[Congressional Record Volume 143, Number 31 (Wednesday, March 12, 1997)]
[Extensions of Remarks]
[Pages E446-E447]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              THE ECONOMY

                                 ______
                                 

                          HON. LEE H. HAMILTON

                               of indiana

                    in the house of representatives

                       Wednesday, March 12, 1997

  Mr. HAMILTON. Mr. Speaker, I would like to insert my Washington 
Report for Wednesday, March 5, 1997, into the Congressional Record.

                              The Economy

       One of the nation's leading economists recently said that 
     the economic performance of the United States today is like 
     being at the top of a mountain. He said, ``There is an 
     exhilaration form getting there and the view is great, but 
     all paths are downhill.'' In a fundamental sense, of course, 
     he was right, because the challenge confronting policymakers 
     today is to preserve the expansion and the economic good 
     times we are now enjoying.


                            state of economy

       The fundamentals in the American economy today look very 
     solid. Experts tell us that the economy is on track with no 
     imbalances, only moderate inflation, an outlook for solid 
     growth at sustainable levels, with nothing obvious on the 
     horizon that would throw the economy off track.
       The facts are impressive. The economic expansion has been 
     growing at a solid, noninflationary pace in recent years, 
     last year growing by 2.5 percent. Much of the recent growth 
     has been fueled by stronger investment and exports. The 70-
     month expansion that the economy is enjoying has outlasted 
     all but two of the other eight post-war expansions. The 
     unemployment rate stands at 5.4 percent, down from 7.5 
     percent in 1992. Much of the job growth has been in sectors 
     paying above-average wages. Inflation, which peaked at 6.1 
     percent in 1990, has remained below 3 percent in recent 
     years. The combination of low unemployment and stable 
     inflation has given the U.S. the lowest ``misery index'' 
     since the 1960s. The federal budget deficit, which peaked at 
     $290 billion in 1992, was down to $107 billion last year. 
     That has helped keep long-term interest rates low.
       There is a broad consensus among the experts that the 
     nation's growth, inflation, and unemployment rates this year 
     will be similar to those of 1996, and that unless something 
     unexpected develops, interest rates will fluctuate within 
     relatively narrow ranges. So the U.S. economy is heading into 
     its seventh straight year of expansion.


                            other countries

       It is not hard to find good things to say about the 
     American economy, especially when comparing to what's 
     happening in other countries. The United States was again 
     recently judged to be first in international competitiveness, 
     and our global market share of goods continues to increase. 
     Our trade deficit is still too large, but it has declined by 
     almost 50 percent as a percentage of our gross domestic 
     product (GDP).
       In addition, the United States continues to lead the world 
     in per capita GDP. We lead the major industrial nations in 
     growth, and have achieved the lowest budget deficit as a 
     percentage of GDP of any of the industrial countries. Job 
     creation in the United States has exceeded all the other 
     major industrial countries combined, and the U.S. 
     unemployment rate has dropped below that of all 
     industrialized countries but Japan.


                                concerns

       But we ought not to spend too much time congratulating 
     ourselves. The U.S. economy still shows some vulnerabilities 
     and there are some areas of concern.
       One is wage stagnation and inequality. Although we have 
     seen some improvement recently, median family income has in 
     recent years stagnated and the wage gap between the rich and 
     the poor has widened. Wage inequality in the United States is 
     more pronounced than in all the other industrialized 
     countries. It bothers me that large segments of our 
     population have seen little or no growth in their own 
     incomes.
       Even though the federal budget deficit has been reduced 
     sharply in recent years, it is important to remember that the 
     United States is still the world's largest debtor. I am very 
     uneasy with the fact that the world's largest and richest 
     economy, the great superpower, has become such a huge and 
     chronic borrower.
       We continue to have shortfalls in savings. We have the 
     lowest personal savings rate among the industrialized 
     countries and it has declined from 4.9% in 1985 to only 4.4% 
     in 1995. The domestic savings simply are not meeting the 
     nation's investment needs. That means we have to rely more on 
     foreign capital and we reduce funds available to invest in 
     future growth.
       Although investment has increased in the 1990s, we are 
     still not investing enough. Real

[[Page E447]]

     U.S. investment in plant and equipment has declined since 
     1985. While we continue to lead the world in spending on 
     research and development, our long-term investment as a 
     percentage of our total wealth is falling just as other 
     competitor nations are increasing their programs. While we 
     spend more money than other countries on education, most of 
     the education experts say that our overall performance, 
     especially in the basic science and math skills, is 
     disappointing. And productivity growth in the United States 
     has been less than 1% over the past decade. That is the 
     second lowest rate among the major industrial countries.


                               priorities

       It is not difficult to identify where our national 
     priorities in economic policy should be. The education and 
     skill levels of the workforce need to be improved. Savings 
     and investment must increase. The budget deficit has to 
     continue to come down to increase savings, and science and 
     technology policy and regulatory reform need urgent 
     attention.
       Looking to the future, what worries me the most is the 
     increasing performance of the world's lower-wage economies. 
     They are now competing more effectively in global markets. I 
     worry about our ability to sustain high-wage jobs in that 
     kind of competitive environment. The challenge from these 
     countries is both direct competition in product services but 
     also with firms which might otherwise be located in the 
     United States moving to these countries. I think we have to 
     focus much more urgently on boosting productivity, stepping 
     up the rate of private sector investment, and improving and 
     broadening the skills of the American work force.


                               conclusion

       The U.S. economy has improved in recent years, but more 
     needs to be done. We especially need to bring the budget 
     deficit down further and expand our investment in education, 
     research, and infrastructure. These help build the foundation 
     for the long-term economic health of our country, and should 
     help improve the lives of average working families.

                          ____________________