[Congressional Record (Bound Edition), Volume 149 (2003), Part 8]
[House]
[Pages 10070-10076]
[From the U.S. Government Publishing Office, www.gpo.gov]




      PRACTICES OF FEDERAL PRISON INDUSTRIES COSTING AMERICAN JOBS

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 7, 2003, the gentleman from Michigan (Mr. Hoekstra) is 
recognized for 60 minutes as the designee of the majority leader.
  Mr. HOEKSTRA. Mr. Speaker, tonight I rise to set in context a bill 
that I introduced with my colleagues, the gentleman from Massachusetts 
(Mr. Frank), the gentlewoman from New York (Mrs. Maloney), the 
gentleman from Georgia (Mr. Collins), the gentleman from Wisconsin (Mr. 
Sensenbrenner), and the gentleman from Michigan (Mr. Conyers), along 
with 98 other cosponsors just before the Easter recess. The bill is 
H.R. 1829. It deals with an issue of reforming Federal Prison 
Industries.
  Some of our colleagues may ask, what is the importance of this bill? 
Or, what are you trying to get accomplished? Let me put that in a 
framework. What is Federal Prison Industries? Federal Prison Industries 
is a corporation, and many of the documents and many of the talking 
points that I will be using tonight come out of the annual report, 
which was just released by Federal Prison Industries within the last 
couple of weeks. But Federal Prison Industries was established on May 
27, 1930 when Congress enacted H.R. 7412. One of the key provisions was 
to ``reduce to a minimum competition with private industry or free 
labor.'' On June 23, 1934, this bill was signed into law, authorizing 
the establishment of Federal Prison Industries.
  The key phrase is ``reduce to a minimum competition with private 
industry or free labor.'' I am going to spend much of the evening 
talking about what Federal Prison Industries is doing to American 
workers and American companies. In effect, what Federal Prison 
Industries is doing is it is costing American workers and American 
taxpayers all across this country to lose their jobs, even though the 
underlying statute clearly states, ``reduce to a minimum competition 
with private industry or free labor.'' Federal Prison Industries and 
this Justice Department has lost sight of the goal of this legislation 
and what the role of Federal Prison Industries was intended to be.
  Now, some within the Justice Department today may say, this is our 
contribution to creating high-quality and high-paying jobs in America, 
and we will get into that in detail also as we go through this process. 
But the key point here is that when Federal Prison Industries was 
established, the mandate was you will reduce to a minimum the impact on 
American workers and free labor and American business.
  The message from the current board of directors is very encouraging. 
It says on page 5 of their annual report, ``Our mission is to do so 
without jeopardizing the job security of the American taxpayer.'' In 
1930, the underlying statute says ``reduce to a minimum.'' In 2003, 
reporting on their annual report for 2002 it says, ``mission is to do 
so without jeopardizing the job security of the American taxpayer.''

                              {time}  1700

  If we go a little further, we will start to see where I think we get 
into some problems.
  Mr. Speaker, what we have talked about, laying the context, is in the 
1930s up to 2003, the underlying legislation, the board says they 
should reduce to a minimum the impact on American workers, American 
taxpayers, their jobs, and free labor.
  It is interesting, as we go to the ombudsman message in the annual 
report. The ombudsman says something different: ``so that a balance can 
be achieved between protecting jobs for Americans while teaching 
inmates meaningful job skills.'' A balance.
  It is a subtle shift, but it is a shift that FPI has been undergoing 
for the last 10 years. They have shifted from having a minimum impact 
on the American workforce to, in a number of different industries, 
having a devastating impact on American workers.
  In Maine at Hathaway Shirts, that closed last year because of 
contracts, because of Federal Prison Industries going out and claiming 
contracts that otherwise would have gone to the private sector. Ask the 
workers at Hathaway Shirts as to whether Federal Prison Industries is 
having a minimal impact. I think they would tell us very clearly that 
when someone loses his job and the factory locks its doors, that is not 
a minimal impact; that is a devastating impact. Their jobs are gone. We 
have put more inmates to work.
  It is outrageous that Federal Prison Industries and this Justice 
Department is talking about a balance as they are putting American 
workers out of business. What kind of balance is that? American 
taxpayers are out of a job

[[Page 10071]]

and someone is asking for balance. It does not look like there is a 
whole lot of balancing going on. This Justice Department has no idea as 
to what a balancing act is when they weigh putting a prisoner to work 
at the expense of an American taxpayer.
  By the way, when Members say, well, it is good to keep prisoners 
working, there is no debate with that. But what we do not want to do is 
we do not want to put them to work at the expense of American 
taxpayers.
  On page 24, an interesting fact. They will say they make money for 
America. Here is what it says in their annual report about taxes: ``As 
a wholly owned corporation of the Federal Government, FPI is exempt 
from Federal and State income taxes.'' That is not a bad deal. I wonder 
what kind of Federal and State income taxes Hathaway Shirts was paying. 
Of course, they are now out of business.
  FPI is exempt from gross receipts taxes, and they are exempt from 
property taxes. That is an interesting thing. They pay no taxes, and 
they put Americans out of work. The Justice Department and FPI is 
looking for a balance. As far as I can see, it is an outrageous balance 
every time we put an American worker out of a job.
  What do they make? Clothing and textiles; law enforcement, medical, 
military and institutional apparel; mattresses; bedding; linens; 
towels; embroidered screen printing on textiles; custom-made textiles 
and curtains; fleet management; vehicular components; rebuild and 
refurbish vehicle components; new vehicle retrofit services; fleet 
management customized services; dorm and quarters furnishings; package 
room solutions; industrial racking; catwalks; mezzanines; warehouse 
office shelving; custom fabricated industrial products; lockers; 
storage cabinets. It looks like a lot of stuff they make in my 
district.
  They have an office furniture business group: office furnishings and 
accessories, seating products, case goods, training table products, 
office systems products, filing and storage products, package office 
solutions, turnkey solutions, distribution and mailing services, 
assembly and packing services, document conversion, call center, order 
for film and services, laundry services, recycling of electronic 
components, reuse and recovery of usable components for resale, 
recycling activities, custom engraving, printing and awards, 
promotional gifts, license plates, interior and exterior architectural 
signs, safety and recreational signs, printing and design services, 
remanufacturing of toner cartridges, exterior and interior task 
lighting systems, wire harness assemblies, circuit boards, electrical 
components and connectors, electrical cables, braided and cord 
assemblies. Wow. They make a lot of stuff that is made in my district.
  The interesting advantage that Federal Prison Industries has, we 
think, well, hey, if they can go out and compete for this business and 
they can provide a better quality product at a better price and at a 
better service delivery than the private sector, so be it.
  If that were only the case. Federal Prison Industries has this 
wonderful thing called mandatory sourcing. The balance that the 
ombudsman calls for, here is the balance that Federal Prison Industries 
has: if the Federal Government wants to buy something and Federal 
Prison Industries makes it, we have to buy from Federal Prison 
Industries. The private sector may make the product, they may make it 
in a better quality at a lower price and a better delivery schedule; 
but sorry, they do not qualify. We know they paid their taxes, but they 
cannot even compete for the Federal Government business.
  Here is what they make. The law says they should have minimal impact 
on jobs and free labor, and they have an element called mandatory 
sourcing. They are quality jobs. This is great.
  Here is what we do with our prisoners. We criticize China for their 
prison labor. Federal Prison Industries, and our Justice Department. 
Inmate pay rates: 23 cents to $1.15 per hour. Wow. It sounds more like 
China than it does America. The good thing is, of course, these people 
are covered by OSHA. Wrong. If we are paying them 23 cents to $1.15 an 
hour, we cannot cover them with OSHA laws.
  These are the people that are putting American workers out of 
business around the country today. My district is heavily impacted by 
the recession, making a lot of office furniture products, and the 
industry is down by 40 percent.
  I have been joined by one of my colleagues. I will give him a chance 
to have a little dialogue here. Before I do that, let me highlight one 
small fact. I am not sure my colleague has seen these numbers. I am 
sure the American people have not seen them.
  As the American economy is struggling, here is a growth company. We 
can invest in the U.S. Government, and we may get one of the best 
growth companies in America today, Federal Prison Industries.
  Federal Prison Industries, in the business segment clothing and 
textiles did not have a good year. They were only up 1 percent; 
electronics, not a bad year, 14 percent; fleet management, vehicular 
components, wow, this is a growth industry. This is a business segment 
that grew 216 percent. Graphics, they had a rough year. They were down 
10 percent. Industrial products, they were down 54; office furniture, 
up 24 percent.
  Not that great of a growth rate, office furniture up only 24 percent. 
The statistic they are now telling us is that the office furniture 
industry in the private sector was probably down 15 percent to 18 
percent, so they grow by 24. The real manufacturer decreases by 18 
percent, and Federal Prison Industries increases their market share. 
Overall, last year Federal Prison Industries grew by 16 percent.
  It is the ugly little secret that this Justice Department, this 
Federal Prison Industries, whether it is in clothing or textiles, 
whether it is in office furniture, whether it is in automotive or 
whatever, as these industries are laying people off, Federal Prison 
Industries through mandatory sourcing and offering poor quality, 
higher-priced goods with longer delivery schedules is adding more and 
more jobs.
  The Justice Department's answer or contribution to creating high-
quality, high-paying jobs in America is to put more prisoners to work 
in prison, lay off taxpayers, and pay the new jobs at 23 cents to $1.15 
an hour. That is Justice's idea of justice in America today. It is 
absolutely outrageous that the Federal Government is allowing this to 
go on. I encourage my colleagues to support H.R. 1829.
  Mr. Speaker, the gentleman from Indiana (Mr. Souder) and I, it was 
not all that long ago that we visited a plant in his district, a 
company that made innovative products and wanted to sell to the 
military, and had sold to the military. What they found out, maybe my 
colleague is going to share the story with us, but again they were 
dramatically impacted by Federal Prison Industries to such an extent 
that they were jeopardizing jobs in their plants so that Federal Prison 
Industries could expand the sale of their goods and services.
  Mr. Speaker, I yield to the gentleman from Indiana (Mr. Souder).
  Mr. SOUDER. Mr. Speaker, I thank my colleague, the gentleman from 
Michigan, for yielding to me.
  I would like to kind of restate in similar words the concerns that he 
has shared here so far this evening and thank him for taking leadership 
in this issue; because I believe if most Members actually looked at 
this bill, there is just no defensible rationale to be against it. It 
is something that is often under the radar.
  One of the good things about the district of my colleague, the 
gentleman from Michigan, is that it is good to have an industrial 
sector where there is a large concentration; but one of the bad things 
is that where you have a concentration, you do not have as many Members 
affected by it. Therefore, they may not feel as much pressure to do 
what is just and right.
  The Grand Rapids Holland area has long been the center of office 
furniture and supply-type furniture in the United States. I grew up in 
a furniture retailing factory, a family business started in 1907. Since 
the 1920s, we were retail furniture merchants. In the old days

[[Page 10072]]

the whole furniture industry was centered in Grand Rapids. That used to 
be where the markets were before they moved to Chicago and then North 
Carolina.
  What we saw was first southern competition, where they did not have 
the unions, kind of weakened some of the northern furniture companies. 
Then we saw cheaper wood because the wood grew faster in some of those 
areas. It was not as good wood in the South as the northern hardwoods, 
but we saw that. Then we saw most of the furniture industry in big 
percentages go offshore and then overseas.
  But in office furniture, we had a success story. The companies, 
including the former employer of my colleague, the gentleman from 
Michigan, stayed, by innovation, at the front end of what we needed in 
the office furniture market, in the supply market in this country. It 
was a good-news story of how to fight off foreign competition. So what 
do we do? We develop internal domestic competition to the industry.
  I have a company that was alluded to by my colleague, Wieland 
Furniture in my hometown of Grayville, Indiana, a town that is now up 
to almost 1,000 people. In their plant, and in full disclosure, it has 
now been purchased by Sauder Furniture out of Archbold, Ohio. It is 
spelled S-A-U, and I am spelled S-O. They are distant cousins. They now 
own this as a division.
  They have 40 employees, and 20 percent of their business involves 
sales to the Federal Government that could be lost if FPI decides to 
revoke waivers on the military bases, and they have lost untold other 
jobs that they could have had.
  As the gentleman from Michigan (Mr. Hoekstra) said when he visited 
this plant, they told him what is really completely irritating about 
this is that they sell it cheaper. We save dollars for the taxpayers.
  Mr. HOEKSTRA. Mr. Speaker, excuse me. If the gentleman will clarify, 
who sells it cheaper?
  Mr. SOUDER. The company, Wieland, the private sector company. Even 
though they have to follow all the laws that my colleagues alluded to, 
they sell it cheaper.

                              {time}  1715

  And because they can sell it cheaper, that would save taxpayers money 
in the Defense Department, at universities, in government offices, in 
anyplace else that Federal Prison Industries is doing it, we would save 
taxpayer dollars if you bought from the private sector. Not only that, 
it is built better. They are selling it cheaper. It last longer. So you 
save money because you do not have to repurchase the goods. The sofas 
hold together. The tables hold together.
  You have now the combination of not only the immediate prices being 
cheaper, but the long-term cost of the value, even to the government 
and any agency buying it, increased exponentially, because you do not 
have to replace it. The wear and tear is not there. You do not have to 
repurchase.
  Mr. HOEKSTRA. You say, well, why do the Federal procurement officers 
not support your bill? You know what? They do. Because as this Congress 
asks different agencies to do more with less, the Federal procurement 
officers come back and say, hey, we can buy better goods and services 
from the private sector for a lower price, but you make us go to 
Federal Prison Industries. If we are going to have to use Federal 
Prison Industries, then do not make us do more with less because we 
cannot buy the best products and we cannot buy the services. You are 
asking us to get more efficient and more effective in using vendors who 
do not meet the standards that we need to compete.
  Mr. SOUDER. The extraordinary thing here is that if they can meet 
these standards, that the Federal procurement officers would like to do 
this. And they are doing this, as he has so eloquently pointed out, 
that they do not have OSHA, the Occupational Safety and Health 
Administration laws that say you got to have this over here and this 
over here. Nobody walks into their plant, and I have had OSHA come into 
little plants in my district much smaller than the House floor saying, 
you do not have your exits marked. You do not have this kind of thing 
over here and threaten to shut them down or fine them. They do not have 
any of that kind of pressure. They do not have minimum wage standards. 
They do not have civil rights standards to see which percentage of the 
population is at which direction. Often these institutions are 
violators of even laws on water and air pollution. They do not have the 
same pressures that you put on the private sector. And still the 
private sector makes it for less price with better quality.
  The owners of the Wheeling Furniture ask me, could our employees get 
these contracts and get the points if they get busted for dealing 
drugs? Could our employees get these jobs if they go rob a bank? Could 
our employees, if they get arrested for other crimes, then become 
eligible to make this furniture?
  This is absolutely crazy. I believe that the stumbling block here is 
that there are many Members here like me who want to work. I am a 
strong supporter of Prison Fellowship and Justice Fellowship and 
organizations as is my colleague, that say people need to develop a 
skill while they are in prison. They need to develop a skill that does 
not take jobs from American workers.
  We are losing jobs all over the place. Figure out, jobs that are 
taken by overseas workers and give them to the prison industry people. 
It is not that we do not want to rehabilitate prisoners. It is not that 
we do not want them to learn a skill. It is not that we do not want 
them to have some income when they are done, and they are taking 
advantage of many Members here who think that, oh, well, this is the 
only way we can help them. If this was another industry that was 
represented in big numbers in their district like it was in my 
colleagues, if it was the building industry, they would be outraged if 
we said we would take prisoners to knock out your contractors. They 
would be outraged if we said we were going to knock out the restaurant 
business. They would be outraged if we said we were going to knock out 
telecommunications. But because this industry is concentrated in one 
area, and because of the general good will, there is this 
misunderstanding that the Justice Department continues to take 
advantage of, and it must be changed.
  It should not be in America that if you rob somebody and deal drugs, 
you can make the furniture, but if you are honest, you cannot. There is 
something fundamentally wrong with that, even if it did not cost less 
and be better quality. And it is particularly stupid when it costs 
less, better quality, and you are taking jobs away from law abiding 
citizens and giving it to people who violate the laws. It makes no 
sense whatsoever.
  Mr. HOEKSTRA. The interesting thing here is this is just not an 
office furniture industry issue. If you go through the numbers, they 
are selling $159 million worth of clothing and textiles. That is why if 
you go to the gentleman from Pennsylvania's (Mr. Toomey) district, our 
colleague, I visited up there. There are lots of cut and sew operations 
that are operating at 25, 30 percent capacities. These are great 
plants. The workers have been sent home. Federal Prison Industries has 
grown. It is what happened with Hathaway Shirts in Maine. The contracts 
went to Federal Prison Industries, and the last shirt manufacturer in 
the United States closed down. But they are still making shirts over at 
Federal Prison Industries. They are doing the electronics. They are 
doing fleet management. It is a fast growing area. I think somehow they 
got the Midwest on their target zone. I think they forgot that Michigan 
is part of the union. Stay away from office furniture. Stay away from 
automotive parts, but they have made that a key part of their business.
  They are now also moving into the services industry so there is a lot 
of folks in here. It also talks about the coalition that we have been 
able to put together. The day I dropped the bill we had 104 co-
sponsors. It was awesome. A bipartisan bill. The gentleman from 
Massachusetts (Mr. Frank), the gentlewoman from New York (Mrs. 
Maloney), two leading Democrats, the

[[Page 10073]]

gentleman from Michigan (Mr. Conyers), the ranking member on the 
Committee on the Judiciary, a Democrat, the gentleman from Wisconsin 
(Mr. Sensenbrenner), the chairman of the Committee on the Judiciary, 
me, the gentleman from Georgia (Mr. Collins), yourself, about 104 
Members are joining us in this effort.
  The sad thing is the way that we get co-sponsors.
  Mr. SOUDER. Let me take a guess. Let me take a wild guess.
  When a company closes and jobs are laid off in an individual's 
district and they say, why are they laid off? And they say it is 
competition from Prison Industries?
  Mr. HOEKSTRA. That is right. Exactly.
  The gentleman from Georgia (Mr. Collins), he has been just a yeoman 
on this for the last 5 years. But what really got him interested was a 
small company in his district which made a very specialize product, 
missile containers. Well, Federal Prison Industries thought that would 
be a nice business to get in.
  How do they justify getting into the missile container business? They 
said, well, we are going to go into the container business. So we are 
going to take a very small piece of the container business so obviously 
it is a minimal impact on jobs in that industry.
  Mr. SOUDER. You are far more informed on this because I clearly got 
involved because I had a company that got immediately impacted and was 
outraged by the injustice. Do they have any criteria and does the 
Justice Department have any response when you say why do you not pick a 
category that does not have U.S. competition?
  Mr. HOEKSTRA. No. Actually what Federal Prison Industries does and 
what they did with office furniture was they took a growth industry in 
America and decided to piggyback on it. And now that that industry is 
facing some difficult times, the industry is down, there is more 
foreign competition coming in, and then they are looking over here and 
they are competing with their own government.
  I just get absolutely enraged when I am back home in my district 
because these are my neighbors. It was just a week ago and I am 
speaking to a local group and a friend of mine that I would like to 
think of as still a young man, but somebody I worked with, somebody 
that I graduated with. He said, maybe you did not hear, but I got laid 
off last week. He had been with the company for 28 years. This is as 
the industry is going down 18 percent. Federal Prison Industries is 
growing by 24 percent. What does that mean? It means they grew from 
$174 million in the office furniture industry to a $217 million company 
in one year, as the industry in the private sector was going down and 
they deliver poorer quality products as at a higher price.
  These people come up to me and say, how come I am out of a job? I pay 
taxes. The company paid taxes. We have got shuttered plants. Hathaway 
is now a shuttered plant. I am sure the folks up in Maine, they are not 
getting any State income taxes. You cannot explain to them and say, 
well, we have got to put these prisoners to work.
  In our bill we do not just put these people in cells. We give them 
vocational training. We are increasing the investment in vocational 
training. We are allowing them and encouraging them to make stuff for 
not-for-profit organizations, to work with Habitat for Humanity. So 
they are going to be doing things and staying busy, but the thing that 
they are not going to be doing is they are not going to be putting 
American workers out of business and out of their jobs. And the other 
thing that my bill does is it says we are not going to shut you down. 
We are saying all you have to do is be able to compete.
  All I want is the workers in west Michigan, the workers in Indiana, 
the workers in Maine and down south to be able to compete for the 
business that if he can, they can get a better product. If they can 
deliver a better product at a better price right, that they can get 
that business. Right now they cannot compete for the business.
  Mr. SOUDER. I know the gentleman is a little more liberal than I am 
in some of this. I do not believe they should be competing at all.
  It is particularly absurd to say that they are going to get a price 
advantage, and they get the regulations relaxed and they get the price 
advantage and the quality advantage. I would make it so they cannot 
flat out compete, but we have to work some kind of a compromise, 
because clearly, this has been very difficult for many years.
  We have laws that say that companies cannot illegally dump from 
overseas. You cannot come in where the government is subsidizing. Why 
do these laws not apply here and how would the Justice Department 
defend themselves when this cannot be done in any other category except 
by prisons?
  Mr. HOEKSTRA. Number one, I agree with you. I would like to go to the 
same place and say you are just not going to make stuff that competes 
with the private sector. The law called for minimal impact. But we have 
got to get the 218 votes. We need to pass this through the House. We 
need to get it through the Senate. And we need to get this done so at 
least these workers will have the opportunity to compete and fight for 
their jobs. They are, in many ways, fighting an uphill battle. They are 
fighting 23 cents an hour labor. They are fighting factories that have 
no OSHA regulations. They are fighting a bureaucracy that the capital 
is funded by us so there is no cost or a minimal cost of capital. But 
the surprising thing is they have shown that they can do it.
  So I am willing to accept that as somewhat of a compromise, and the 
compromise that we have developed, not only do we have great bipartisan 
support here, but we have got support from the Federal Contracting 
Officers. Where else can you go and get a letter of endorsement from 
the AFL-CIO, the U.S. Chamber of Commerce, the Teamsters and the NFIB? 
I mean, this is where organized labor and the business groups all come 
together because we are all interested in one thing.
  We are interested in creating, and maybe in this case, preserving 
high-quality, high-paying jobs in America where this Justice 
Department, this FPI, this Federal Prison Industries and some would say 
this administration, is bent on eliminating high-quality, high-paying 
jobs. It is outrageous.
  Mr. SOUDER. I think many Americans who are watching this and our 
colleagues and staffers around the Hill are going, this absolutely does 
not make sense. If they have not listened to this debate before, it is 
like, how could this be happening? About the only people who could 
possibly defend this would be somebody in prison; but we are not saying 
they are not going to have a job or income, because you and I have both 
advocated for many years that, and have been personally interested in 
how you deal and rehabilitate people in prisons and give them job 
skills. That is not what this is about.
  So who could possibly be blocking this? What is the problem? It makes 
no sense. It is one of these things that you hear the Federal 
Government does and you think, well, how does this keep happening? Is 
it the dollars that are generated by some benefit to employees in 
Federal Prison Industries who are contracted to supervise the 
prisoners? Is it the amount of money that has been given to different 
agencies? Is it inertia, that government will not do it? It is not a 
defensible policy. No one likes to stand up and defend this. And when 
they do, quite frankly, the few times we have ever had any kind of 
debate, the debate has not been anchored to reality. As I recall, some 
of our colleagues, they talk about the importance of employing 
prisoners, but they cannot deal with the fact that people in your 
district or my district have been following the law have been laid off 
to employ somebody who violated the law. They cannot defend that 
position and usually they do not try.
  So who exactly has held this up, and what is the problem here and why 
do they not pay attention?
  Mr. HOEKSTRA. The problem that we have, I believe, is within the 
bureaucracy of Federal Prison Industries. I think you used the word 
``inertia.'' They have got this momentum going.

[[Page 10074]]

They are building new plants. They are employing all of these workers. 
They cannot think outside of the box. They are wedded to the box that 
says we are going to make products that everybody can identify with.
  Going out and starting a new relationship with Habit for Humanity and 
a new category of products that does not compete with the private 
sector, that is too hard to do. This is pretty easy. And I think that 
is what it is.
  The scary thing here, this is where we are today. Over the next 5 
years, the plan of this Justice Department, in their annual report, 
Attorney General John Ashcroft not only endorses these results of 
increasing sales by 16 percent and saying that is a wonderful thing, 
without thinking about what it has done in your district and my 
district and other districts around the country, they are requesting, 
and I think other documents would show that what they want is 30 
percent growth over the next 5 years.

                              {time}  1730

  So I mean there are those within this group of people who see this as 
a wonderful opportunity, for whatever reason, a wonderful opportunity 
to put more Americans out of work. So my legislation is going to pass; 
I just do not know whether it will pass this year or whether it will 
pass in 3 to 5 years. Because each and every year when we go through 
this process, and the gentleman and I have worked on this for about 5 
years together, but it becomes much clearer to Members.
  We have been kind of tilling the soil, and the seed does not sprout 
and grow until it happens in their district. Then they come back and 
say, hey, Pete, Mark, I finally get it. I had a company that was 
selling this stuff to the Federal Government and they were doing a 
great job, and last week Federal Prison Industries came in and said, 
oh, by the way, that is now our business, we are going to make it. And 
they say, Pete, my folks make that. They had a better quality product, 
it is cheaper, and they cannot even bid for the business. Is that 
right? And I have to say, yes, that is exactly how it works. Glad to 
have you on board and glad to have you now being a supporter.
  What we need is we need to get to the 218 Members this year so that 
we can get those folks in our districts and other districts back to 
work as soon as possible by at least providing them the opportunity to 
compete for this business.
  Mr. SOUDER. If the gentleman will yield, one of my concerns is that 
this inertia starts to develop a bigger and bigger base; and I hope our 
colleagues understand that if they do not move soon, the bigger this 
machine gets, the more people that get involved in contracting and 
building the prison industry infrastructure itself, all of a sudden we 
will have a monster that starts to consume society.
  The other day when I was driving to the airport, or being driven to 
the airport, I saw a crew out cleaning the roads who were on a work-
release-type program. Imagine if our county and State governments 
picked this up and instead of doing a work-release program, they 
decided they will run the local gas station, which would be the 
equivalent here. So when you come up to an interstate exit or a highway 
exit you would now have gas stations operated by people who are in 
prison, restaurants operated by people in prison. There would be an 
outrage. But manufacturing is not as visible to the consumer eye as 
retailing. They are taking jobs away in the industrial sector and 
transferring them. And by the way, those industrial sector jobs have 
the biggest multiplier effect on our economy.
  You know, I am a little older, too; and when I was getting my MBA 
back in 1974 from Notre Dame, one manufacturing job was the equivalent 
of seven. Now it is closer to 15 in its impact that brings dollars into 
the community. So when you rip those manufacturing jobs away, maybe 
they are in a building you cannot see. But if you start to visualize 
that you are taking as many jobs in my little hometown, say 40, as 
would be employed in the grocery store, plus the dairy sweet, plus the 
gas station, plus a couple of other small retailers in this town, and 
say all this retail infrastructure is going to be operated by prison 
industries, you would have more outrage in the community. Yet those 
retailing jobs do not extend dollars to the community like the 
manufacturing jobs.
  We have to wake up. And lest I step on another sore point here in 
Congress, we years ago decided for good or ill that Indian gaming could 
be allowed. But Members started to realize that that same clause could 
be used for supergas stations or retailing operations that could be 
based and moved around similarly by exits. The best thing you can say 
about the comparison with the Native Americans and how they were using 
it was, hey, it was originally their land, we probably took the land 
unjustly, they are following the law. This group, which is doing in 
effect the same type of expansion of their categories of industry, 
putting law-abiding Americans out of work, do not have an injustice; 
they are there because they committed an injustice and we are trying to 
rehabilitate them. They do not have any prior claims, yet you see them 
stealthily moving through sectors of the economy threatening American 
jobs.
  The fundamental question is: Why is this not like other types of 
illegal dumping from other countries, where they are subsidized? Why is 
this not like other countries, where we lose competition because they 
do not have to have the same American laws? And why is it not focused 
on trying to gain jobs that have gone outside of America in Federal 
Prison Industries rather than take law-abiding jobs?
  How do you answer those questions? How does any Member of Congress 
answer the question, when some factory in America loses a job, and that 
person says, if I robbed a bank, if I abused cocaine, would I be able 
to keep my job? It is backwards, and it makes absolutely no sense.
  I am worried that if we do not move here with a Justice Department 
that you would expect to be favorable and a Congress that should be 
paying attention that this momentum and this inertia is just going to 
overwhelm us. My esteemed colleague has been gaining sponsors, but not 
fast enough. And we really need to get a sense of urgency in this House 
and in this administration.
  You know, you cannot talk about losing jobs in America, you cannot 
walk out there with a straight face and say we are trying to help the 
economy, and by the way we are taking away from law-abiding citizens. 
It does not fly.
  Mr. HOEKSTRA. Well, if the gentleman will yield, under this Justice 
Department, what has happened? The gentleman talked about this, and the 
statistics are ugly. We have seen the growth numbers: 16 percent 
overall, 24 percent in office furniture, 216 percent in vehicular 
elements and those types of things. So under this Justice Department we 
are seeing growing sales.
  The gentleman brought up a couple of great points that I want to 
respond to. The gentleman talked about dumping. Under this Justice 
Department, sanctioned by this administration, Federal Prison 
Industries has gone and signed contracts with Canadian companies, in 
the office furniture industry again. It is a Canadian company that 
could not necessarily penetrate or compete for government contracts 
here in the U.S., so what they did is they signed a contract with 
Federal Prison Industries. Basically, Federal Prison Industries either 
just passes the product through, or maybe does just a little bit of 
assembly, so we now in government offices around the country, 
government procurement officers, we are requiring those folks, through 
Federal Prison Industries, to buy Canadian-manufactured products.
  And, by the way, Canada, thanks for helping us with Iraq. The country 
just north of us stiffed us on the war. The country just north of us 
stiffed us on the war, but Federal Prison Industries is embracing them 
and saying, hey, make a deal with us and you can sell your products. 
You do not have to compete for the business; we will make the Federal 
Government buy your stuff.

[[Page 10075]]


  Mr. SOUDER. If the gentleman from Michigan will yield, let me see if 
I understand this. The company in my district or your district, where 
the employees that have been following the law are making something 
that is cheaper and better made, they go in to bid.
  Mr. HOEKSTRA. They may never bid.
  Mr. SOUDER. Or they would like to bid for, say, military training 
base equipment at a housing unit, tables, sofas, other things, file 
cabinets, whatever it is; and they go in, and because of the points 
that are in effect given to prison industries, that even though they 
are lower priced and better quality, they might not even be competing 
with Federal Prison Industries; they might be competing with a Canadian 
or foreign-owned company? So that not only are products made unfairly 
in prison, but the wholesaling and marketing profits are going to a 
company from overseas, knocking American law-abiding workers out. So we 
have a double whammy that would certainly not be allowed in any kind of 
international trade agreement.
  Mr. HOEKSTRA. I want to make it very, very clear. Our companies are 
not even allowed to compete for the business. Federal Prison Industries 
gets right of first refusal.
  Mr. SOUDER. So it is not points.
  Mr. HOEKSTRA. It is not points. If Federal Prison Industries makes 
it, they can demand that that housing project that the gentleman just 
talked about buy from them, no matter what else they get. No matter 
what other kind of bid, they have to buy from Federal Prison 
Industries. The companies in our districts cannot even go compete for 
that business.
  Mr. SOUDER. If the gentleman will yield, this is not like a veterans-
owned company or a female-owned business or a minority-owned business 
where you say, okay, they get a 10 percent advantage; this is flat-out 
they cannot even bid, even if it was half price?
  Mr. HOEKSTRA. No. There is a reason it is called mandatory sourcing. 
It is not preferential sourcing, where there is a scoring system and if 
you are within 5 or 10 percent of the private sector price you have to 
buy it from us. It is not preferential competition. It is mandatory 
sourcing. You must buy from Federal Prison Industries. If you want a 
waiver or seek a waiver, Federal Prison Industries determines whether 
you will get it.
  It is absolutely outrageous. And I just want to mention one other 
thing the gentleman talked about. The inertia, the momentum where we 
build up this prison industrial complex; 111 different factories: 
Alderson, West Virginia; Atlanta, Georgia; Beaumont, Texas; Butler, 
North Carolina; Dublin, California; Edgefield, South Carolina; Fort 
Dix, New Jersey; Greenville, Illinois; Jessup, Georgia; Leavenworth, 
Kansas; Lee, Virginia; Manchester, Kentucky; Oakdale, Louisiana; 
Pollock, Louisiana; Ray Brook, New York; Safford, Arizona; Sandstone, 
Minnesota; Seagoville, Texas; Terre Haute, Indiana; Tucson, Arizona; 
Minnesota; Mississippi; Texas; Connecticut; New Jersey; Kentucky; 
California; Pennsylvania; Illinois; Tennessee; New York. 111 different 
factories. Absolutely they are building it up.
  So we have this momentum put in place that just wants to gobble up 
more and more business. They want to grow and grow, grow by 30 percent 
after they have grown by 16 percent. They have come up with these 
creative marketing schemes, and what they are selling is they are 
selling their mandatory sourcing. They are going to these Canadian 
companies and saying if you sign these contracts with us, we may or may 
not do anything with the product except pass it through. It may not 
even stop at a prison, but if you sell through us we can make people 
buy your stuff that otherwise probably would go to an American company.
  Thank you, Federal Prison Industries. Number one, you take our jobs. 
This is a new scheme that has come up within the last 12 to 18 months. 
So this is the direction this Justice Department is going. I guess they 
do not realize that there has been a little bit of an economic downturn 
in America. They think we have full employment. This Justice Department 
is now saying, before we put people in Michigan or Indiana back to 
work, we have to get those people in Ontario back to work. And when we 
get those people in Ontario back to work, we will take a look at 
Michigan and Indiana. But we have to first take care of those people in 
Ontario.
  It is really too bad that the Attorney General and Federal Prison 
Industries are getting away with this. Probably Federal Prison 
Industries is getting away with this because the Attorney General is 
not paying any attention to it, although we have met with the White 
House. We have tried to get the attention of the Justice Department.
  The President came to Michigan a couple of months ago, and he asked 
about this issue. I think he shares our passion. He thinks it is wrong. 
He made a comment along the lines of, hey, Pete, I think we have that 
issue done. But, Mr. President, no, we have not. Matter of fact, it has 
gone from bad to worse. This Federal Prison Industries is a fast-
growing growth industry. That is what we want to have in the economy, 
but that is not what we want to have at Federal Prison Industries. But 
under your Justice Department, that is exactly what is happening.
  Mr. SOUDER. If the gentleman will yield, my understanding is a lot of 
this is defense contracting.
  Mr. HOEKSTRA. Well, a good part is defense. But a lot of these 
products are used throughout the Federal Government. A good portion is 
defense, yes.
  Mr. SOUDER. We are about to mark up in the Committee on Government 
Reform a new defense procurement act, as is Armed Services; and I am 
trying to understand, again, as the Department of Defense came and 
talked with those of us on the committee last night, their argument was 
they are trying to reduce costs and get more flexibility in the Federal 
Government. Why would they then do something that costs more with less 
quality in another area? And how are they going to justify coming to 
Congress and asking us to vote for that acquisition act if they do not 
fix this?
  Mr. HOEKSTRA. It will be very difficult. Again, the folks in the 
Defense Department are very much in support of this type of reform 
because they want to go to the private sector, or at least they want to 
have the opportunity to go to the private sector. Typically, the 
private sector is going to be more flexible. From experience, we know 
they can provide a more cost-effective product and a better quality 
product. So, again, that is why Federal procurement officers are with 
us.
  The folks that are not with us are the bureaucracy within the 
Department of Justice; and I am hoping that somebody just rings the 
bell over there and says, wait a minute, guys, this is wrong. We need 
to stop this, and we cannot believe that on our watch this is what is 
happening.

                              {time}  1745

  We are growing the inmate workforce at the same time that 
unemployment rates in many parts of the country are going up. Again, 
Federal Prison Industries and Office Furniture grew by 25 percent as 
the industry went down by 18 to 20 percent, a 45 percent differential. 
It is terrible to say, but I would probably have been overjoyed if 
Federal Prison Industries would have stayed level, but they did not 
even have the courtesy in this competitive, tough economy to not be 
greedy. They got greedy.
  Mr. SOUDER. Mr. Speaker, this President has had few things as 
defining in his career as the principle of contracting out and not 
having things be done by the Federal Government that can be done by 
entrepreneurial, private sector people. He did that his first term as 
governor of Texas, second term as the governor of Texas, and campaigned 
on that. Sometimes he goes too far in contracting out.
  My question is how can we have such a disconnect in the Department of 
Justice with the goals of the President of the United States that are 
explicit through every agency right now ordering contracting out, and 
this is not contracting out, it is contracting back. It is sucking jobs 
out of the private sector, bringing them, kind of a reverse

[[Page 10076]]

contracting out, and then in the proposals, proposing to increase that. 
At the rate of growth that this category is going, what is the point of 
us in Congress trying to look at contracting out if they are going to 
be contracting in in this area.
  Mr. HOEKSTRA. This is why Federal employees support us as well. What 
may happen is the Federal Government may decide to outsource and 
contract out certain things, and the winning contractor may be Federal 
Prison Industries.
  Mr. SOUDER. Mr. Speaker, if the gentleman would yield, like when one 
goes to a national park and the individual greeting you is somebody who 
works for Federal Prison Industries.
  Mr. HOEKSTRA. I would not go that far.
  Mr. SOUDER. We do not know the way this is going. People in my 
hometown who have worked all their career building furniture, all of a 
sudden are put out from somebody from Federal Prison Industries. It 
shows graphically, if one visualizes it, what if your local park ranger 
works for Federal Prison Industries? Or what about if somebody doing 
the typing in for accountants would be?
  Mr. HOEKSTRA. They are getting into services, into the telemarketing, 
into the processing and all of these kinds of things. Digitizing of 
photos and photo libraries. They are getting into an unbelievable 
number of things. Some are highly sensitive.
  What the gentleman has laid out I would like to think is nowhere in 
the realm of possibility, but I should know better. I would never have 
thought that they could have grown by 25 percent in office furniture or 
16 percent overall this past year. I would never have thought in their 
annual report that they would have publicized and highlighted the fact 
that they are paying all of 23 cents an hour up to $1.50. They are 
proud of it and proud of their results. This Department of Justice has 
demonstrated through their annual report, even though the original 
criteria said minimal impact on workers and American taxpayers, they 
are not abiding by that standard anymore.
  They are ruthlessly and aggressively going out to try to transfer 
jobs from the private sector and move them into Federal Prison 
Industries. It is one thing for you and I to be talking here in a 
theoretical sense, and it is a very different thing, and I have seen it 
in the gentleman's district and in my district, where I run into folks 
who say I have been laid off. Are you making any progress on the 
Federal Prison Industries, knowing that this is not going to fix all of 
the problems, but it sure could help.
  If we could just get some of those people back to work, it would get 
us moving in the right direction. We need that base volume because the 
next thing that is on the horizon after Federal Prison Industries is 
foreign competition. Our industries should not have to worry about 
competition from their own government at the same time they are 
worrying about competition from China, but that is exactly what they 
are doing. Our government has duplicated the China model: Invest in 
capital, they get their capital free, and then pay the workers very, 
very little. The American government, I guess they are teaching our 
companies how to compete against the Chinese by duplicating the Chinese 
model through Federal Prison Industries, and it is an outrage.
  Mr. Speaker, I yield to the gentleman from Indiana.
  Mr. SOUDER. Mr. Speaker, I congratulate the gentleman for his work on 
this and in trying to get the Department of Justice aware that they are 
in direct contradiction of the goals of this President and this 
Congress which has said we are looking at how to maximize the private 
sector and put Americans who are law-abiding citizens back to work.
  I do not want to face people in my district who might have to wear a 
button that says ``I follow the law, I am employed.'' We need to look 
for options for people to be trained. This is not about not giving 
people in prison an opportunity, but there is no reason that going to 
prison should give people an unfair advantage, particularly going 
through foreign countries, against people who in America have followed 
the law who are working hard who have actually outcompeted foreign 
companies to hold their sector until the U.S. Government behind them, 
waiving regulations and waiving capital costs, then giving them a 
mandatory advantage to go for higher prices with less quality and say 
you still must buy it, and then have the gall to come to Congress and 
say we are trying to contract out. We are trying to save money for the 
Federal Government when, in fact, they are putting people in our 
districts out of work.
  It does not make sense and it does not fly, and I hope more Members 
and staff will pay attention to this debate. It is pretty much of a no-
brainer. I hope that the Department of Justice will turn around on 
this. They are projecting this as a growth industry. It is incredible 
to me that they would not be humiliated by this, and instead look at it 
as a growth industry.
  Mr. HOEKSTRA. That is what is coming down the road. It has been a 
growth industry. It is going to continue to be a growth industry. I am 
optimistic with the kind of support that we have for the bill on a 
bipartisan basis, we have had a coalition of the gentleman from 
Massachusetts (Mr. Frank), the gentlewoman from New York (Mrs. 
Maloney), the gentleman from Wisconsin (Mr. Sensenbrenner), the 
gentleman from Michigan (Mr. Conyers) and myself, together for a number 
of years, and I am looking forward to this to move through the 
Committee on the Judiciary quickly, and am hopeful that we can get this 
bill to the floor and have a good debate.

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