[Congressional Record Volume 142, Number 25 (Wednesday, February 28, 1996)]
[House]
[Page H1491]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              WE NEED TO INCREASE PRODUCTIVITY AND SAVINGS

  The SPEAKER pro tempore (Mr. Kim). Under a previous order of the 
House, the gentleman from Michigan [Mr. Smith] is recognized for 5 
minutes.
  Mr. SMITH of Michigan. Mr. Speaker, a challenge is facing this 
country, and I think there is excellent news for our future, for 
families, for wages that give families a decent living, if we make some 
simple changes down here in Washington.
  Washington cannot do everything, and eventually, you know, in this 
country we are going to have to produce a good product that people 
around the world in this country want to buy, and we can sell it at a 
reasonable price.
  Government can do some things to make sure that happens.
  Think for a moment as you look at tax policies around the world and 
in the industrialized nations, and I see our chairman of the Committee 
on Ways and Means here. We in the United States penalize savings and 
investment more than any of those countries. If you look at what has 
happened the last decade, we see the United States trailing in savings. 
Out of every take-home dollar in the United States, we are saving about 
4 cents. That compares with about 18 cents in Japan, up to 34 cents out 
of every take-home dollar saved in South Korea. So we are shy on 
savings.

  Part of it is because we have tax policies that discourage savings, 
almost penalize savings.
  If you look at the investment, the new investment in machinery and 
equipment over the last 10 years, again we see the United States 
investing less per worker than those other industrialized countries. So 
it is not surprising that the result is a lower, slower rate of 
increase in productivity.
  Make no mistake, the United States is the most productive nation in 
the world, but our rate of increase in productivity is slipping over 
the last decade. We cannot afford that.
  What is happening in this post-cold-war economy is that Eastern 
Europe, the Asian tigers, are doing everything they can to attract 
capital.
  I was talking to some of the Wall Street financiers 3 weeks ago. They 
are saying with some of their portfolio funds they are now investing in 
other countries because they think they might be able to get a higher 
rate of return.
  Look, in this next campaign we are going to be talking about new 
taxes, we are going to be talking should it be a flat tax, should it be 
some kind of a national income tax, should it be some kind of a value-
added tax? All of those taxes are essentially the same in achieving the 
goals of encouraging savings and encouraging investment.
  The country that attracts that investment and expands the capital in 
their country is going to be the country that ends up with a higher 
standard of living. We have got to do that.
  Here are some of the things that we can do to increase the savings 
rate in this country:
  We have got to reduce the negative savings that is caused by 
Government overspending. Government now borrows about 18 cents out of 
every dollar we spend. That means that if you look at all of the money 
that was lent out in the United States last year, the Federal 
Government borrowed almost 42 percent of all of the money lent out in 
the United States last year.
  We remember our lessons in economics. The greater the demand, the 
higher the price. That is why Alan Greenspan came to our Committee on 
the Budget and said, ``If you guys can balance this budget, you are 
going to see interest rates drop between 1.5 and 2 percent.'' That 
means a tremendous difference in what happens to the economy, it makes 
a tremendous difference in reducing the price of everything we borrow 
money for, from cars to homes to college educations.
  I would yield to the gentleman from Georgia [Mr. Kingston].
  Mr. KINGSTON. If the gentleman will yield, is it not true that on a 
2\1/2\ interest rate reduction for a $75,000 home over a 30-year period 
of time, the American consumers, the American homeowners, would save 
$37,000?
  Mr. SMITH of Michigan. Is that not amazing? And I am going to give an 
example for some folks down in Hillsdale County, where the homes are a 
little less. If you had a $50,000 home and you ended up having--you had 
a mortgage that lasted over 30 years, it would reduce the amount of 
money that those homeowners paid by $30,000.
  Think of what would happen if it was a business deciding to invest a 
half a million dollars in some new equipment or build new machinery. It 
would reduce the cost of that equipment and machinery, we would end up 
putting better tools in the hands of the greatest work force in the 
world; that is, the American work force; and we would see our 
productivity take off.
  I mean, that is why Alan Greenspan followed it up saying, look, if 
you can do this and interest rates drop, you will see this economy 
growing like it has never grown before.

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