[Congressional Record Volume 142, Number 18 (Friday, February 9, 1996)]
[Senate]
[Pages S1187-S1190]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                  THE RISING TIDE MUST LIFT MORE BOATS

 Mr. DASCHLE. Mr. President, yesterday our distinguished 
colleague Senator Kennedy delivered to the Center for National Policy 
an important address challenging us to confront a number of issues 
critical to our economy and our society. I commend the address, ``The 
Rising Tide Must Lift More Boats,'' to the attention of Senators and 
the public, and ask that it be printed in the Record.

         Address of Senator Edward M. Kennedy, February 8, 1996

       I'm grateful to your president, Mo Steinbruner, for that 
     generous introduction, and I also want to acknowledge your 
     Chairman, my former outstanding colleague in Congress, Mike 
     Barnes. I'm honored to address the Center for National 
     Policy. The Center has made impressive and innovative 
     contributions to the national debate. It truly is a national 
     policy center. I hope to speak with you today in that 
     spirit--about the future of the American economy, the clear 
     and present threat to the American standard of life, and a 
     strategy for a prosperity that lifts not only the numbers and 
     statistics, but the wages and hopes of hardworking people.
       By most indicators, the economy is doing very well. The 
     stock market is hitting record highs. Inflation has been low 
     and consistently so. Unemployment is down. And after years of 
     slow growth, productivity is finally on the rise.
       But those appearances are deceiving. The prosperity is less 
     than it seems--because it is uneven, uncertain, and 
     inequitable. All is not well in the American economic house, 
     because all is not well in the homes of too many American 
     workers and their families.
       Americans are working more and earning less. Their standard 
     of living is stagnant or sinking. They have been forced 
     deeper into debt and they have less to spend. They worry--
     about losing their jobs, losing their health insurance, 
     affording their children's education, caring for their 
     parents in old age, and somehow still saving for some 
     semblance of security in their own retirement.
       President Kennedy said that a rising tide lifts all boats. 
     And for the golden decades after World War II, that was true. 
     But today's rising tide is lifting only some of the boats--
     primarily the yachts.
       The vast majority of economic gains are being channeled to 
     the wealthy few, while the working men and women who are the 
     strength and soul of this country and its economy are being 
     shortchanged.
       From World War II until 1973, national economic growth 
     benefited the vast majority of Americans. We were all growing 
     together; but now we are growing apart--and the result is a 
     tip-of-the-iceberg economy. Since 1973, the lower 60 percent 
     of American wage earners--three fifths of our entire 
     workforce--have actually lost ground. Real family income has 
     fallen for 60 percent of all Americans, even as the income of 
     the wealthiest 5 percent increased by nearly a third, and 
     income for the top 1 percent almost doubled. As we approach 
     the 21st century, we confront an economically unjustified, 
     socially dangerous, historically unprecedented, and morally 
     unacceptable income gap between the wealthy and the rest of 
     our people.
       Twenty years ago, the typical CEO of a large corporation 
     earned 40 times the salary of the average worker. Today that 
     CEO earns 190 times more. Can this be called fair? Can this 
     be the basis of a good or even a stable society?
       Productivity gains used to guarantee wage gains. But not 
     anymore. In 1994 and 1995, productivity rose by 3 percent. 
     Yet wages fell by more than 2 percent--the biggest drop in 
     eight years. So the average worker did more, and yet the 
     income gap grew worse.
       Flat or falling wages are compounded by the ever present 
     specter of layoffs. Once, corporations reduced their 
     workforces only when they were in trouble. But now profitable 
     companies are laying off good workers, at a time of 
     increasing sales, in an endless quest for ever fatter profits 
     and ever higher stock prices.
       The recent merger between Chase Manhattan Bank and Chemical 
     Bank earned rave reviews on Wall Street--but brought anguish 
     and loss to so many homes. Stock prices soared, but 12,000 
     jobs will be lost. Can this be called fair? Can this be the 
     basis of a good or even a stable society?
       And as economic insecurity multiplies, other values suffer. 
     Community and family feel the pressure. Parents work longer 
     hours or take second jobs, and every extra hour on the job is 
     taking from their children--time not spent at Little League, 
     or PTA, or simply reading a bedtime story.
       Every loss of health insurance; every cut in support for 
     child care, schools, colleges, and job training makes it 
     harder for families to earn a better future. There are those, 
     even in my own party, who see a separation between economics 
     and values--a theoretical 

[[Page S1188]]
     opposition which they use and misuse as an excuse for evading 
     fundamental economic questions. But we cannot solve great 
     social problems by instructing people to be good while their 
     financial situation is going from bad to worse. The V Chip 
     makes sense, but it is no substitute for college loans. It 
     will not buy clothing or food. It will not give working 
     families a sense of hope. We have no chance of restoring 
     values if we don't improve the lives of working Americans. 
     When the economy is wrong, nothing else is right.
       A storm is coming, and the effects are already being felt 
     by most families. Only the short-sighted, who look only to 
     the next quarterly report, can be content to live with the 
     clouds that now also shadow corporate horizons. Soon the 
     winds will be blowing through the boardrooms too. America's 
     workers are also America's consumers. We can only lay off so 
     many workers, cut wages and benefits by so much, and tear 
     down government support programs for so long, before we 
     downsize the consumer sector as well. In a winner-take-all 
     economy, eventually there will be fewer buyers, and fewer 
     winners, and ultimately even many corporate losers.
       The Republican program, from the Contract with America, to 
     the flat tax, exploits the income gap--but does nothing real 
     to solve it. The silence on this fundamental issue from the 
     Republican Presidential candidates on the campaign trail is 
     deafening.
       By bashing Medicare, slashing education, and trashing the 
     environment, Republican budget plans only widen the 
     disparity. In fact, half of all spending cuts in the 
     Republican budget that President Clinton vetoed came from 
     programs benefiting the bottom 20 percent of families; less 
     than a tenth of the cuts come from the top 20 percent.
       Two-thirds of the tax breaks in the Republican plan would 
     flow to the top 20 percent--and the bottom 20 percent would 
     actually face a tax increase. The middle 60 percent would 
     suffer a net loss too, once the spending cuts are factored 
     in.
       It makes no sense for Republicans to preach hope, growth, 
     and opportunity--while touting policies that bring growth 
     only to the richest, deny hope to the poorest, and restrict 
     opportunity for the vast majority.
       We need to set a different course. Early in this century, 
     as Henry Ford pioneered one of America's great new companies, 
     he raised the wages of his workers to twice the average in 
     other industries. It made little apparent sense in terms of 
     short-term profits. But he knew that in the long run, he 
     would sell more Model T's if his own workers could afford to 
     buy them. In the truest sense, he created his own consumers.
       There are still some Henry Fords left, like Aaron 
     Feuerstein, the Massachusetts mill owner, who decided to keep 
     paying his employees instead of laying them off while he was 
     rebuilding a factory that burned down last December.
       The issue is not rich against poor, management against 
     labor, or individuals against government. Sadly, the Party of 
     Lincoln is now dividing America against itself. We cannot 
     permanently sustain a prosperity that permits us to be 
     divided between the wealthy few and the worried many.
       We are committed to a free economy. But in times of testing 
     in the past, we have had to act together as a nation to 
     maintain the economy's freedom. A century ago, when economic 
     power was concentrating in monopolies, we enacted the 
     antitrust laws. In the midst of the Great Depression, we 
     created a New Deal of employment programs and a social safety 
     net.
       Our day is different and our answers must be matched to it. 
     But one basic principle remains the same: Government does 
     have a role to play as the agent of our common concerns, and 
     the expression of our shared values. The era of big 
     government may be over, but a return to the era of no 
     government is no answer.
       President Clinton has spoken eloquently about this issue. 
     So has Secretary of Labor Robert Reich, and so has the Center 
     for National Policy. This is a defining moment for our 
     nation--and a defining test for our party. We say we are the 
     party of the people. Then how can we say little, and offer 
     even less, while the very people who are the very reason for 
     our being watch their livelihoods and lives become 
     diminished?
       Other great tests of conscience and purpose, like civil 
     rights and the Vietnam War, may have been more visible and 
     more immediate. The income gap has been opening slowly, over 
     a period of years. Perhaps it could have been diagnosed 
     earlier and treated sooner. Instead, it has festered quietly, 
     and caused a long, slow-motion depression of wages and job 
     security.
       If we do not respond to this Quiet Depression, if we do not 
     stand up now for the people we are supposed to represent, 
     then as Democrats we will not deserve our name, our history, 
     or their continuing confidence. It is our urgent task to 
     fight for an economy where working families and the middle 
     class can begin anew to make gains.
       So today, I am proposing a strategy to end the income gap--
     to put the American dream back in the dreams of all 
     Americans. Each part of society has its role to play--the 
     business sector, the individual, and government. The 
     strategy I advocate combines incentives for good corporate 
     citizenship--improved protections for workers' rights--
     increased investment in education, training, technology 
     and research--and greater wage and benefit security for 
     all workers.
       I realize that any strategy that requires legislative 
     action has little chance in the present Congress. But the 
     temporary ascendancy of reaction is no reason to be silent 
     about what's right for America. Let us fight out the 1996 
     election on the fundamental issue of the income gap. And when 
     President Clinton is re-elected, and Democrats retake 
     Congress, let it be our pledge and our priority to right this 
     lopsided economy.
       Nothing less will do. The economic insecurity of millions 
     of American families breeds distrust among our citizens and 
     disrespect for our government. It tears us apart as a nation, 
     and erodes law and order. It undermines family and community 
     life--and threatens the character of America as a society of 
     opportunity and justice for all.
       First, as a basic precondition of all else, we must assure 
     reliable, substantial and sustainable economic growth. Growth 
     alone does not guarantee better incomes; but without it, we 
     have no chance of closing the income gap. We cannot solve the 
     problem of stagnant wages by redistributing rewards within a 
     stagnant economy. Inflation has been lower for longer than at 
     any time in decades; the Federal Reserve Board must become 
     more aggressive in permitting and encouraging economic 
     growth.
       The Federal Reserve's charter requires it to pay attention 
     to two goals--reducing unemployment and fighting inflation. 
     Both goals are critical, but the Board too often seems to 
     attend to only one of them. We need greater growth. We cannot 
     right the nation's economic imbalance, or reverse the income 
     gap facing working families, if 2.5% is the fastest which the 
     Federal Reserve will let the economy grow.
       America is historically a growth nation--and any policy 
     that long defies that history will put this society at risk. 
     We are stable, free people in part because we are also a 
     people of plenty.
       Second, we should create a two tier corporate tax rate that 
     rewards those corporations which create higher quality and 
     better paying jobs here at home. Let's accept the profit 
     motive, and make it work for our workers as well as our 
     corporations. I am not proposing tax penalties for bad 
     corporate conduct, but tax incentives for good corporate 
     citizenship.
       We reward other countries with tariff benefits if they 
     qualify as ``Most Favored Nations.'' Now we should establish 
     a category of ``Most Favored Companies'' and reward them if 
     they share profits with workers, maintain or add good jobs, 
     and treat their employees well.
       Businesses will qualify for Most Favored Company status on 
     the basis of their quantifiable track record over a rolling 
     four-year period in creating jobs--avoiding layoffs designed 
     simply to maximize profits--paying adequate wages--sharing 
     gains--training and upgrading skills--and providing decent 
     health care and retirements benefits.
       Most Favored Companies will be taxed at a reduced rate--for 
     example, 30% rather than 34%--or a 10% reduction for 
     companies taxed at lower rates. To take advantage of the 
     reduced rate, the company would agree to allocate half of the 
     tax benefit to its workers.
       Third, we should supplement the two tier corporate tax with 
     other incentives to close the income gap.
       We should provide comparable incentives to encourage fair 
     treatment of employees in the non-profit sector, and in 
     start-up firms and other enterprises that pay no tax or 
     little tax.
       We should adopt a tax incentive to encourage employers and 
     workers to place retirement savings in pension funds, IRAs, 
     and 401(k) plans that invest in Most Favored Companies.
       We should reduce the capital gains tax on new equity 
     investments in Most Favored Companies.
       We should give preference to Most Favored Companies in 
     awarding government contracts and grants.
       We should provide tax credits to businesses that convert 
     full or part-time workers without benefits to employees with 
     adequate benefits. We should encourage companies that award 
     dividends to their stockholders to contribute a similar 
     benefit to their employees. Shareholders in companies that do 
     so should have their dividends taxed at a reduced rate.
       We can pay for all these changes by eliminating costly tax 
     loopholes that encourage layoffs, discourage job creation, 
     and reward companies for moving American jobs overseas. Over 
     the next seven years, corporate welfare, tax loopholes and 
     tax preferences will cost the federal government over four 
     trillion dollars. In 2002, these tax entitlements will 
     represent a larger share of the federal budget than Social 
     Security, Medicare, or Medicaid.
       The loopholes are gaping. In 1991, 73% of foreign-based 
     corporations doing business in the United States paid no 
     federal income taxes--I repeat, not a single dollar. And more 
     than 60% of U.S.-based companies paid no U.S. income taxes.
       We should eliminate the transfer-pricing loophole, under 
     which multinational companies avoid U.S. taxes by shifting 
     income through rigged transactions to overseas subsidiaries.
       We should eliminate the runaway plant loophole, which lets 
     foreign subsidiaries of American companies defer taxes on 
     income earned abroad. These companies never pay taxes on 
     their profits if they reinvest them overseas. The painful, 
     preposterous result is that our tax laws generate new jobs 
     and investments in foreign countries rather than here at home 
     in America.
       We should close down the foreign sales corporation 
     loophole, a paper shell that lets 

[[Page S1189]]
     companies shield thirty percent of their income from U.S. taxes.
       We should eliminate the title passage loophole, which 
     encourages U.S. companies to move profitable transactions 
     onto the high seas to avoid U.S. taxes. In fact, this 
     loophole was closed in both the House and the Senate versions 
     of the Tax Reform Act of 1986, only to have it reappear 
     behind closed doors in the final bill.
       We can and must close the Benedict Arnold loophole, which 
     allows billionaires to renounce their citizenship and move to 
     a foreign tax haven in order to avoid taxes on the wealth 
     they have accumulated in America. In 1995, the Senate voted 
     overwhelmingly to end this disgrace. Yet the Republican 
     budget quietly restores it.
       Fourth, we should act to put new trust in antitrust, by 
     amending the laws to restrain mergers and acquisitions in 
     cases where combinations and spinoffs will cause layoffs so 
     large that they are contrary to the public interest. Our goal 
     is not to penalize the efficiency and productivity needed to 
     compete in the new international economy. But the antitrust 
     laws now bar monopolies harmful to communities, to 
     geographical regions and markets, and to consumers. The same 
     prohibition should apply to mergers that can affect 
     communities, regions, and workers even more adversely than 
     any monopoly ever would.
       We should eliminate tax deductions for expenses for mergers 
     and acquisitions that result in substantial layoffs, and 
     strengthen existing provisions in current law that limit the 
     deductibility of interest on massive debt utilized in these 
     acquisitions. We should re-examine accounting rules that 
     invite the corporate restructurings that encourage massive 
     layoffs, downsizing, and reduced wages.
       The fifth step in this new economy strategy is to expand 
     opportunities for workers who want union representation. 
     Today, employers who interfere with free choice and 
     intimidate union advocates get away with only a slap on the 
     wrist for their lawless conduct. Penalties for such 
     violations should be strengthened. And the federal government 
     should deny contracts and business to companies that 
     repeatedly, flagrantly, or willfully violate their employees' 
     rights and dignity.
       We should also re-tool labor law itself to fit the growing 
     number of temporary workers who move from one employer to 
     another on short-term assignment, as we did in the 
     construction industry. It is almost impossible under current 
     rules for them to be represented by unions in negotiating for 
     better wages, benefits, and working conditions. Federal law 
     here has to be changed. A flexible workforce must not mean an 
     exploited workforce.
       Sixth, government at every level--federal, state, and 
     local--must invest in education and training. In an 
     increasingly global economy, uneducated workers in America 
     will find their wages increasingly pressured downward by 
     unskilled and underpaid workers overseas.
       We need to work with states and local school districts to 
     demand and to help all schools meet high standards of 
     achievement and to expand early childhood education. We need 
     to change the way we train teachers and offer them the 
     recognition and support they deserve on the basis of their 
     performance. As President Clinton has pledged, we should 
     install computer technology in every school by the year 2000, 
     in cooperation with businesses across the nation. We cannot 
     prepare children for the 21st century in 1950's classrooms.
       The doors to college must be re-opened to more Americans. 
     Tuition costs should be deductible, and every qualified high 
     school graduate should be guaranteed economic access to 
     higher education.
       We must provide training for real jobs to high school 
     students not going on to college. We must provide retraining 
     for workers who lose or change their jobs. We must reward 
     companies that invest in upgrading the skills of their 
     workforce.
       Seventh, since small business is the real job creator in 
     the new economy, it must be encouraged to do what it does 
     best--create new products, enter new markets, increase 
     productivity, and thereby put more people to work.
       We must reduce the red tap associated with government 
     assistance and regulation. Small businesses employ 50% of our 
     workers, yet bear more than 60% of the regulatory burden. The 
     average annual cost of regulation, paperwork, and tax 
     compliance for small business far surpasses what large 
     companies have to spend as a percentage of revenues. A recent 
     Small Business Administration study found that 19 cents of 
     every revenue dollar in small companies of less than 50 
     employees was spent on regulation. Genuine regulatory 
     reform can ease these burdens. It could have been enacted 
     by Congress long ago, if so many on the other side were 
     not so intent on misusing regulatory reform as an excuse 
     and a cover to protect polluters, undermine the 
     environment, and jeopardize health and safety in the 
     workplace.
       Eighth, we should make research a priority--in terms of 
     both direct federal funds and new incentives for business. 
     Despite its far smaller economy, Japan will spend more 
     dollars on non-defense R&D than we do next year. Yet, the 
     Republican budget plan would cut R&D spending by 30% by the 
     year 2002. Nothing could be more short-sighted than this 
     policy of financing an unneeded tax cut by retreating from 
     the scientific frontiers of future prosperity. Both the laser 
     and the transistor resulted from government financed R&D. 
     Computers, integrated circuits, medical breakthroughs like 
     MRIs, and even the revolution of the Internet were federal 
     R&D initiatives.
       Ninth, we should do more to defend American workers against 
     low-wage labor and sweatshop practices from overseas. It is 
     not protectionist to refuse to compete on the basis of who 
     can exploit their workers the most. We should declare a pause 
     before entering into new free trade agreements, so our 
     economy and our companies can adjust to NAFTA and GATT. And 
     we should condition any and all new trade benefits on 
     compliance by other countries with international labor 
     standards. We favor free trade. But it must not mean that 
     more and more of our workers have to work more and more of 
     their days for free to match sweatshops overseas.
       We should strengthen our immigration laws to prevent the 
     importation of foreign wages and working conditions. We 
     should make it illegal for employers to lay off Americans and 
     then fill their jobs by bringing in workers from overseas. 
     Any U.S. employer who wishes to hire from abroad--even for 
     temporary jobs--should have to recruit U.S. workers first. 
     And we should end the unskilled immigration that competes 
     with young Americans just entering the job market.
       Tenth, Congress should take long overdue direct action to 
     improve incomes and benefits.
       We can and must raise the minimum wage. The present level 
     of four dollars and twenty-five cents an hour is a national 
     scandal--not even enough to lift a family out of poverty. We 
     should start now by raising the minimum wage to $5.15 an 
     hour, and restore as much as possible of the purchasing power 
     it has disgracefully lost in recent years. No American who 
     works for a living should have to live in poverty.
       We can and must strengthen the Earned Income Tax Credit, 
     not reduce it. President Reagan called it the ``best anti-
     poverty, the best pro-family, the best job creation measure 
     to come out of Congress.'' Ronald Reagan was right, and the 
     Republican Congress should heed his words.
       Health care, too, can and must be a priority again. I for 
     one will not permit health care to become the forgotten 
     issue. It is all too present for Americans who have to pay 
     the bills and face the fears every day. My abiding goal is 
     still health security for every citizen. The reform I have 
     introduced with Senator Kassebaum is a significant step with 
     broad bi-partisan support. It could be enacted quickly--if we 
     can overcome the obstruction of a handful of Republican 
     Senators doing the bidding of insurance industry profiteers. 
     Our reform is simply justice: workers who change their job or 
     lose their job should not lose their health insurance too.
       Finally, we must secure the safety and sanctity of 
     pensions. They must never become a corporate slush fund or a 
     piggy bank for risky investments. Here again, the 
     Republicans, instead of building more protections, seek to 
     undermine those that already exist. The Republican Congress 
     proposes to let unscrupulous corporations raid workers' 
     pension funds, and they even make the preposterous claim that 
     they're closing a tax loophole. This is odd, coming from 
     those who previously never seem to have met a tax loophole 
     they didn't like. In fact, it will cost the government 
     nothing to protect pension funds against corporate raiders 
     and unscrupulous investment managers.
       We should create new incentives to extend pension coverage 
     to all workers, not just the 48% who are currently covered, 
     by establishing a new class of multi-employer, portable 
     pension accounts.
       We can also put workers' pension funds to work to close the 
     income gap. We should maintain and strengthen the incentives 
     which the Republicans seek to eliminate that can direct the 
     $4.5 trillion currently in pension funds to investments that 
     will mean more and better jobs here in America. The AFL-CIO 
     Investment Trust is now committing half a billion dollars a 
     year to housing and economic development projects. Their rate 
     of return is highly competitive, and there are similar 
     examples across the country. The issue here is as plain as 
     the investment opportunity. The pension funds of American 
     workers should be financing economic growth at home, not the 
     export of American jobs overseas.
       Of course, no economic program, no matter how far-reaching, 
     can resolve all the hurts or fulfill all the hopes of a 
     nation. But all to often we forget the link between values 
     and economics. We lament the loss of traditional ``family 
     values,'' yet we forget that the golden age we look back to 
     was also a time when family incomes were steadily rising. We 
     berate Hollywood for glorifying sex and violence, yet we 
     worship the profit motives that generate the very films we 
     condemn. We hear voices calling for the end of affirmative 
     action, or worrying that our society has become too diverse 
     to survive, but we ignore at our peril the fact that those 
     voices are driven by fear of economic loss. We worry about 
     the loss of patriotism, yet our tax policies encourage 
     corporate decisions that are plainly anti-American.
       If we really believe in family values, then let's do a 
     better job of valuing families. Let's change policies that 
     threaten their jobs, their health care, and their pensions. 
     Let's help people educate their children and care for their 
     parents. If we really want to put the 

[[Page S1190]]
     ``United'' back in the United States, then let's do all we can to 
     expand the pie and provide economic opportunity for all, 
     instead of letting the nation fragment into two separate and 
     unequal factions of haves and have-nots.
       We will only make things worse by pursuing nostrums and 
     illusions--whether they take the form of social reaction, or 
     the new deception of the flat tax. The flat tax is a cynical 
     response to the income gap--offering but perhaps not even 
     delivering a small tax cut as the only raise most workers 
     will get--while surely providing a shameful windfall for 
     those who already have the most. The Forbes flat tax gives 
     new meaning to Franklin Roosevelt's indictment of the 
     Republicans as the party of the privileged. The only family 
     value the Forbes flat tax would enhance is the net worth of 
     the Forbes 400.
       We are coming to the close of what has been called the 
     ``American Century.'' It has been an extraordinary era in 
     which we have conquered imperialism, fascism, and communism 
     abroad. We have wrestled with racism, sexism, poverty, 
     depression, crime and other enemies within. We have 
     struggled, often imperfectly, yet with great success, to 
     build a fairer and freer society. And we have wisely used 
     some of our resources to help other nations achieve and 
     protect their own democratic ideals. The danger is that the 
     achievements and the vision that made this possible are 
     fading too quickly into the forgetfulness of history, and 
     that we are becoming a nation fragmented between rich and 
     poor, its values diminishing as its standard of living is 
     devalued.
       We can and must end the income gap in America. It will 
     require a new Progressive Era which will come, just as the 
     first one did, just after the forces of reaction think they 
     have achieved their dominance. We can and must restore true 
     progress in America. That is our duty as progressives. That 
     is the defining mission of the Democratic Party. And in my 
     view, that is the only way we can win--and the only way we 
     will deserve to win--in 1996.

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