[Congressional Record Volume 142, Number 38 (Tuesday, March 19, 1996)]
[Extensions of Remarks]
[Page E377]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        POLITICS VERSUS GROWTH?

                                 ______


                           HON. NEWT GINGRICH

                               of georgia

                    in the house of representatives

                        Tuesday, March 19, 1996

  Mr. GINGRICH. Mr. Speaker, I commend to my colleagues the attached 
article from Investor's Business Daily. With economic growth of only 
1.4 percent last year, the possibility of a recession still casting a 
shadow and the middle-class being squeezed on all sides, the situation 
cries out for serious action. Unfortunately, the President vetoed the 
Balanced Budget Act of 1995 and so far has offered nothing to address 
the issue of economic growth.
  As the Daily points out, there is room for agreement on a capital 
gains tax. The President has long supported a targeted one. According 
to one study, such a cut would have created 1.4 million new jobs 
between 1995 and 1999, added an additional 1 percent a year to the 
stock market and brought in $9-$18 billion in Federal revenue. We must 
be prepared to respond to the under performance of the economy. Let us 
hope the President is ready to work out an agreement. I submit the full 
article into the Record.

                  [From the Investor's Business Daily]

                          Politics Vs. Growth?

       The economy grew just 1.4% after inflation last year, and 
     recession is possible this year. Congress and President 
     Clinton should skip the political games and move now to turn 
     things around.
       Speaking in Michigan on Monday, Clinton gave us his 
     ``growth agenda.'' Yet that's just a new, transparent label 
     on his old wish list: a minimum wage hike, a tax deduction 
     for college costs, government vouchers for worker retraining, 
     and the Kennedy-Kassebaum health-insurance reform.
       Half his points--the health bill and the wage hike--plainly 
     have nothing to do with growth. At best, they'd be good for 
     those who have jobs.
       Education and training do boost growth in the long term. 
     Yet Clinton has yet to show how more government sponsorship 
     of these goals will help achieve them. It hasn't worked that 
     way in recent decades.
       Don't look to other Democrats, either. House Minority 
     Leader Richard Gephardt recently claimed we ``don't know'' 
     how to boost growth. His best guess is that favorite of Labor 
     Secretary Robert Reich: tax penalties on corporations that 
     downsize.
       In fact, Clinton certainly knows what the economy needs, 
     and Gephardt probably does: Tax cuts, the pro-growth move 
     that worked for Presidents Kennedy and Reagan alike.
       House Speaker Newt Gingrich is ready to play ball. ``All 
     the warning signals are there'' for recession, he told 
     reporters last week. ``I think if the President really wants 
     to help us to avoid a significant recession . . . we should 
     have a pretty substantial (budget) package in the next week 
     or two.''
       Gingrich could have added. ``If the President really wants 
     to get re-elected.'' Clinton is riding high in the polls now, 
     but presidents who don't deliver solid growth rarely win a 
     second term.
       To Gingrich's credit, he has put jobs above politics. If a 
     Republican Congress and a Democratic president can agree to 
     cut taxes, Americans may just opt for more of the same. It 
     could give Clinton a pro-business image just when he needs 
     it.
       But what kind of tax cuts should the deal contain?
       The collapse of last year's talks puts us in a whole new 
     ball game. The GOP's $245 billion grab-bag of tax reductions 
     is dead.
       Some Republicans want to salvage part of last year's 
     biggest-ticket proposal, the $500 per-child credit. That 
     might fit their political needs, but it is more social policy 
     than economic stimulus.
       And unless Clinton and Congress can agree on large spending 
     cuts, tax cutters will need to keep their ambitions modest. 
     Big cuts run straight into the iron wall of the ``Byrd 
     Rule.'' this says tax cuts must be ``paid for,'' and the 
     rules for ``paying'' overestimate how much revenue most tax 
     cuts would lose the government.
       The bind is so constrictive, the Byrd Rule so absurd, that 
     the GOP has been reduced to considering bringing back the 
     airline ticket tax to pay for tax cuts.
       With so little room to play in, the clear choice is the tax 
     cut that delivers the most bang for the buck: Trimming 
     capital-gains tax rates.
       GOP leaders are said to be considering a cut in the top 
     rate from 28% to 20% for individuals only. The relief would 
     be retroactive to the start of this year.
       Clinton has long publicly backed a least a targeted cap-
     gains cut. And throughout the budget battle, he has said he's 
     open to a rate cut.
       If Clinton were to quietly approve, we might get something 
     resembling the original ``Contract With America'' cap-gains 
     plan. Lehman Brothers Chief Economist Allan Sinai, no supply 
     sider, calculated that that would have added 0.7% to the 
     gross domestic product from 1995 to 1999.
       Such a cut would have created 1.4 million new jobs over the 
     same five years boosted the S&P 500 by more than 1% a year 
     and put $9 billion to 18 billion in extra revenues in federal 
     coffers, according to Sinai.
       DRI-McGraw Hill projected growth of 1.9% in productivity, 
     $22.7 billion in higher tax revenues and a near 12% drop in 
     the cost of capital, cumulatively over 10 years.
       Thanks to organizational strength, Bob Dole may pull out 
     ahead of the GOP presidential pack over the next week. Yet 
     the strong showing by political neophyte Steve Forbes, and 
     the failure of Pat Buchanan's economic pitch, prove that 
     prosperity and opportunity sell at the ballot box.
       Dole needs a message--and Clinton needs growth. For the 
     sake of the economy, let's hope they can work together to 
     give us a cap-gains tax cut now.

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