[Congressional Record (Bound Edition), Volume 146 (2000), Part 14]
[Senate]
[Pages 20901-20904]
[From the U.S. Government Publishing Office, www.gpo.gov]



                               ECONOMICS

  Mr. MACK. Mr. President, as my colleagues know, I will be leaving the 
Senate at the end of my term. I want to

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put a few thoughts on the record over the next few days, depending on 
the time available.
  I have four grandchildren--three grandsons and one granddaughter--
Ronnie Elam, Brett Elam, Blake Caldwell, and Addison McGillicuddy. The 
comments I am going to make today really are from the perspective of 
thinking about them and their future and the desire to see that they 
will grow up in a country and in a world where their opportunities will 
be equal to, if not better than, those of their parents, their 
grandparents, and their great-grandparents. I want them to have a 
better understanding when they reach that point when they have their 
own families.
  As people look back on the last several decades of the 20th century, 
I want, at least from my perspective, to be able to put on the record 
what I believe happened from both an economic and foreign policy 
perspective, and from a national security perspective. So that is what 
my comments will reflect today, my thoughts with respect to economics 
primarily and some that will reflect my feelings with respect to 
national defense.
  So I would like to talk about economics, a topic that has been one of 
my passions as a Member of the Congress. Economic policy was the very 
reason I ran for the House of Representatives back in 1982. As many of 
us may recall, our country remained in a deep recession at the time, 
still struggling to recover from the economic policies of the 1970s. 
Although it was still being phased in, President Reagan's economic 
program was under attack by our friends across the aisle. But, to me, 
the Reagan economic program was a bold reaffirmation of the very 
purpose of America.
  Many people have noted the happy coincidence that the year 1776 saw 
the publication of two of the most important documents in world 
history, Adam Smith's ``Wealth Of Nations'' and Thomas Jefferson's 
Declaration of Independence. These works share the theme of freedom. 
Smith made the case for free trade and unfettered markets, as Jefferson 
put in words the concept that government exists to protect individual 
liberty.
  These documents rebutted, refined, and transcended the prevailing 
views of 1776 Great Britain. For over a century, these principles held 
firm and the United States stood tall as a beacon of hope and 
opportunity for people from all points on the globe.
  Ours was a society without a rigid class structure, a society that 
promised equal opportunity for all based on individual enterprise and 
hard work, not government privileges and connections. America had no 
large bureaucracies intruding upon every sphere of commercial life. We 
relied on the willingness of individuals to shoulder the risk and 
responsibility that is part and parcel of private enterprise.
  But this distinctly American way was challenged by two worldwide 
crises in the 20th century. First came the Great Depression. Although 
gross government mismanagement of the money supply and 
counterproductive trade policies were the cause of this crisis, 
government was put forward as the cure. This led to the proliferation 
of alphabet agencies seeking to steer every aspect of the American 
economy, as government assumed a new income redistribution role.
  The second crisis was the rise of totalitarianism on the European 
Continent. The United States won World War II, but in the process of 
saving Europe from one brand of tyranny, an equally evil force came to 
occupy half of Europe, and the war effort was used as the justification 
for price controls and economic intervention that was unprecedented in 
the United States.
  The welfare state in America grew by leaps and bounds. Once it was 
conceded that the Government is the guarantor of income, each 
successive call for new and bigger programs became harder and harder to 
resist. At the same time, the consolidation of the Soviet bloc 
presented the largest threat to freedom in human history, presenting 
new and costly challenges for America as the beacon of freedom. 
Exaggerations of Soviet economic success fueled the call for greater 
Government involvement in the U.S. economy. Over time, high tax rates 
and regulatory excesses accumulated like barnacles to slow the once 
mighty ship of American private enterprise.
  It is hard for younger Americans to imagine how bleak our Nation's 
prospects appeared before Reagan assumed the Presidency. Recurrent, 
simultaneous bouts of high unemployment and high inflation confounded 
most economists, who viewed the two as a tradeoff. It was thought that 
to reduce unemployment you had to accept inflation and to reduce 
inflation you had to accept higher unemployment. Producers and 
consumers suffered from an energy crisis. And real household incomes 
were shrinking as fast as ``bracket creep'' was raising everyone's tax 
bill year after year. The response of the incumbent administration was 
hardly inspiring--ranging from suggesting ``voluntary'' wage and price 
controls to preaching that we must learn to live within limits. In 
short, the American establishment was telling the American people to 
accept the notion that they no longer controlled their own economic 
destinies.
  Starting in the 1970s, the media aggressively advanced the notion 
popular in intellectual circles that America's free enterprise system 
was failing. This view persisted through the 1980s. The best-seller 
lists were crowded with books telling of the decline of America and 
predicting that Japan would be the economic juggernaut of the 21st 
century. Even in the 1992 campaign, Bill Clinton and Al Gore were 
extolling the virtues of the European economic systems, of social 
democracy and industrial planning. We hear echoes of this approach 
today, with candidate Al Gore's Government-knows-best mentality. Gore 
proposes to micromanage and fine-tune the economy, social engineering 
through tax credits designed to make people behave the way the 
Washington bureaucrats want them to--such as buying ``fuel-efficient'' 
eighteen-wheeler trucks.
  Ronald Reagan's ``Program for Economic Recovery'' was the opposite of 
the Government planning approach advocated by the critics of 
capitalism. Reagan rejected the idea that policymakers could fine-tune 
the economy, much less control it from Washington. Instead, he sought 
to establish a stable environment conducive to economic growth. This 
meant getting inflation under control, and reducing taxes, regulation, 
and the size and scope of Government. It meant restoring the incentives 
for working, saving, investing, and succeeding. It meant opening 
America to the benefits and challenges of international trade.
  Ronald Reagan's economic principles resonated within me. I had seen 
first-hand the obvious connection between the expansion of Government 
and our worsening economic performance. When I started in the banking 
business in 1966, I probably spent 90 to 95 percent of my time engaged 
in activities that I considered productive--designing new services to 
attract business, working to increase the market share and 
profitability of the bank. The rest involved Government paperwork. By 
the time I left in 1982, this ratio had completely flipped: I was 
spending 85 to 90 percent of my time trying to figure out how to comply 
with Government regulations and mandates. There was a constant stream 
of letters from the Government dictating how we should manage our 
business, from the Comptroller of the Currency, the Treasury, the FDIC, 
and the Federal Reserve, on topics ranging from flood insurance to so-
called truth-in-lending. I remember a letter that went so far as to 
tell us the specific temperatures to set our heating and cooling 
thermostats in our businesses. Some people may have forgotten this 
level of Government intrusion.
  In fact, others may believe it never could happen in a country such 
as America, but it has. It has happened before, and if we are not 
vigilant, it could happen again.
  I received a letter from Federal Reserve Chairman Paul Volcker 
detailing which types of loans we could and could not make. To make the 
example, I could lend a family money to add an additional bedroom to 
their home. If

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that same family wanted to add a swimming pool to their home, I was 
prohibited from making that loan.
  To some, this may have made sense if you believed that the Government 
should be managing consumer demand, but that role made no sense to me.
  With my experience in the banking business, it wasn't hard to 
understand why we as a nation were having difficulty competing around 
the globe, when we had moved so many of our resources away from 
productive activities and into trying to comply with Government 
regulations. Over the years I had come to realize that all the abstract 
Keynesian theories I was taught in college ignored how the choices and 
incentives of individuals are altered by government interference in the 
economy. By failing to account for the real world, those theories in 
practice had come pretty close to ruining the economy. But along came 
Ronald Reagan, with a common sense approach that went back to basics--
free markets, free enterprise, free trade. Here was a man who had 
recognized that big Government was a detriment to the economy, a man 
who approached things from the perspective of freedom as opposed to 
Government. I shared that perspective and recognized the importance of 
President Reagan's election. On election night, November 4, 1980, I 
knew that I had to get involved in this great campaign to restore 
freedom--but I would have never guessed that, two decades later, I 
would be standing here in the United States Senate.
  Ronald Reagan clearly saw that the problem was too much government, 
and the solution was more individual freedom. When he assumed the 
Presidency, we suffered from high inflation and high unemployment. To 
combat the first, he prescribed reigning in the rapid growth of the 
money supply, asking the Fed to minimize the damage to the economy 
caused by high and volatile inflation. The second problem required deep 
cuts in the high tax rates that were deterring work, saving, and 
investment. But the Fed delivered tight money a lot sooner than the 
Congress could deliver the tax cuts, which were phased-in over 3 years. 
The Fed had overreacted to the stimulus of tax cuts that had not yet 
arrived, exacerbating the economic downtown, throwing the budget 
seriously out of balance, and putting the third year of the Reagan tax 
rate reductions in jeopardy.
  In the recession of the early 1980s, the economic policies of 
President Reagan that inspired me to public service came under attack. 
In the now famous ``Stay the Course'' campaign of 1982, the President's 
party retained control of the Senate, minimized losses in the House 
despite the dire economic times, and preserved the Reagan economic 
program. We also kept on track President Reagan's defense policies, 
which were under attack from short-sighted critics who were unwilling 
to pay the price to ensure our freedom. I am proud that my first 
campaign was in that fateful year, when President Reagan's detractors 
stood a chance of putting his programs in jeopardy and I was able to 
make a stand in favor of his programs.
  As I mentioned, the Reagan economic program was my inspiration to run 
for office. As a freshman, I cut my teeth in the House by circulating a 
letter vowing support for the President's veto of any bill that 
tampered with the third year of the tax cuts. After I obtained the 146 
signatures necessary to sustain a veto, that threat disappeared, and 
the Kemp-Roth tax cuts were allowed to work. President Reagan's most 
dramatic policy change was without a doubt this supply-side tax cut. It 
seems also inconceivable today that just two decades ago, marginal 
income tax rates were as high as 70 percent in the United States. It 
was little wonder that our country was in economic decline, when its 
most economically productive citizens could keep only a 30 percent 
share of their additional earnings. These high tax rates not only 
discouraged additional work and investment at the margin, but also 
confiscated capital that could have been used for job creation by the 
private sector.
  By cutting income tax rates by 30 percent across-the-board, Reagan 
restored a large measure of freedom to the American taxpayer--not just 
the freedom to spend money that would have been taxed away, but the 
freedom that results when economic decisions are no longer influenced 
by high tax rates. It was not about the dollars that would have been 
collected had tax rates stayed high, but the choices that would never 
have been made because of these high rates--decisions to expand plant 
capacities or start new businesses, for instance.
  President Reagan entered the White House with one paramount spending 
goal: to rebuild our national defense, since national security is the 
most fundamental responsibility of the Federal Government. He realized 
that to provide this desperately needed public good, while cutting tax 
rates to unleash the productive forces of the nation, required fiscal 
restraint in the non-defense portion of the Federal budget.
  The difficulties that President Reagan had in taming the 
congressional urge to spend made a balanced budget and tax limitation 
amendment to the Constitution one of my top priorities when I entered 
Congress. It also motivated me to be the main House sponsor, along with 
Dick Cheney, of the Gramm-Rudman Deficit Reduction Act, which worked 
for at least a few years to hold spending down. Today, as much as ever, 
I believe some super majority restriction on the ability of Members of 
Congress to spend taxpayers' dollars is necessary. Unless taxes are cut 
to keep the revenues from flowing into Washington, the trillions of 
dollars of surpluses that are projected over the next decade will not 
last--if the taxes are collected, Congress will spend them.
  Reagan also initiated a sea change in monetary policy. He did not 
want the Federal Reserve to manipulate the money supply in an attempt 
to target interest or unemployment rates. All he wanted was price 
stability, the elimination of high levels of inflation from the 
economy. The Fed should not be responsible for the level of growth in 
the economy--this is the role of the private sector. The best economic 
environment that the Fed can provide is one in which inflation 
expectations play a small or almost nonexistent role in long-term 
planning. Reagan's appointees to the Federal Reserve Board, people like 
Alan Greenspan, Preston Martin, Manley Johnson, Martha Seger, and Wayne 
Angell, shared this view and took politics out of monetary policy.
  Throughout the Reagan years, the loudest and strongest advocate of 
stable prices in the Congress was Jack Kemp. Jack would talk tirelessly 
about the need for ``a dollar as good as gold,'' and his intellectual 
and political support for this position no doubt influenced President 
Reagan's selection of Greenspan as Fed Chairman. Alan Greenspan 
continues to hold sway at the Federal Reserve as part of the Reagan 
legacy, and his record at containing inflation has set a high standard. 
As a member of the Senate Banking Committee I have attempted to 
institutionalize this approach to monetary policy, sponsoring a bill 
that would make price stability, not economic growth or 
``stabilization,'' the goal of the Federal Reserve. Thanks to the 
monetary policy initiated by President Reagan, this legislation is now 
a safeguard rather than a necessity.
  The prevailing attitude concerning trade has also shifted, thanks to 
President Reagan--who recognized the fallacy of protectionism. In large 
part, this was due to his belief in competition and free enterprise. 
But his attitude was also shaped by his confidence in America. He was 
neither afraid of foreign competition, nor embarrassed that imports 
might be preferred over American goods. America, as a nation of 
immigrants, represents the best that the world can offer. More than any 
consumer good, the main export of America must be the ideal of 
political and economic freedom, an ideal that is undercut by trade 
restrictions.
  By signing a free trade agreement with Canada, opening free trade 
negotiations with Mexico, and proposing the dismantling of agricultural 
trade

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barriers in the Uruguay Round of the GATT, Ronald Reagan went on the 
offensive for trade liberalization. At a time when Japan-bashing was 
commonplace--when Members of Congress were literally bashing Japanese-
made electronics into pieces on the steps of the Capitol--Reagan did 
not retreat from his basic free-trade principles. The remarkable 
success of U.S. industries from computers, semiconductors, software, 
biotechnology and many others over the past 2 decades has vindicated 
Reagan's belief that American business prospers best in an open and 
competitive free enterprise environment.
  Today, principally as a result of the supply-side policies pursued by 
the Reagan administration, the U.S. economy is healthy. Both inflation 
and unemployment are low. Productivity is growing rapidly and incomes 
are rising.
  Any doubts that President Reagan is responsible for today's bounty 
should be dispelled by considering a few fundamental questions. Would 
American economic growth be as robust today if the Federal Government 
still took 70 cents of every additional dollar of income from our most 
productive citizens? If the typical family was hit with a 49 percent 
Federal income tax rate on top of an effective payroll tax rate of 14.2 
percent?
  Would our economy be so strong if we were still suffering from 
double-digit inflation and interest rates, due to the politicized use 
of monetary policy to manipulate consumer demand? If the trend of the 
last 2 decades were toward managed trade, rather than freer trade? 
Would entrepreneurs and innovators abound if high inflation and high 
tax rates on capital gains slashed the returns to their risk-taking?
  Would the Soviet Empire have fallen if it had not been for the 
military buildup, diplomatic leadership, and resolute defense of 
freedom during the presidency of Ronald Reagan? Would our country be as 
secure as it is today if instead of trading partners, the people of 
Eastern and Central Europe were still prisoners of the Soviet bloc? If 
our fellow Americans south of our border were still the potential 
victims of imported totalitarianism instead of full participants in 
established democracies?
  Our debt to Ronald Reagan reminds me of an exchange mission I once 
went on, with Tom Foley and Dick Cheney.
  It was a congressional delegation that went to France in 1985. On 
that trip, we spent most of our time in Paris. But for the last several 
days, we went out to the French countryside. I went to a little town 
called Le Mans, where I traveled around with my host, Francois, from 
that district. I learned a lot about what his country was experiencing.
  At the end of that tour, we did what many of us would refer to as an 
old-fashioned town meeting, where I responded to questions from the 
French audience for almost 2 hours. At the end of the period, I asked 
Francois if it would be all right if I were to ask the audience a 
question. And he was gracious in my request, and I asked them: Since I 
am returning to America tomorrow, I would like to be able to tell other 
people of the State of Florida what you think about our country.
  The first person stood up and said: ``We think of America as a 
dynamic, growing, thriving, exciting place.'' A second person that 
stood up said basically the same thing. The third person to address me 
was a fellow who probably was in his late 70's or early 80's. This 
fellow was stooped over, his weight being supported precariously on an 
old, gnarled cane. He came over closer to me, looked me directly in the 
eyes, and said: ``You tell the people of America that we will never 
forget that it was the American G.I. who saved our little town. You 
tell them we'll never forget!''
  Well, I feel that way about Ronald Reagan, my political hero, who 
inspired me to enter politics. America will never forget what President 
Reagan did for us. He gave us back our faith and renewed our belief in 
this country. He gave America back its pride. He rebuilt America's 
defenses. His economic policies reduced taxes, reduced inflation, 
reduced unemployment. He put America back to work again. He reminded 
America what made us a great nation--our commitment to freedom. And he 
won the cold war without firing a single shot.
  The citizens of America and the people of the world will never 
forget.
  Mr. President, I yield the floor.

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