[Congressional Record Volume 141, Number 34 (Thursday, February 23, 1995)]
[House]
[Page H2155]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                         NEUTRAL COST RECOVERY

  The SPEAKER pro tempore (Mr. Largent). Under a previous order of the 
House, the gentleman from Michigan [Mr. Smith] is recognized for 5 
minutes.
  Mr. SMITH of Michigan. Mr. Speaker, I entered earlier today into the 
extension of remarks a tribute to one of Michigan's heroes in Iwo Jima.
  I rise on this 5-minute special order to remind my colleagues of the 
economic danger that faces our country if we do not take some action to 
encourage capital investment in America.
  Expensing and neutral cost recovery is the only proposal in the 
Contract With America that specifically encourages businesses to 
purchase machinery and equipment and facilities. The problem that was 
brought to my attention today is an article in the National Review 
dated February 20. I hope my colleagues will take time to read the 
article entitled: Missing the Point. In summation, I read from the 
article. It says: ``Living standards of American workers rise or fall 
with the amount of capital their employers are able to invest in 
them.'' In 1990, the average American manufacturing worker was 
supported by $98,598 worth of machinery, structures and other capital, 
according to the Department of Commerce.
  Service industries invested just $21,495 per worker. Recent research 
traces the stagnation in real wages to slower growth in capital 
investment per worker, and the danger of what is happening in this 
country is that the rest of the world is acting very aggressively to do 
everything they can to attract our capital investment. They are 
changing their tax laws, they are taxing their businesses less.
  Over the long haul, worker productivity, GDP per worker, is vital 
because it determines growth in the wages and living standards. Let me 
give a little historical outlook on this. From 1950 to the early 1970's 
average annual productivity growth of 2.3 percent per year helped 
America advance and raised our standard of living above everybody else 
in the world, but since 1975 we have slowed to a crawl, 0.8 percent per 
annum, while worker productivity in Europe and Japan has expanded more 
than twice the rate of what we have expanded in the United States. If 
we compare the United States with the rest of the world, we save less 
of our take-home dollar, we invest less per worker in machinery and 
equipment and, not surprisingly, our increase in productivity is also 
at the bottom of the list of the industrialized world.
  Neutral cost recovery, indexes depreciation schedules for inflation. 
Under our tax code businesses have to wait 5, 10, 15, 20 years before 
they are allowed to deduct from their income those investments in 
machinery and equipment. We make them
 depreciate it over that period of time while inflation eats up the 
value of that depreciation.

  I sponsored the neutral cost recovery bill last year with 90 
bipartisan cosponsors. This year I reintroduced the bill, H.R. 199, and 
this proposal has been endorsed by leading business organizations, the 
U.S. Chamber of Commerce, the National Federation of Independent 
Businesses, National Business Owners Association, and others because 
they appreciate the fact that capital formation is the key to economic 
success and maintaining and improving our standard of living in this 
country.
  Under this neutral cost recovery bill, businesses would be allowed to 
expense or deduct in the first year of purchase, $25,000. Neutral cost 
recovery or indexing the outyear depreciation for inflation in the time 
value of money would be applied to those outyears in the depreciation 
schedule.
  I conclude, Mr. Speaker, by suggesting that we need not put our 
businesses at an economic disadvantage with the rest of the world. We 
need to change our tax laws, we need to encourage capital formation and 
the investment in machinery and equipment that increase the efficiency, 
and ultimately the productivity, and finally the competitive position 
of this country.

                          ____________________