[Weekly Compilation of Presidential Documents Volume 29, Number 8 (Monday, March 1, 1993)]
[Pages 295-306]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Remarks to the National Business Action Rally of the U.S. Chamber of 
Commerce

 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 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

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$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 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

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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 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

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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

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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 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

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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 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, lets 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

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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 spending 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.

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    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 
manufacturing 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 two 
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

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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 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

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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.
    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

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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 
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 the DAR Constitution Hall. In 
his remarks, he referred to Ivan Gorr, chairman of the board; Richard 
Lesher, president; and William Marcil, vice chairman of the board, U.S. 
Chamber of Commerce.

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