cooperation,but it fell on hard times. Europe 
     and the United States indulged their special interests by 
     allowing a trade war over agricultural products to delay 
     creation of broader new rules and coverage under the General 
     Agreement on Tariffs and Trade. The United States and Japan 
     continued to scrap over trade imbalances that persisted 
     despite a series of agreement aimed at managing currency 
     fluctuations; and Third World nations continued to stagger 
     under the burden of their international debt until the 
     deflation during the Bush regime forced interest rates 
     sharply lower.
       In ``the good old days,'' the Federal Reserve Board could 
     turn on the low-interest-rate switch and jump-start the 
     economy again. Now, it's not so simple: Not only are 
     consumers and businesspeople not anxious to take on new debt, 
     they are worried by the country's and their own long-term 
     future. Thus, from June 1989 through October 1993, the 
     Federal Reserve Board took 24 easing steps that helped 
     corporations and individuals reduce the interest rate burden. 
     But in terms of stimulating the economy, the old magic seemed 
     to have lost some of its potency.
       As 1994 got underway, a modest business recovery was taking 
     place, sufficient to trigger a reversal of the Fed's easy-
     money policy. Clearly, the economy was creating more jobs--
     notably in the services sector--more quickly than the most 
     optimistic Clinton aides had hoped, with a minimum impact on 
     consumer price inflation. Responding to a higher yen that 
     raised Japanese car prices--and to the improved quality of 
     American cars--American buyers turned increasingly to 
     Detroit's offerings. Thus, for at least a short horizon, the 
     American economy under Bill Clinton was enjoying a comfort 
     level that politicians in Europe and Japan could only envy.
       Yet, the harsh reality--and no one knows it better than 
     Clinton--is that the United States faces severe, longer-term 
     problems. The president and Congress, even through committed 
     to a steady reduction of the fiscal deficit, must improve the 
     skills of the labor force. That will require greater 
     expenditures by business as well as government.
       Will the economy, despite improvement in 1994, be able to 
     generate the kind of high-quality jobs needed in the new 
     technological age? That remains an unanswered question.
       A notable phenomenon of the late 1980s and early 1990s was 
     the ``down-sizing'' of the large corporation. Day by day, in 
     monotonous and ominous echoes, companies such as 
     International Business Machines Corp., General Motors Corp., 
     Sears, Roebuck and Co. and others announced they would close 
     plants, eliminate thousands of jobs--and more or less carry 
     on production at the same pace.
       From the business standpoint, it made sense; from the 
     worker standpoint, it represented a sea change from the good 
     old days, when even a high school graduate could expect 
     employment of sufficient duration to help him or her fulfill 
     the American dream of raising a family, owning a car, and, 
     over the years of a long-term mortgage, owning a home.
       Restoration of such an American dream is extremely unlikely 
     in the short run, and perhaps impossible for many years to 
     come. The deficit remains a constant. Of all the self-
     inflicted wounds of the past three decades, none has been 
     more harmful than the public debt saddled on the American 
     people by the eight years of Reaganomics, accompanied by an 
     actual decline in real wages.
       There had been an actual decline in real weekly U.S. 
     earnings from $315 in 1972 (in 1992 dollars) to a mere $255 
     in October 1992--a drop of almost 20 percent. As a result, 
     many American families had to turn to more than one 
     breadwinner. Yet, as Clinton's Council of Economic Advisers 
     Chairman Laura D'Andrea Tyson pointed out, from 1978 through 
     1991 real median family income showed no change, despite the 
     increase in hours worked.
       The right policy prescription is to focus on investment--
     not just on controlling the federal budget deficit, as 
     important as that may be. We need a fiscal thrust--the 
     expenditure of more money in the public sector. That would 
     include rehabilitation of the urban educational system, and a 
     revision of teachers' pay commensurate with the 
     responsibilities they have; revival of revenue sharing to 
     take some of the burdens off state and local governments; and 
     the transfer of large amounts of budget money now committed 
     to defense programs to civilian programs, notably for 
     ``infrastructure''--roads, bridges, highways and the like.
       For the next decade or two, the American people will be 
     forced to live through a regimen of constrained national 
     budgets. But the next decade or two is not forever. The 
     United States remains the strongest economic power, but is 
     more dependent on global well-being than it ever was before. 
     This country cannot operate, as Reagan in his first term 
     supposed it could, with ``benign neglect'' of the impact of 
     U.S. policies on the prosperity of other nations. Our goal 
     should be to share global power with a stronger Japan and 
     Germany, instead of concluding that we must collide.

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