[Weekly Compilation of Presidential Documents Volume 30, Number 8 (Monday, February 28, 1994)]
[Pages 353-360]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Remarks to the Business Council

February 23, 1994

    Thank you very much, Bob, and thank you, ladies and gentlemen. I was 
glad to walk in here and see the Attorney General. I just saw Lloyd 
Bentsen, the Treasury Secretary. He said, ``I've heard this speech 
before. I think I'll leave.'' [Laughter] Mr. Panetta, how are you? Is 
anybody working in the Federal Government?
    I am delighted to be here, and I thank you for the invitation to 
come by. I have seen many people in this audience on various occasions 
to talk about different issues over the last several months. And I'm 
glad to see so very many people in the administration here tonight to 
have the opportunity to speak with you. We have tried to maintain close 
ties to the American business community and to work in partnership on as 
many issues as we possibly could.
    As all of you know, the Business Council was formed in 1933, a 
pretty tough year for this country, to help President Roosevelt pull 
America out of the Depression and move it forward. This group provided 
guidance on a number of profoundly important issues then, and I believe 
has a very important role to play today.
    Most of you know that with the help of Bob Rubin, the National 
Economic Adviser, and Alexis Herman, who is here, my special liaison to 
the business community and to other public groups in the country, I have 
worked in a very disciplined way over the last 14 months to try to seek 
out the opinions of people in the business community of different 
political parties, different views, both support and sometimes 
opposition, because I think it is so important to have a dialog and for 
you to believe that there is a genuine listening ear in the White House 
and a real interest in trying to work on these problems together.
    I'm glad to see Senator Riegle and Senator Packwood here. We have a 
lot of important work to do today in this coming session of Congress. 
But let me just say, when I took office it really was the end of one era 
and the beginning of another. The election conveniently dovetailed, 
missing by only about 3 years the formal end of the cold war and the 
beginning of the post-cold-war era with a whole new awareness in our 
country of the extent to which all our affairs were shaped by a global 
economy which we can no longer totally control or even largely dominate, 
and that we had profound questions to face on the eve of not only a new 
century but a new millennium, which would determine whether or not we 
would go into that new millennium stronger, better, and more well 
positioned to make sure that it wouldn't be only the 20th century that 
would be known as the American century in the history books.
    I have always believed that the purpose of politics in our country 
is to get people together and to get things done. Therefore, I have 
always sought and often achieved partnerships sometimes with allies that 
were unusual in the cause that was plainly good for the public. I want 
to thank those of you who were part of those partnerships last year, 
part of our efforts to reduce the deficit or to pass NAFTA or to get the 
GATT agreement done, or to reduce export controls or to start a genuine 
defense conversion initiative or to help prove that we could pursue an 
environmental policy that would be good for the environment and also 
good for the economy. I also want to challenge you to keep talking with 
us as we face the problems that lie ahead this year and in the years 
ahead.
    I have tried to address the issues that the business community 
talked to me about in the campaign of 1992, the issues that are 
uppermost in the minds of most of you who just want a good environment 
in which to operate. We've worked on the budget deficit and the 
investment deficit in America. We've tried to get the growth rate up and 
to produce jobs in the private sector, after years in which most new job 
growth net was in the public sector. We've tried to address the fact 
that for more than a decade, health costs have outpaced the growth of 
the economy by a factor of two or three, and that we have not been as 
aggressive as we ought to be as a nation in opening the world to our 
products and services and, at the same time, making sure our markets 
were open as well.
    In short, I have tried to fashion a role for the Government and this 
time, fit it to this time--one that recognizes that the private sector 
is the engine of economic growth, but

[[Page 354]]

that our Government has a role to play as a partner in setting the 
framework and dealing with the basic fundamental questions that every 
government must face in dealing with the particular challenge of this 
age and time--trying to prepare our country to compete and win in the 
global economy.
    The economic plan which the Congress adopted last year by such a 
stunning margin reduced the deficit by $500 billion, cut spending by 
$255 billion, allocated every new tax dollar to deficit reduction, cut 
over 300 Government programs, including $80 billion in entitlement 
savings over the budget which was in place when I took office, much more 
than was thought possible when we began.
    This year's budget, which I have submitted to the Congress, cuts 379 
program lines out of a total of 636 in the Federal budget, eliminates 
115 programs altogether. And the Wall Street Journal said, and I quote--
I'm sure the editors will make sure nothing like this appears again--but 
they said, and I quote, ``For the next year, discretionary spending will 
actually fall by $7.7 billion without adjusting for inflation. That has 
not happened since 1969.'' This budget reduces Federal employment by 
118,000, more than the 100,000 this year recommended by the Vice 
President's reinventing Government commission.
    If we stay on the path we are now on, by 1998, the National 
Government will be smaller than it has been in 30 years, the deficit 
will be $200 billion a year less than it was projected to be when I took 
office and before our plan passed, and for the first time since Harry 
Truman was President, there will be 3 years of declining deficits in a 
row. The deficit as a percentage of national income is now as low as it 
was in 1979, before the deficits started to explode. In other words, we 
have restored fiscal discipline to this budget and to this Government 
without gimmicks or without fooling with the Constitution.
    I hope that the budget I have presented and the record established 
by the Congress last year will be sufficient to persuade at least most 
of you that we should not pass the balanced budget amendment because it 
would mandate one of two things: either significant tax increases which 
could imperil the economic recovery along with cuts, significant cuts in 
defense, in Social Security or Medicare and Medicaid and in areas where 
all of you believe we should be investing more; or it will be ignored. 
And if it is ignored, it will put the Government's future in the hands 
of 40 percent plus one of both Houses, basically giving minority control 
over the future of the country to whoever wants to blackball any kind of 
budget proposal made. This is a gimmick. We don't need it. We are 
bringing the deficit down.
    And I'll talk a little more about today, a little more about what we 
have to do to bring it down further. Do I think it should be 
structurally in balance? Yes, I do. But it's also important to note that 
the Federal Government doesn't handle its accounts the way most of you 
do. We don't have a capital budget. We don't amortize capital expenses. 
We don't separate long-term investments with high return from current 
expenditures that amount to basically consuming the same programs we've 
had in years past. So I hope that you will support budget discipline but 
oppose the balanced budget amendment.
    The second point I'd like to make is this administration tried to 
prove once again that open trade is a bipartisan American commitment, 
that we have never done very well when we tried to close our borders or 
be protectionist, but that if we are going to open our borders and push 
for open trade in a world economy where we are 22 percent of the world's 
GDP as opposed to 40 percent, which we were at the close of the Second 
World War, we have to demand equal access to our goods and services.
    We worked on NAFTA. We worked on GATT. We worked on a national 
export strategy, supported strongly by the Secretary of Commerce, who is 
here, and also the Secretary of State, who came in. And I want to say, 
for the first time in a long time, we've got the State Department and 
our Embassies all around the world genuinely working on promoting 
American economic interests, that the commercial desks mean something 
there now, and we are really trying to do this in a disciplined, 
comprehensive way that I believe is very, very important.
    The Saudi purchase of the Boeing and McDonnell Douglas aircraft I 
hope--it may be the biggest--but I hope it's only the first

[[Page 355]]

in a long line of examples of partnership involving, in this case, three 
Cabinet members, the President's Chief of Staff, and many others working 
to see that we got a contract that American business earned on the 
merits, the kind of contract we have too often lost in the past for 
reasons having nothing to do with the merits. And I'm very proud that 
that happened.
    We lifted export controls on $37 billion of high-technology 
equipment in the telecommunications area and the computer area that had 
no relevance to the post-cold-war era. And it will be a very significant 
and important contribution to economic growth.
    I have approved for announcement tomorrow a new export 
administration act which will be significantly better than the present 
law. I want to be candid with you: A lot of you won't like it all 
because we do provide for the continuation of the capacity of the 
President and the Government to restrict exports for reasons that appear 
to be good and sufficient. I urge you to look at what we will recommend, 
evaluate it. If you think it is wrong, tell us and work with us.
    But remember this: One of America's continuing responsibilities is 
to try to do whatever we can to deal with some of the problems that will 
replace the terror of the nuclear age, in all probability, in the 21st 
century. One of those big problems is the proliferation of weapons of 
mass destruction, not just nuclear weapons but biological weapons and 
chemical weapons and the vast proliferation of conventional but high-
tech weapons that can do a lot of damage in a short amount of time.
    So we will, for the foreseeable future, as a nation have certain 
responsibilities that I believe require us to maintain the ability to do 
some things in the area of export control that may be difficult for 
everyone from time to time. So I urge you to look at the act, evaluate 
it. If you think we're wrong be as specific as you can and tell us why, 
because we want an honest dialog on this. I think you know that I am for 
more trade. And I think you know I want to listen if you think we're 
wrong on this. So I think we're on the same wavelength, but we do 
believe that this administration and its successors for the foreseeable 
future, in a world in which there will be a lot of chaotic events that 
can be made much worse by irresponsible conduct by others, we need some 
leverage in this area. And I hope we can reach agreement on what the 
proper balance is.
    I am very proud of where we are to date. If you look at the last 
year, we've had a very good year. I appreciate what Chairman Greenspan 
said about it in his congressional testimony yesterday. Business 
investment was up 18 percent in 1993. There was a record number of 
public offerings for high-tech companies. Durable equipment expenditures 
were at their fastest pace in 20 years. The private sector provided for 
over 90 percent of the nearly 2 million jobs created by the American 
economy in 1993, which, as I said, is a reversal of the trend of recent 
years when many of the new jobs were coming from Government.
    These are things that I think are very, very important. Yesterday 
Mr. Greenspan said--I've got his quote. I wouldn't have quoted him if I 
had known he was going to be here; I would just ask him to stand up and 
speak and I'd sit down. [Laughter] But he said, and I quote, ``The 
deficit reduction package apparently had a salutary effect on long-term 
inflation expectations. The outlook for the economy as a result of 
subdued inflation and still low long-term rates is the best we've seen 
in decades.'' That is the environment we want to preserve. It is the 
basis which will permit you to create success for the American economy.
    The question then is, what is our role, and what are our 
responsibilities? What things do we need to do, and what things do you 
need to help us do well? First, I think it is clear to everyone here--
and I might mention I'm glad to see my friend, David Kearns, because 
he's done so much work on education--that we're still a long way from 
where we need to be in the education and training of the American work 
force. We are supporting some bills which have enjoyed significant 
bipartisan support and business support in the Congress that will enable 
us to enshrine in law the national education goals and promote local 
experimentation, everything from charter schools to public school 
choice, in the Goals 2000 bill.

[[Page 356]]

    We are supporting opening the doors of college opportunity to 
everyone with a student loan program now that has lower interest rates 
and better repayment and will allow up to 100,000 people in 3 years to 
be part of a national service program to earn some money against their 
college costs by working in their local communities.
    We are supporting a school-to-work program which will build on the 
apprenticeships which now exist in some States and some industries but 
which are not uniform throughout the country. Most Americans will not 
get and do not need to have 4-year college degrees to have good jobs. 
But the economic data is clear, 100 percent of the American people 
coming out of high school now need at least 2 years of some kind of 
further training, whether in the work force, in a community college, in 
the service, in a blend of all. But if you look at the income 
differentials, it is shocking.
    The unemployment rate for people who drop out of high school is 5 
percent higher than it is for high school graduates. That unemployment 
rate, in turn, is 2 percent higher than it is for people that have 2 
years of college. That unemployment rate, in turn, is another 2 percent 
higher than it is for 4-year college graduates. Average income is $4,000 
lower for high school dropouts than for high school graduates, which 
is--their incomes are $4,000 lower than for people who have had 2 years 
of college, and their incomes are about $8,000 lower than people who 
graduated from college. So it's clear that this country has a national 
interest in at least getting people through high school and with 2 years 
of further education and training.
    And finally, I hope, as major employers, you will help us when the 
Secretary of Labor and the Secretary of Education come forward at the 
end of the year or later in the year with this reemployment system. The 
unemployment system on which payroll taxes are paid today is based on an 
economy that no longer exists. People are not normally called back to 
the job they are laid off from. But that is the premise of this 
unemployment system. That's the whole basis of the feud attacks. And it 
doesn't work anymore.
    We believe we can cut down on costs over the long run and 
dramatically increase labor mobility if, instead of waiting for people 
passively to run out of their unemployment and then start looking for a 
job which, because they haven't acquired a new skill, will probably not 
pay what their old job did, if we start immediately, as soon as people 
are unemployed, retraining them for a job that is relevant to the 
future.
    I think this is a profoundly important structural change that we 
have got to make if we want labor market mobility, if you want a pool of 
trained workers. And we don't want a lot of alienated, hard-working 
Americans who think that they went all over the country looking for 
decent jobs, they have played by the rule, and they can't find a place 
in life. So I hope you will help us this year to pass the reemployment 
system.
    The next thing I hope you'll do is to help the Attorney General to 
pass a good crime bill. We had a bunch of people in from California 
today to talk about earthquake relief, and I couldn't help noting that 
yesterday in California--you may have seen it on the news--a 45-year-old 
mother of two who had been a policewoman for 4 days was gunned down by a 
teenager who just murdered his father with a semiautomatic weapon--one 
week, less than one week after she had become a police officer.
    This crime issue is a complicated one. It is easy to demagog and 
difficult to do much about. But there are things we can do. We know 
there are things that work. We know that if we had the same ratio of 
police to violent crimes today we had 35 years ago, and the police were 
walking the streets, working with the neighbors and the kids in the 
neighborhood, that the crime rate would go down, not just because of 
more arrests but because there would be fewer crimes. We know that.
    If you look at the experience of Houston, where, in the last 15 
months, there was a 22 percent drop in crime and a 27 percent drop in 
the murder rate--and coincidentally, the mayor got reelected with 91 
percent of the vote; I think there was some connection there--if you 
look at what they did, it was the deployment of more police officers in 
a better, smarter way, more relevant to the existence of the people in 
the communities. I see Mr. Lay nodding his head there. That

[[Page 357]]

is what happened. I've seen this happen place after place after place.
    This crime bill also provides not only stiffer penalties for serious 
offenses but also provides more money for drug treatment for people, 
facilities, and alternatives to incarceration, opportunities like boot 
camps for first-time nonviolent offenders. We can have a smart, as well 
as a tough, crime bill.
    I hope you will help us to pass a sensible welfare reform bill this 
year which recognizes that welfare should be a second chance, not a way 
of life, that cracks down on child support enforcement and provides 
education and training and child support and moves people into the 
workplace.
    I hope you will support the administration's antidrug strategy. I 
know that Lee Brown was here. And I see Jim Burke over here. I should 
let him come and give a speech for it. But we have a significant 
increase in funds to help us deal with drug problem areas in this 
country. And it's an important time to take a stand on this because of 
the disturbing evidence that there is now an increase again in drug use 
among young people because they think it may be more acceptable. And 
it's no more acceptable or no less dangerous than it was last year, the 
year before, or the year before. This is a cultural thing we have to 
change. And we're trying to make a beginning on that.
    Finally, let me say a couple of words about health care. We spend 
14.5 percent of our income on health care. No other country except 
Canada spends over nine. They are at about 10. Erskine Bowles, who has 
done such a great job as head of the Small Business Administration, 
probably because he's qualified--it wasn't a political appointment in 
that sense; he spent 20 years helping people start businesses--says that 
we're servicing less than all of our people with 14 percent of our 
revenues and other countries are servicing all of theirs within the 
range of nine. That doesn't make any sense. And no company could survive 
like that in a competitive environment. I think that is one of the 
problems.
    We know that every month about another 100,000 Americans lose their 
health insurance permanently. We know we have significant problems where 
people who retired early from companies that aren't solvent are losing 
their health care before they are old enough to get on Medicare. And a 
lot of other companies that are critical to our economic future are 
bearing massive burdens because of that. We have some American companies 
now spending almost 19 percent of payroll on health care.
    We know that there is massive cost-shifting in our system because of 
totally uncompensated care and because Medicare and Medicaid, especially 
Medicaid, often don't reimburse our physicians and hospitals for the 
full cost of their care. We know small businesses pay 35 to 40 percent 
more in premiums for the same health care coverage that big business and 
government pay.
    We know that if something doesn't happen and present trends 
continue, that we'll be spending over 18 percent of our gross domestic 
product on health care by the end of the decade. And if present trends 
continue, none of our competitors will be over 12, which means we'll be 
at a 50-percent disadvantage.
    We know that some of this is unavoidable because of factors, good 
and bad. The good factors are that the United States invests more in 
medical research and medical technologies, in academic health centers. A 
lot of you in this room are probably on the board of various academic 
health centers. And that is an important part of our economy, an 
important part of our quality and way of life, and we wouldn't give it 
up for the world. And we shouldn't. And we pay a premium for that in our 
health care system.
    We also know that this country is more violent than other countries. 
We have higher rates of AIDS than a lot of countries. We have bigger, 
therefore, bills at the emergency room, more people cut up and shot and 
getting expensive care than other countries. That's something we would 
gladly trade in, and we're trying to find out how to trade it in. But 
until we trade it in, we'll pay a premium in our health care system for 
that. And it's wrong for us to pretend that health care reform on its 
own terms can close the gap between where we are and where our 
competitors are.
    Nonetheless, we also know that this is the most bureaucratic, the 
most expensive to administer system in the world, even though a lot of 
big companies have found ways to

[[Page 358]]

have access to managed competition and to squeeze the inflation out of 
their costs. But the system is causing us great grief.
    The other thing I want you to understand--going back to the budget, 
because so many of you supported the deficit reduction plan--is that 
every single scenario for every single budget--and you can ask the 
Budget Director to attest to this--shows the deficit going down for 
about 3 more years and then shows it going right back up when we have 
flattened all discretionary spending, when we have continued to decrease 
defense, only because of exploding health care costs overtaking 
everything else in the budget.
    So that if we do not reform the health care system, if we don't do 
something to get costs under control and to provide coverage to 
everybody to stop the cost shifting, then you will see an exploding 
Federal deficit as we move toward the end of the century. And you may 
want us to spend more money on--what will the world look like by then--
on job retraining, on export promotion, on defense conversions, on the 
development of dual-use technologies, on whatever, and we won't have it 
because all of our new money will be going to health care--everything--
and not more money for new health care, but more money for the same 
health care.
    You may say, ``Well, inflation is down in health care costs.'' 
Inflation has gone down in health care costs every time there has been a 
serious attempt to reform the system. It went down in the Nixon 
administration when President Nixon proposed almost the same plan that 
I've proposed. And then it started right up again. So I would say to 
you, we have to find a way to deal with this.
    The Congressional Budget Office, in evaluating our program, 
confirmed our analysis that our plan would pay for itself and contribute 
to deficit reduction, and it would reduce health care spending--listen 
to this--$400 billion between the years 2000 and 2004. In the short run, 
we had differences with the CBO; they said that our program would cost a 
little more of Government money and save a little more in private sector 
money, by the way, than we had estimated. But we've had these kinds of 
differences before, but we worked them out.
    I want to be clear on a couple things. Number one, any health care 
bill that I sign will pay for itself and contribute to long-term deficit 
reduction. It won't be some pig-in-a-poke that will explode the 
Government budget in the years ahead.
    Number two, I do not want to pay for people who do not have health 
care now who are in the work force with new broadbased taxes. I don't 
think it's right to tax people who are already paying too much for their 
own health care to pay for somebody else's.
    Number three, a lot of the doctors who have read this program 
actually like it. We consulted with hundreds and hundreds of doctors, 
and I had a doctor in my office a couple of weeks ago that put together 
an organization with several thousand other doctors who worked for him. 
He said, you know, if people understand what's really happening to 
medicine, they would like this. It gives doctors more protection than 
the present, the status quo will, unless we do something to change it.
    The fourth thing I want to say is, the nub of this is something I 
would hope you would agree with me on. The nub of this is, you cannot 
solve this problem of cost-shifting and of inflation until you do one 
thing: find a way for everybody to have access to health care and to pay 
for it, so that somebody else doesn't have to pay for it. Then if you 
want to control costs, there has to be some competitive pressure. That 
is, the consumer has to know what the health care bill is, which is why 
in our plan employees have to contribute as well as employers. And there 
has to be some competitive pressure, which is why we proposed the most 
controversial part of this from the point of view of most large 
employers, which is the whole alliance structure.
    And I will just say this about the whole issue of alliances. I do 
not want to create a new Government bureaucracy. I want to find some way 
to recreate the same economic reality that the farmers' co-ops did when 
they were organized. In other words, if you want to have community 
rating, which I think is very important to this, so you don't have real 
rating discrimination, especially for small businesses, if you want to 
have real community rating, you have to have a way to aggregate at least 
the smaller purchasers into big

[[Page 359]]

enough units so they can buy on the same terms that most of you can. And 
if you don't do it, you can legislate community rating all you want, and 
it won't happen. The State of New York has legislated community rating. 
But it doesn't necessarily happen.
    So if you don't like this, then tell me how you would do it. 
Somebody says, ``Well, make these alliances voluntary.'' Washington 
State made them voluntary. Look at the Washington State plan. Anybody 
that wants that instead of mine, step forward. The alliances are 
voluntary in Washington State because there is one plan and one fixed 
price. If you fix the price, you've got community rating. So Washington 
State can make the alliances voluntary because the small businesses want 
to get in so somebody else will handle all their paperwork for them. 
It's a heck of a deal. And the price is already set. The Congress won't 
do what Washington State did, I predict. We want to see competition and 
market forces, not price fixing. But that is a possible option. I don't 
think it's going to happen.
    The point I want to make is this: This is a complicated thing. There 
are no easy answers. My bottom line is I can no longer justify why 
America spends more and does less than anybody else with a system that 
threatens to bankrupt the Government, paralyze our ability to invest in 
the future and to grow and to be a good partner with the private sector, 
and that promises to charge you more and more every year in cost-
shifting once you have squeezed all you can squeeze out of your ability 
to compete by your size and your disciplined organization, which is what 
most of you have been able to do the last 2 or 3 years.
    So what I'm asking you for on behalf of myself and the Congress, 
including Members in the other party like Senator Packwood, who really 
want to see something done on this, is to be our partner in this. You 
know based on your experience that everybody is going to have to be 
covered. And there is only--in my opinion, there are only three ways to 
do it. You can have a tax and do it the way the Canadians do. You can 
require employers to cover it, the way most people are covered here. You 
can have a mixture the way the Germans do, where employers, cover their 
employees but if you're a high-income person, you have to get your own. 
You can have an individual mandate on everybody, but the problem is, 
look at the problems States have right now in enforcing the automobile 
liability requirement.
    So there is no easy way to do this. If this were easy, it would have 
been done 60 years ago when Roosevelt tried to do it or 20 years ago 
when President Nixon tried to do it or in the Carter administration. 
This is not an easy thing. But we have reached a point--if you look at 
the trends in the Federal budget, if you look at how we're spending our 
money in our economy, if you look at how every last red cent you spend 
needs to be evaluated in a globally competitive context, we have reached 
the point where, on sheer grounds of humanitarianism for the working 
people of this country--and most people without insurance work, and they 
pay their taxes to give health care to people who don't work today--so 
on the grounds of humanitarianism and self-interest, we need to do this.
    If we care about what the Federal budget is going to look like 5 or 
10 years from now, and you don't want to see Leon Panetta either gray or 
bald within 2 years, we have got to face this question. We have tackled 
it and danced around with it and struggled with it and piecemealed it, 
literally, for six decades now. And I believe the time has come to act.
    If you can help us get wired together on the basic principles of 
coverage for everybody, an end to cost-shifting, responsibility for 
individuals as well as employers in sharing some of the cost, we can 
work out the rest. And we need less rhetoric and more commitment to try 
and to solve what is a huge problem for all Americans.
    We've got a lot on our plate this year. But I didn't run for this 
job just to come to nice dinners. I thought you hired me to get things 
done. I can't do it unless you help. But helping means not only being 
critical but being a critical part of the solution.
    Thank you very much.

Note: The President spoke at 7:12 p.m. in the ballroom at the Park Hyatt 
Hotel. In his remarks, he referred to David T. Kearns, former chairman 
of Xerox and former Deputy Secretary of Education; Kenneth L. Lay, 
chairman and chief executive officer, Enron Corp., Houston, TX; and 
James

[[Page 360]]

R. Burke, former chairman and chief executive officer, Johnson & 
Johnson, Inc., and chairman, Partnership for a Drug-Free America.