    [Public Papers of the Presidents of the United States: William J. Clinton (1993, Book I)]
    [February 23, 1993]
    [Pages 185-195]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Remarks to the U.S. Chamber of Commerce National Business Action Rally
    February 23, 1993

        Thank you very much. Chairman Gorr, President Lesher, Vice Chairman
    Marcil, ladies and gentlemen, I thank you for that warm welcome. And I
    welcome you to your Nation's Capital and to this magnificent old hall.
        I was glad to be here early enough to hear at least some of the
    Marine Band warming you up. That should put us all in a better frame of
    mind.
        I thank you all for your concern for your country and for the
    contribution you make every year and every day to make America work. I
    want to say a special word of appreciation for the people from my native
    State who even hung a sign up there so I could find them.
        As you know, if you've been following the news, I have been out on
    the road discussing with the American people the economic plan I have
    presented to the Congress. Yesterday I had a particularly amazing day,
    seeing everything that is best about our economy and some of the most
    profound challenges we face. I began at an interesting firm called
    Silicon Graphics in California's Silicon Valley, where I spent a goodly
    amount of time visiting with the employees and watching what they do.
        The Vice President and I went there to outline our technology
    policy. But afterward we just talked to the employees and listened to
    them. I was amazed to see that this company, as so many others in this
    country, has really succeeded in making the changes going on in our
    world friendly to the company, its employees, its owners, and its
    customers, not the enemy. As I have said so many times across this
    country, I think one of my primary jobs as President now is to try to
    figure out a way to make these turning changes in the global environment
    our friend and not our enemy.
        Silicon Graphics have unleashed the creative energy of their most
    talented people. They've made a strength of the diversity that is so
    prominent throughout the State of California. They reduced bureaucracy
    to make it virtually nonexistent, pushed decisions down to the lowest
    level, and succeeded in creating products that are displaced every 12 to
    18 months with their own products.
        Then I flew up to Washington to meet with the employees at the
    Boeing Corporation, our

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    Nation's largest exporter, a company that, as you know, is in some
    trouble now. It just announced 23,000 layoffs. And after I met with
    several thousand of the employees there, I had an hour private meeting
    with the heads of all the major American airplane companies: with
    Boeing, then with McDonnell-Douglas, with Pratt-Whitney, those who
    manufacture the airplanes and the component parts that are an important
    part of our economy.
        They're facing some very tough competition. They have some
    structural problems in the market here, and I think have been subjected
    to some fairly unfair competition abroad, principally from airbus, a
    consortium of European efforts that has benefited from $26 billion in
    direct Government subsidies in the last year few years.
        I spent a lot of my adult life dealing with large organizations in
    times of challenge and change. I had the great privilege to be Governor
    of my State for a dozen years. And I have acquired an enormous respect
    for people in the private sector and what they've had to cope with in
    this country over the last 12 to 15 years, some of you over the last 20
    years, as we have moved inexorably into a very different global economy.
        I came here today to ask for your support for my economic plan to
    take this country in a new direction because I believe it will make
    business more competitive and workers more productive and will help us
    to deal with some of the principal problems that we have faced over the
    last several years: high levels of unemployment periodically, stagnant
    wages among workers, lower levels of overall productivity than many of
    our major competitors.
        In the news today, there are things which are good news. We know
    that in the last quarter, American productivity jumped to almost a 20-
    year high as more and more American businesses have come to grips with
    the challenges they face. We know that the housing markets are beginning
    to pick up, and that's good news. We know that in the last 2 months of
    the last quarter, consumer confidence took a big jump, and that's good
    news.
        But we also know that there are still very serious problems in this
    economy with creating new jobs, serious problems with stagnant incomes,
    and enormous problems that have led to dampening the growth of new jobs
    in the small business sector. The restructuring of big business, which
    has been going on now for more than a decade, led to a reduction in
    employment in every year of the 1980's in larger businesses. But in most
    of that decade, the reduction in employment in big business was more
    than offset by the creation of new jobs in small businesses. In the last
    couple of years, that trend has not been able to continue.
        There are lots of reasons why. Clearly, the exploding cost of health
    care is one. The credit crunch that exists in much of our country is
    another, and we're trying to address that. And there are many other
    reasons. But it is plain that the lack of a clear national economic
    strategy to deal with our long-term problems has played a central role.
        My goal in this economic program is to follow a strategy which will,
    short- and long-term, increase jobs, increase incomes, and increase
    productivity. That means, in my judgment, we have to increase
    investment, both public and private; we have to do more to educate and
    train our people so that they can produce at high levels; we have to
    take far better advantage of technology in the world, especially in the
    commercial sector.
        In the 1980's, the most successful industrial strategy we had was
    our defense budget which kept our lead in international defense
    technologies while we were losing our lead in many commercial
    technologies.
        We have to have a strategy for preserving our environment that makes
    that an engine of economic growth, not a burden on business and a drag
    on the economy. We have to reduce our inordinate Government deficit. We
    have to deal with the health care crisis. And we have to change the way
    Government operates and relates to the private sector in very
    fundamental ways.
        There has not been a serious reexamination of the structure, the
    role, and the function of the Federal Government in some sort of
    comprehensive way in a generation. And because we have guaranteed claim
    on revenues and guaranteed claim on some customers, we have not been
    under the same pressures that many of you have to undergo, the kind of
    searching reexamination that the international economy has imposed on
    all of you. And I am committed to doing that.
        I ask you before we get into the details to look at just two things:
    First of all, if we do not think to change the fundamental pattern

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    of the way your National Government works, if we just keep on doing what
    we've been doing and argue around the edges, the Republicans winning a
    little here, the Democrats winning a little there, everybody chipping
    around, but basically we keep on the same course, here is what will
    happen. By the end of the decade the annual deficit will be $653
    billion. About 22 cents of every dollar you pay to the United States
    Government will go to pay interest on past debt. We'll be up to about 60
    cents on entitlements by then because of the exploding cost of health
    care and more people retiring. We will be spending a certain amount of
    money that we have to spend on the national defense, and people in the
    Congress will come to this city having made great campaign commitments
    to all of you out in the country and without regard to their party,
    they'll be arguing over how they're going to spend 3 or 4 cents on the
    dollar because we will be paralyzed in the expenditure of the public
    money, and we'll have less money to spend on investment in our future.
        We'll be spending 20 percent of the gross national product on health
    care. And no other country, if present trends continue, will be above
    10, which means every productive enterprise in the country will be
    spotting its international competitors 10 cents on the dollar in health
    care alone. If we continue the present patterns, that is what we have to
    look forward to.
        We have no alternative but to change. We should begin with a program
    that increases public investment in technology and education and in
    people and bring this deficit down at the same time. That's hard to do.
    This country has never tried to do that before. We've had times past
    when times were good and the deficit was brought down. And in times past
    when things were tough, the deficit has been increased to increase
    investment. Our Nation has never before tried to increase investment and
    reduce the debt at the same time. It is not easy to do.
        I have offered a plan to do that that cuts spending with real
    specific cuts, not rhetoric about overall caps; with tax increases that
    I believe are progressive, although none are free of pain; and with
    targeted, specific investments to grow this economy.
        Now, already we're beginning to see some impact. Just since the
    election, since the Secretary of the Treasury and other people on our
    economic team and the President have been able to send clear signals to
    the market that we are going to bring down this deficit, there has been
    a seven-tenths of one percent drop in long-term interest rates.
        Just yesterday, due to increased confidence in the plan in the bond
    market, long-term interest rates fell to a 16-year low. As a result,
    over the last several days mortgage rates have begun another significant
    decline. The serious drop in interest rates is already providing a major
    stimulus to economic growth and major savings to millions of American
    families.
        As interest rates fall more people will be able to save money on
    business loans, home loans, car loans, credit card transactions; all
    these things will free up cash to get the economy moving again. If we do
    it right and deliberately, the vast majority of Americans will save more
    money on lower interest rates than they will pay in the higher energy
    tax. Many businesses will save more money on lower interest rates than
    they will pay in the other tax increases. By increasing the pool of
    available investments through debt reduction, we can free up tax money
    away from interest on the debt to invest in education in our future, and
    we can free up major sources of funds in the private sector.
        We have to do this together. The reason the debt portion of the
    package is important is that many of the changes which happen in America
    that are good, by definition, have to happen outside Washington.
    Generations of experience has taught us that the private sector
    functions best when the Government supports it but does not direct it;
    frames environment but does not intrude upon it; when the climate is
    stable and sustaining but when you can create jobs and grow the economy
    through your own enterprise.
        For many years I was charged with being the chief advocate for the
    business community of my State. I went around the world trying to sell
    our products and increase investment in our State. We worked on a long-
    term strategy under the most difficult imaginable circumstances. When I
    took office in 1983, our unemployment rate was in double digits and most
    of our counties had unemployment rates not only in double digits but in
    the high unemployment counties in the State we had several counties with
    unemployment rates in excess of 20 percent. And we set about to increase
    investment, increase competitiveness, improve the

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    education and training of our work force. Last year we ranked second in
    the country in job growth, and for the last 5 years have been in the top
    10, not because of anything I did but because of what we did.
        There has to be a clear partnership here that empowers the private
    sector to grow jobs by having the right kind of environment, the right
    kind of incentives, and the right kind of long-term commitments. This is
    the sort of commitment that I seek to bring to the Nation with this
    national economic program.
        I think it is impossible to underestimate the importance of any
    particular element although there are those who will. If we don't reduce
    the deficit, long-term interest rates don't go down, and the Government
    spends more of your money paying interest. If we don't cut spending, the
    deficit reduction package has no credibility. And besides that, a lot of
    this spending really needs to be cut. If we don't raise some revenues,
    we won't really cut the deficit as much as we should. And if we don't
    have some targeted investments, we will ignore the fact for the last 12
    years, while other countries have been putting more into infrastructure,
    into technology, and into education and training, relative to the
    efforts of our competitors, we have been declining. And in absolute
    dollars, our Federal effort has declined in many critical areas.
        So I would argue that we need a comprehensive approach. But let me
    be clear again: This administration understands clearly that the private
    sector is the central engine of economic growth. I have tried to put
    together a plan that will enable you to succeed.
        I hope that this plan and this speech, frankly, is just the
    beginning of a continuing dialog between us. I don't accept the
    conventional wisdom that a President has about 6 months, and after that
    everybody's running for reelection and everything's over and the
    political climate takes over. The truth is that we have been going in a
    certain direction economically for 2 decades, and we have been in the
    grip of a partisan and interest-dominated gridlock for a long time, and
    it is not going to turn around overnight. And a lot of the things that I
    have to do here with our business cannot be done overnight. And so we
    need a dialog, a set of continuous changes.
        If it is true that business has to manage change on a constant
    basis, surely it must also be true of Government. We can no longer
    afford the luxury of being told that the President has a year to work
    and after that everybody just waits around until the next election. That
    is a highly unproductive way to spend your money. And I believe we can
    do better.
        Every one of you who's ever run any sort of enterprise knows that
    there comes a time in the life of any organization when the person in
    charge has to face facts and change or just let the thing drift into
    decline, maybe sudden loss. I sought this office because I became
    convinced that the classic American idea of progress, the idea that if
    we worked hard, played by the rules, made the necessary adjustments,
    we'd all do a little better, and we could certainly leave a better life
    to our children. And that idea had been imperiled by our failure to face
    many of the fundamental realities about which I have already spoken.
        Our Government has responsibilities which have been too long
    neglected: to run a balanced economy, to invest in our people, to
    support business ability, to create wealth. In this city, people are
    very good at blaming one another for who did the wrong thing and
    pointing the finger at one another, but we've not been very good in the
    last few years at forgetting about blame and assuming responsibility.
        Last Wednesday when I gave my State of the Union speech to Congress,
    I said to the Republicans and the Democrats in the audience, and I say
    to you, that I don't much care anymore whose fault our problems are. I
    do think we should all be willing to assume responsibility for improving
    the situation. And if it gets better, I could care less who gets credit
    for it. But the time has come to go to work.
        I think that, to be fair, before I ask any of you to change
    anything, I need to set an example with the Federal Government. Let me
    begin by saying there are an awful lot of good people who work for you
    everyday in the Federal Government, people of astonishing dedication.
    And like any other business, there are a lot of people who are out there
    in the Federal Government who know a lot more than I do about what we
    could do to change it, to save you money, and to make it work. But as an
    institution, our system has become too large, too slow, too
    unresponsive.
        The Government accepts, even when it's doing things that you would
    all agree with, is often locked into a style of management and outmoded
    priorities on spending and regulation

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    and rulemaking that hamper even the best of intentions. Really, if this
    Government were a business, it would have gone under a long time ago.
    And again I say, not because of the people working here--most of the
    people who work for you decided to do this because they love their
    country, and they believe in public service--but because we have simply
    not been forced to undergo the discipline of reexamining how we do our
    business.
        And so it is time to take stock of Government, not just from the
    point of view of cutting but from the point of view of how it can be
    made to work. We have to look through every program and ask if it works.
    I've said this before, but I'll say it to you in case any of you missed
    it, I felt enormous sympathy for all my predecessors when I walked into
    the Oval Office and found that I had Jimmy Carter's phone system
    operating with Lyndon Johnson's switchboard. [Laughter] It was a
    metaphor for how business is done: when you call into the White House,
    there's someone actually there picking up a wire and hooking it into the
    extension. [Laughter] And I might say, they're some of the most valuable
    people we have, because they do something that every modern organization
    needs: They can find anybody in the country when they need to.
    [Laughter] And we certainly need those operators to do that. But the
    point is that that really is a metaphor for the fact that Government
    often feels that it doesn't need to reexamine it.
        I found that I could not have a conference call as the President of
    the United States in the Oval Office--[Laughter]--except for one:
    anybody in the central office who wanted to hear what I was saying could
    punch the lighted button and listen. [Laughter] We also found,
    interestingly enough, that while it cost money to change the technology
    on telephones, we were actually spending more money than we should be on
    monthly service charges and operating charges because we had an
    antiquated system. It was amazing.
        Well, anyway, I think the Government has to set an example. So I
    have submitted to the Congress a budget that, in the coming fiscal year,
    will cut the White House staff by 25 percent below what it was when my
    predecessor left office, and not only cutting it but reorganizing it so
    that it will function better. We'll have a smaller drug policy office
    with more influence and more impact. We'll have an Economic Policy
    Council for only the second time in our country's history to go with the
    Domestic Policy Council and the National Security Council so that we can
    bring all the people who have an influence on economic policy together
    and focus on every aspect of it so that the right hand knows what the
    left hand is doing, and so that, hopefully, we can do a better job of
    anticipating the real consequences of any decisions which are made.
        I've also asked the Congress to cancel next year's pay raise for
    Federal employees and to reduce their raises in each of the following 3
    years, not because I want to hurt those people--they make this
    Government go--but because we have to tighten our belts before we ask
    Americans to tighten theirs.
        I have submitted a budget that reduces the administrative costs of
    every Federal Agency in the next 4 years by 3 percent, 3 percent, 3
    percent, and 5 percent, a total of 14; and which will reduce by
    attrition, not by firing, the Federal work payroll by 100,000, for
    savings in excess of $9 billion.
        I was pleased the other night when I went up to the Congress to
    deliver my talk that the leadership told me they were going to reduce
    the staffs of Congress by the same amount that we reduced the
    administrative budget of the Federal Government, which is a real change
    and a welcome one.
        We have also tried to reduce a lot of the executive perks to set an
    example. A lot of our Secretaries are now eating in the dining room with
    their employees, and they're finding they're learning more during the
    lunch hour about how we can improve the Agency than they could have in
    all the meetings that have been scheduled.
        But these things are the tip of the iceberg. We have really got to
    find a way to reinvent the way the Government works, to bring modern
    technology and modern management practices to the workplace, to speed
    the flow of information, streamline decisions, and empower people at the
    grassroots level. I want you to be able to look at your National
    Government a couple of years from now as a model for customer service,
    not a bureaucratic monstrosity.
        As an indication of that commitment, I have appointed as the Deputy
    Director of the Office of Management and Budget for Management, my
    friend Phil Lader, a remarkable businessman from South Carolina, who
    understands these

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    concepts and will be able for the first time to make the management part
    of the Office of Management and Budget as important as the budget part.
    It's not just important to cut the spending; it's important that
    whatever you give us we spend right. And I think we can.
        Let me just give you one example. We have contributed an inordinate
    amount of money to the Superfund to clean up sites which need to be
    cleaned up. The money is being used to pay lawyers' fees instead to
    clean up the sites. We might as well have just have been crass and said,
    ``We don't care about the environmental consequences. We're not going to
    raise this money. We're not going to have a fund.'' Then we could pat
    ourselves on the back and say, ``We're really concerned about this
    environmental problem of toxic waste sites, and so we raised the
    Superfund.'' Except the Fund's not being spent to clean up the sites.
    We're going to find a way to spend that money cleaning up pollution not
    paying for lawyers. That's the kind of thing we have to do if we're
    going to run this Government right.
        There are also 150 very specific budget cuts in this budget. And to
    people who say to me, ``Well, you ought to be able to find more, ``I
    say, ``that's right, but there's 150 I found in 4 weeks that haven't
    been there in 12 years.'' So I feel that we're doing pretty good.
        I'm more than happy to do more. But since the first budget President
    Reagan submitted in 1981, which did have a lot of very specific budget
    cuts, this budget is the one that has the most specific cuts. Not saying
    to the Congress, ``Well, let's put a cap on this or a lid on that and
    you all figure out how to distribute the pain,'' but saying, ``I'll take
    responsibility for angering these constituencies by cutting this
    spending.''
        Can we do more? Of course we can. But we had to get off to a fast
    start. And I have made a good-faith offer to Republicans as well as
    Democrats, and to the Congress, and to people around the country to talk
    about how we can do that. It is very, very important.
        The second thing I want to say to you, however, is that there is a
    big structural deficit which it is difficult to overcome by budget cuts
    alone, for this reason: Every year we grant cost-of-living increases to
    people on Social Security, and we should. There is a surplus in the
    Social Security tax fund which is being used to make the deficit look
    smaller. And that is very hard on small business in America, by the way,
    that we finance so much of our Government through the payroll tax. We'll
    need those payroll taxes later, but not now.
        We have increases in health care for the same reasons you do, that
    is, the cost of health care is rising faster than the rate of inflation.
    That drives up the cost of Medicare for the elderly and Medicaid for
    low-income people.
        And then we have another problem aggravated by the flaws in our
    system, which is that every month in this country 100,000 Americans lose
    their health insurance and some of them are eligible for the Medicaid
    programs for the working poor. So our costs go up as private sector
    folks can't afford to cover people with health insurance anymore, and
    they get pushed onto the Government payroll. So those increases occur
    and will continue to occur until we reform structurally the health care
    system. And I'll come back to that in a moment. So those increases are
    there.
        Then there are some programs that I think are quite central to our
    economy that require us to continue to fund them. Many are controversial
    with those who don't benefit from them, but I believe in some of them.
    I'll tell you a couple I believe in. I think that we should continue to
    fund the superconducting super collider because I think it's good
    science, even though it's expensive. We are going to create a lot of
    jobs in the future through investments in technology and science.
        I believe that we cannot afford the space station design we have
    been operating on. And it hasn't been properly funded for years, and
    it's having huge costs overruns. But I think there should be a space
    station program that supports our shuttle program and supports the kinds
    of technological benefits that space has produced for the American
    economy here down on the ground over the last several years. And so I
    will support that, though we will not increase that spending as rapidly
    as it would take to support the old design. But we will do enough to
    keep all the people that are working, working in this area that I think
    is important. And that means we'll spend more money on that, and I think
    that's significant. But there still will be net budget cuts that are
    very deep, and I'm looking for more.
        I also want to say that I intend to make reports to you on that, and
    before we get to any tax increases I want to know that the spend-

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    ing cuts are going to be there. I will not sign a tax increase without
    the spending cuts.
        The tax problem, as you know, is highly progressive. And some say
    that it is so progressive that it will discourage people from
    reinvesting. I would just ask you to study the whole thing. We provide
    for the first time in the history of the country a permanent investment
    tax credit for small businesses for 90 percent of the employers who have
    40 percent of the workers but create a majority of the jobs in this
    country.
        We provided alternative minimum tax relief for the big capital-
    intensive businesses of this country, who have told us repeatedly that
    the alternative minimum tax treatment in the present Tax Code actually
    discourages people from making investments. We have provided some relief
    from the passive-loss provisions of the income Tax Code for people who
    are in the real estate business, because I think that has aggravated the
    condition not only of real estate but of some of our banks and
    contributed to the credit crunch. So I think there will be both direct
    benefits to real estate and indirect benefits to people who had to get
    bank financing by changing this passive-loss provision.
        There are lots of other things in this bill which I think are
    important to the creation of jobs. So I ask you to look at it as a whole
    package and to recognize that we have to, again, move away from a tax
    system that is based too much on fixed-rate taxes, like excise and
    payroll taxes, more toward income taxes that have also offsetting
    incentives to invest. I believe that that is the proper direction to go.
        I know there is also some controversy over the energy tax. And I'd
    like to talk about that for just a moment. If we are to find more
    revenue, I would rather not tax work and effort of working people. I
    would instead rather have some tax that operates on consumption and
    promotes energy efficiency in the development of alternative energy
    technologies. We have the lowest energy taxes in the world by far. And
    there was an enormous consensus among the deficit-reducing folks all
    over the country that there ought to be an energy tax but a big
    difference about what kind it ought to be.
        There were those, principally in the East, who said we needed a huge
    gas tax. I can hear the groan from my folks up there in the gallery.
    It's tough on people who live in the West or who have to drive long
    distances to work where there's no public transport, where there's no
    practical carpooling. It really could have an adverse impact on sectors
    of our transportation economy.
        Then there were those who if you want only to clean up the
    environment, you should have a carbon tax. The problem is, that's pretty
    rough if you're from Pennsylvania or Ohio or West Virginia or someplace
    where coal is important to the economy and where you're already bearing
    the enormous burden of the enforcement of the Clean Air Act.
        So this Btu tax, taxing the heat content of energy, seemed to be a
    fair way of spreading the burden in a limited way across all energy
    sources, in a way that would still do what I think needs to be done,
    which is to promote conservation and not undermine something else that I
    strongly support, which is the increased production of natural gas in
    America. It's our fuel. It's clean, and it will create enormous economic
    opportunities in the future.
        I want to say again, I don't want to raise one penny of this money
    unless we have the spending cuts. Not a penny. And I am sure, after now
    almost 5 weeks in office, that there are more cuts coming. I can tell
    you I will find more. And I think we have gotten everybody in the
    National Government interested in finding more. And I encourage you to
    give us more. Nothing is off the table, except those things that reflect
    the fundamental interest of the American people.
        But remember, we don't want to do anything that will further erode
    our investment in our children and their future in programs that are
    working. Indeed, we need to do more there. And we cannot afford to break
    the fragile bond of responsibility we have with elderly people who live
    on Social Security for all their income and who need Medicare for their
    health care. We can reduce further health care expenditures of the
    Government but only in the context of an overall resolution of the
    health care crisis.
        The plan I have presented will reduce the deficit substantially and
    fairly. And if we do, it will mean lower interest rates. You can see
    that already by this historic low in long-term interest rates coming out
    today.
        I also want to say, however, that in my judgment, there are some
    things we should invest in, not just the things I've mentioned for
    business: the permanent investment tax credit for small business, the
    targeted capital gains tax, the technology extension center, the
    manufactur-

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    ing changes in the alternative minimum tax, the incremental investment
    tax credit that will be available to every business in America over the
    next couple of years. But there are also some things that we need to
    invest in our people. And I'd like just to mention one or two of them.
        Another change in this tax system is one that I will hope you will
    all support, and it is the one that enables us to hold harmless to 40-
    plus percent of the taxpayers with incomes of $30,000 or less. This is a
    dramatic increase in the refundable earned-income tax credit for working
    people. This mechanism in this plan will enable us to say for the first
    time in the history of the country, ``If you are a full-time worker with
    a child in your house, you will not live in poverty.'' Let me say why I
    think that is so important.
        One of the things we have to deal with in America to make ourselves
    more productive is how we can reduce the volume of the large underclass
    we have: the people who are permanently trapped in poverty, the children
    living in the big cities. And we have to think of strategies to deal
    with that. Some of those things are things that I think you can do. I
    have proposed, for example, urban enterprise zones which give huge
    incentives for private sector investment in depressed areas.
        But we have to break the psychology of poverty and dependence on the
    Government. I will come forward later this year with a welfare-reform
    proposal that will literally end welfare as we know it, will say we'll
    have education and training and child care and health care. After 2
    years you've either got to go to work or do public service work to draw
    an income tax from the Government.
        But consider this: We also need to build in incentives. You know as
    well as I do from the people you work with that an incentive system is
    better most of the time than a rulemaking system. So we can have a
    welfare rulemaking system, but you've got to change the incentives. How
    many working women are there in America today who barely make ends meet
    because of the cost of child care? I mean, an enormous number.
        So what this refundable earned-income tax credit will do is to
    change the economic system. It will say: We are going to reward work.
    You put in your 40 hours; you've got a kid in the house. If we need to,
    we will refund money through the tax system, but we're going to lift you
    above the poverty line so no one will ever have that as an excuse not to
    be a productive citizen. If everybody in this country were working, we
    wouldn't have half the problems that the Government wrestles with here
    all day, every day. And I hope you can support that.
        Now, let me just make another couple of comments that relate to
    this. In the next few days we will be announcing some initiatives that
    we're going to take from a regulatory point of view to try to deal with
    the credit crunch, to try to make it possible for banks to loan money to
    businesses again, to try to release the energies for the old-fashioned
    character of small business loans, to try to reduce the fear that a lot
    of banks have that if they make sensible loans, the Government will come
    down on them.
        I think that the improvement in the books that will come from
    changing the passive-loss provision, plus the regulatory changes we
    make, will really make a dent in this credit crunch problem, especially
    in the areas of our country where it has been so profound. And if it
    isn't, you let me know about it in a few months, and we'll do something
    else. We have got to deal with this problem for small business to grow
    again.
        Now, let me talk just very briefly about what I think will become
    very quickly a controversial part of this program. There will be those
    who want to cut spending and wish we didn't have to raise any taxes, who
    will say, ``You wouldn't have to raise so many taxes if you didn't spend
    any new money on anything.'' And that is absolutely true. I admit that
    is absolutely true. I want you to know what I propose to spend new money
    on and why, in addition to the tax incentives I've already discussed.
        First of all, I want to increase research and development in new
    technologies that will create new jobs and new economic opportunities,
    dramatically. Not only by making the research and experimentation tax
    credit permanent, but by increasing commercial R&D by more than we
    reduce defense R&D, and by emphasizing dual-use technologies in defense
    research and development.
        It is killing me to look at the numbers when you compare the
    percentage of our income we're spending on research and development in
    America compared to our competitors. Five years, 10 years, 20 years from
    now, that means more high-wage jobs somewhere else and fewer

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    high-wage jobs here. And we cannot tolerate it. We must again achieve
    competitive levels of R&D, and that is a worthy expenditure of your tax
    money. We have good people who will do that right and spend it
    efficiently, and I would hope you would support it.
        There is no way the private sector can equal the aggregate efforts
    in Germany, Japan, or any other rich country, provided there by enormous
    public sector investment to support the private sector. So I hope you'll
    be for that.
        Secondly, I think we have to invest more in our infrastructure, in
    our roads, our bridges, our airports, in high-speed rail, in water
    projects, in sewer projects, in environmental cleanup. We are again
    spending a much lower percentage of our income on that than all of our
    major competitors. And that bears a direct relationship to productivity,
    to wealth generation, and to the cost of doing business in the private
    sector. So we propose to fully fund the surface transportation act and
    to do a lot of things in this area.
        Third, we propose to really invest some money in targeted people
    investments that will increase productivity. Let me just mention three
    or four. Number one, we want to spend some new money to set up a network
    that will permit us to immunize every child in America by the age of two
    for preventable childhood diseases. For every dollar we spend on that
    today, we will save $10 in the future in preventable diseases. We are
    dangerously at risk of new outbreaks of diseases because our
    immunization levels have fallen so low.
        Most of the controversy you've seen in the press is about the price
    of vaccines, and that's a legitimate issue. But it is also true that we
    don't have the delivery network in this country we need. And as a
    result, we have the appalling statistic that in America, which produces
    vaccines for the world, we have the third-lowest immunization rate in
    this hemisphere. Only Bolivia and Haiti are lower. It is unconscionable.
    We can't justify it. For a little bit of money today we can save big
    bucks tomorrow.
        Secondly, we ought to fully fund the Head Start program, because it
    is a proven success that will save us $3 tomorrow for every dollar we
    spend today.
        Those are among the things that I think we should do. Let me just
    mention two others. We ought to have an apprenticeship program in
    America that guarantees every high school graduate access to 2 years of
    further quality education in the workplace, in a community college, in a
    vocational institution. The Federal Government's responsibility here is
    basically to help States in the private sector create networks and to
    fill the funding gap. For next to no money we could bring our 2-year
    education program up to where it is universally accessible to all
    Americans and it is at a level of quality comparable to our competitors.
    We are not there today. For not very much money, we can do that.
        The next thing I think we really ought to do is to open the doors to
    college education to all Americans. Not just open them, but keep them
    open. The college drop-out rate today is two and a half times the high
    school drop-out rate. And one reason is that a college education is
    about the only thing that increased more rapidly than health care costs
    in the 1980's.
        Now, all of you need to think about this as this is something you
    can do that I can't since all these colleges--none of them are Federal
    institutions. Something needs to be done to contain the rising costs of
    those colleges. But in the meantime, we need to make sure that young
    Americans are not dropping out just because they can't afford to go.
        The student loan program today is wildly expensive. It costs $4
    billion a year, $3 billion in defaulted loans alone. And what we need to
    do is to set up an income-contingent repayment plan so everybody can pay
    back as a percentage of their income, which will reduce the incentive to
    default; really stiffen the collection measures, including involving the
    IRS in it. I'm tired of people making money and defaulting on their
    loans; that's not right. But we also should make available the
    opportunity for many young Americans to pay back their student loans by
    serving their country, by going home and working as teachers or police
    officers, or doing things that need to be done in the community.
        We can rescue a lot of these kids out of inner cities by letting
    them work before they go to college and put in time in building up
    credits so that they then turn their loans into scholarships before they
    even go. These are things that ought to be done.
        You know, when President Kennedy started the Peace Corps, it shaped
    the imagination of a whole generation. We need a peace corps here at
    home to deal with our problems here at home, and it needs to be much
    bigger than the Peace Corps ever was.

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        Finally, let me just make this point: If we cut spending, increase
    revenues, target investments, we'll have a Government that will go in
    the right direction for the next 4 years with real discipline. If you
    want to get to the end of the decade with a healthy American economy, we
    have to do something else. We've got to reform the health care system.
        In 5 years, projected Government expenditures on health care would
    go from $210 billion to $350 billion, a two-thirds increase, annualized
    increase of 12 percent per year. We are already spending, as of the end
    of 1992, 14 percent of our gross domestic product on health care. No
    other nation in the world except Canada is over nine, and they're just
    barely over nine. And our health indicators are not all that much
    better. In fact, they're quite worse in some areas.
        Now, this is not a simple problem. This is the most complex issue
    with which I have ever tried to come to grips. But one thing is pretty
    clear: If present spending trends continue, we'll be bumping 20 percent
    of GDP by the end of the decade, and you can forget about our being
    competitive in manufacturing.
        At our economic conference in Little Rock, Red Poling, the chairman
    of Ford Motor Company, pointed out how Ford's health care costs had
    risen by 800 percent in the last 20 years, and now they spend as much on
    health care for workers as on steel for cars. Almost $1,100 of the price
    of each American car is in health care. Our competitors in Japan have
    only $550 in a car; hard to be price competitive and make money.
        Small businesses are hit even harder by health care costs. And for
    many self-employed people and farmers, it's impossible to get health
    care. As I said earlier, 100,000 Americans a month are losing their
    health insurance. Seventy percent of the small businesses in this
    country are still providing health care to their employees, but they're
    hurt very badly by insurance-rating practices in most States. And
    workers are terrorized by the fact that if they or someone in their
    family has ever been sick, they have a preexisting condition which locks
    them into a job.
        I had dinner the other night with a high school friend of my wife
    who is a wonderful small business guy with four employees. And one of
    his employees just had a child with Down's syndrome. And he told me, he
    said, ``You know, that guy and I, we're partners for life now.'' And he
    said, ``He really can do better. He's a gifted person. I want him to be
    able to go on and move, and he can't.''
        And more and more businesses are having to give up their health
    insurance every year or run the co-pay so high they might as well be
    giving up on it. And that, as I said earlier, is driving some people
    back down into the Federal Government's and the State government's
    health care system.
        What I want to do is to find a way to preserve what is best about
    American health care--the right to choose your doctor, the technology
    that we have--and stop the incredible waste on paperwork, which means
    that clerical workers are being hired at 4 times the rate of health care
    providers in hospitals and doctors' offices, on unnecessary technology,
    on the absence of preventive and primary care, on all the things that we
    know that are wrong.
        And some time in the next several weeks, within 100 days after the
    time I took office, we'll be presenting a plan to the Congress and the
    American people to deal with that. But I want to be up-front about this.
    The economic plan I have presented will bring that debt down for 4
    years. If we don't deal with the health care crisis, it's going to turn
    around and go right back up in the next 4 years, just like your costs
    are going to.
        We have got to face this. Every other advanced country in the world
    has devised some system which works better than ours does to keep costs
    closer to inflation while providing a basic package of benefits to all
    Americans. We cannot fix this economy over the long run unless we do
    that. It is inhumane. It is also very bad business to let the status quo
    persist.
        Let me close just by saying that if every American looks at my
    proposal in terms of what is best for him or her, at least one-third of
    it will seem unattractive. That is, if you're an upper-income person who
    has to pay the income taxes, you would say, ``Give me the budget cuts
    and don't increase spending.'' Unless you're in a technology-related
    business in which you might say, ``Give me the budget cuts and the new
    investments, but forget about the tax increases.'' Or if you're an
    educator, you might say, ``Fund Head Start.'' A middle-class person
    might say, ``Tax the rich and spend the money on new jobs. Cut the
    budget, but forget about the energy tax.'' A lower-income person might

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    say, ``Tax the wealthy. Give me the new spending, but forget about the
    budget cuts.''
        In other words, if everybody looks at this just through the prism of
    how it will immediately affect you, it's a nonstarter, because there's
    no way you can bat three for three. We can't get there.
        And that's why I say to all of you what I have asked the American
    people to do; I invite your efforts to improve this, to say what's wrong
    with it, to say how we can make it better. That's fine. But ask the
    question, not just what's in it for me, but what's in it for us. This
    country has got to change. We know we cannot stay on the present course.
    We know we cannot stay on the present course.
        We also know if we look ahead to the future that the next 20 years
    could be the best years this country ever had. But we've got to increase
    productivity. We've got to increase job generation. We've got to
    increase income, and we've got to increase our ability to rely on all
    the American people. We do not have a person to waste. I believe this
    program achieves those objectives, and I ask for your support.
        Thank you very much, and God bless you.

    Note: The President spoke at 11:15 a.m. at DAR Constitution Hall. In his
    remarks, he referred to U.S. Chamber of Commerce officers Ivan Gorr,
    chairman of the board; Richard Lesher, president; and William Marcil,
    vice chairman of the board.