Ask the Scholar
Document scope · 1 page
Scholar
Ask about this object, its catalog metadata, its source description, or the page inventory.
For page-specific OCR and visual context, open one of the page chats.
Scholar Source Context
Document identity
localId
323153269
label
American Business Conference 4/9/91 [OA 6897] [2]
core
doc
dtoType
document
citationUrl
pageCount
1
Source metadata
id
323153269
contentType
document
title
American Business Conference 4/9/91 [OA 6897] [2]
citationUrl
identifierLocal
13751-002
collections
Records of the White House Office of Speechwriting (George H. W. Bush Administration)
Speech Backup Chronological Files
imageCount
1
hasImages
yes
source
import
hasTranscription
no
Source extras
naId
323153269
levelOfDescription
fileUnit
recordType
description
ocrSource
nara-archive
Single page context
seq
1
pageIndex
0
type
document
mediaId
ab592c7588574249
ocrText
Originally Processed With FOIA(s):
FOIA Number:
S
S
FOIA
MARKER
This is not a textual record. This is used as an
administrative marker by the George Bush Presidential
Library Staff.
Record Group/Collection:
George H.W. Bush Presidential Records
Collection/Office of Origin:
Speechwriting, White House Office of
Series:
Speech File Backup Files
Subseries:
Chron Files, 1989-1993
OA/ID Number:
13751
Folder ID Number:
13751-002
Folder Title:
American Business Conference 4/9/91 [OA 68971 [2]
Stack:
Row:
Section:
Shelf:
Position:
G
26
21
3
4
Snow/Simon
ABC
Draft One
April 5, 1991
3 p.m.
ADDRESS BY THE PRESIDENT TO THE AMERICAN BUSINESS CONFERENCE
THE WILLARD INTERCONTINENTAL HOTEL
APRIL 9, 1991
2 p.m.
[Introductory acknowledgments].
It's always great to talk to the American Business
Conference. I've been here four times in recent years, and I've
hired away at least two of your leaders -- Bob Mosbacher and Alan
Levitt. I wish I'd had that much luck fishing in Florida last
week. //
It's an honor and a pleasure to talk to a group that stands
for success -- a group that admits only small to medium sized
companies that succeed in the marketplace.
But I've got to tell you, I feel a little funny being here.
1 pm CEO of
After all, I work for a huge corporation that has lost money for
33 of the last 35 years. //
At any rate, in keeping with today's theme -- Charting
Economic Growth in the 90s -- I'd like to talk about this
administration's plan for generating more Great American Success
Stories like yours. /
Our recent success in the Gulf has renewed Americans' belief
in themselves. In just the past couple of months, consumer
x
x
confidence has soared. The stock market has begun climbing
been
toward the 3,000 mark. Most economists predict that the
recession soon will give way to a new cycle of growth.
But we can't rest on laurels: There's an entire world of
competition out there. The administration's economic growth
package is designed to let people like you do what you do best -
- create jobs, create new opportunities, create wealth. Its four
pillars can help America take its rightful place in a new global
economy.
Let's start with a first pillar, the capital gains tax.
I can't think of any issue that's been more badly
misrepresented than this one. Our critics say a capital gains
cut helps only the rich. They're dead wrong.
Here are the facts: More than a quarter of all capital gains
are declared by people with annual incomes of less than twenty
thousand dollars a year. More than three-quarters are declared
by families who make less than members of Congress. A capital
gains cut isn't a sop to the rich. It's a lifeline to the poor
and middle class.
Consider what a capital gains cut can do:
A capital gains tax cut helps people in need.
When times get tough, people of modest means must sell
things to make ends meet. They move into smaller houses. Sell
off furniture, heirlooms, stocks and bonds. Yet they can't get
around to paying their bills until they've paid the taxman. And
lots of times, they are being taxed on so-called gains that only
reflect the effects of inflation. In the end, they sell precious
possessions, and get to keep only pennies.
I recently got a letter from a woman in Virginia whose
husband has suffered a stroke -- whose fourth child suffers Downs
syndrome -- whose family needs to move into a less expensive home
because they can't pay both their mortgage and their medical
bills.
Yet because of the capital gains tax, they can't afford to
sell their home. Once they have paid their taxes / their
realtor's commissions / their lawyer's fees / their settlement
fees / they don't have enough left for even a modest down
payment.
She wrote: "Please tell Congress for me that a cut in the
capital gains tax will not benefit big business. It will enable
a once-middle-income family suffering two major catastrophes to
'buy down' to a lower cost of living // and enable a disabled
husband to support his wife and four children."
The capital gains tax punishes people who live paycheck to
paycheck, and suddenly run into financial trouble. A cut in the
capital gains rates gives them a chance to survive tough times.
Here's a second advantage of a capital gains cut: It
rewards people who turn good ideas into good deeds.
It makes the American dream accessible to people who DON'T
have lots of money, but who DO have good ideas.
Consider the effects of the cuts enacted in 1978 -- in part
because of the efforts of Jim Jones here. Jim, you helped lead a
bipartisan effort back then; we need more people like you now. //
Before that tax cut took effect our tax code actually
punished people who risked money on new businesses. The
government didn't insulate investors from risks, but it did
siphon off much of the reward.
After the capital gains cut, investors could make money on
wise risks. They suddenly had good reason to provide the seed
money for fledgling businesses and industries. The pool of money
for new businesses grew tenfold in ten years -- and that's after
you take inflation into account.
Most of this money went to small start-up companies, like
many of yours. These companies supplied 80 percent of the new
jobs during our recent economic boom. As those firms thrived,
investors made money. As investors made money, they paid capital
gains taxes. Federal capital gains receipts also increased
tenfold during this period.
This is not unusual. Every time in our history that we have
cut capital gains taxes, new companies have blossomed and capital
gains receipts have increased.
Another advantage: A capital gains cut will encourage
savings and discourage debt.
For the past four years, we have taxed capital gains like
any other form of income. At the same time, we have encouraged
people to take on debt. Not surprisingly, people have borrowed
more, invested less. If you want an obvious example of this
phenomenon, think about the home equity loan.
Home equity loans give people access to the increased value
of their homes without forcing them to shell out capital gains
taxes. Since we don't tax these loans and we let people deduct
the interest payments, we encourage our people to buy debt.
Our preference for borrowing hurts lots of people. The
construction industry suffers. Potential small businesses go
wanting for help. The economy just doesn't grow as much as it
could.
This leads us to another point: A capital gains cut can
slash the cost of saving our financial industry.
An increasing number of studies show that a reduction in the
capital gains rate will restore hundreds of billions of dollars
in commercial and residential property values. That jump would
improve the balance sheets of lending institutions, including
troubled savings and loans -- and increase the value of
institutions up for sale. In this way, a capital gains rate cut
immediately would chop billions of dollars from the cost of
rescuing the savings and loan industry. As property values grew,
the long-term costs of recovery would shrink even more.
A capital gains cut will make us more competitive in the new
world economy.
None of our major competitors imposes a high tax on capital
gains. Japan and Germany enjoy higher savings rates than we do
in part because they tax capital gains at a much lower rate than
they tax wages and other income.
Hungary and Czechoslovakia have decided not to tax capital
gains because they want to promote savings and economic
enterprise.
So let's take stock:
If we want to compete effectively in a world marketplace, we
should cut the capital gains tax.
If we want to encourage savings and investment, rather than
debt and hoarding, we should cut the capital gains tax.
If we want to reward enterprise, not envy, we should cut the
capital gains tax.
The point is simple: Capital gains taxes are taxes on the
American dream.
They punish the people who stand to gain the most from
growth, the poor, the middle class. They encourage the well-to-
do to hoard their wealth, rather than investing it.
This is the real fairness problem.
If we want to unleash the creative power of the American
people, we should ignore those who would rather be righteous than
right. //
We should cut the tax on the American Dream.
Now, let's turn to a second pillar of growth -- free trade:
As you know, I have asked Congress to extend my "fast-
track" trade authority.
Fast-track is another term for "good faith.' " It guarantees
that Congress will accept or reject the very same agreements that
our negotiators and their counterparts have adopted. This
doesn't weaken Congress' power to review agreements; it simply
prevents 11th hour changes that would force negotiators from all
countries to return to the table and start from scratch.
Our trading partners consider fast track a vital test of our
reliability. And three impending trade initiatives could stand
or fall depending on whether Congress permits the fast track
process to continue. The North American Free Trade Agreement,
the Enterprise for the Americas Initiative and the Uruguay Round
of trade talks all depend on fast track.
I know you support free trade. But we can't take full
advantage of our opportunities without fast-track. Today I ask
your help in getting Congress to join us in reaching out to this
new and vibrant world.
I also need your support in a third crucial element of our
growth package -- banking reform.
In many ways, our banking industry strains under the weight
of ancient regulations and restrictions. We want Congress to
help modernize our banking system, make it safer for consumers,
and increase its competitive strength.
Let me touch just a few of of our reform proposals:
Our package would limit the liability of insured deposits to
no more than $100,000 per person per institution, and retirement
savings to $100,000 per person per institution. This restriction
obviously protects small savers.
Our package would discourage wheeling and dealing by
charging insurance premiums based on risk. Good institutions
would pay lower rates than unsound ones. We also would alter the
current "too big to fail" policy. We want institution to know
that they no longer can consider the government as the lender of
last resort.
Our package would prevent unsound institutions from offering
"new" banking services. It would prevent unfair banking
practices. It would pay for a larger, better focused team of
regulators.
Our package would authorize nationwide banking for bank
holding companies, after a three year phase-in period.
In brief, our reforms try to strip away incentives for
irresponsible behavior. Our comprehensive package strives to
make our banking system more competitive / up to date / safe /
and sound.
Think of the banking system as an irrigation system for the
economy. When it works properly, it cultivates the seeds of
economic growth. When it doesn't, companies like the ones
represented here can wither and die.
This brings me to the fourth pillar of our growth package:
Investing in the future.
Our budget emphasizes the importance of looking ahead, of
building an America that is ready and eager to take its place in
an emerging world economy.
of
It stresses the importance educational reform. Our new
Education Secretary, Lamar Alexander, has outlined a reform
strategy that involves common sense.
It starts with the assumptions that schools succeed when
teachers teach,
When parents support the schools/
When schools welcome help from people with skills --
businesses, industries, academics, retirees
When communities eliminate the barriers -- crime,
corruption, inefficiency, -- to education.
Your Vital Link program offers a perfect example of the kind
of partnership Lamar seeks to build with industry, and I'm sure
he'll be seeking out your advice and help in the future.
Our invest in the future strategy also recognizes the
importance of preventive health care -- staying fit, staying
healthy.
It encourages research and development in basic and applied
science.
It seeks to improve our transportation system -- the roads,
airports, and railways that take people to and from work.
It strives to reward stewardship of our natural resources
without choking off economic growth.
It tries to create real competition in all areas of
government service -- education, health care, housing,
employment. It lets people choose the best way of pursuing their
dreams.
Now, I know I have covered a lot of ground here. But our
growth package incorporates some powerful, simple themes.
We want to promote growth.
We want to unleash the power of American imagination.
We want Americans to think in terms of their capabilities,
not their disabilities.
Many people call the 20th Century The American Century.
Well, we should not be content with that. Our growth package
will help make the 21st Century the Next American Century. We
can help our sons and daughters continue the American tradition
of excellence if we give them the freedom to excel.
This is a great nation because men and women like you
believed in yourselves. Believed in your ideas. And trusted the
public to choose wisely.
These same virtues can propel us to future greatness as a
nation. I ask your help in pursuing that quest. Together, we
cannot fail.
Thank you, and God bless this great nation.
December 13, 1990
Dear Ms. Gunn:
This is a much belated thank-you for your very thoughtful
letter to me of September 18. I was sorry to learn of
the difficult circumstances that your family has had to
deal with during the past few years. That you would take
the time to write and explain how my proposals on the
capital gains tax would benefit your family has touched
me deeply.
I agree that the capital gains rate needs to come down.
In 1989 I attempted to reduce the rate to 15%. In 1990
I tried for a more modest 19.6%. On both occasions these
measures were defeated by the Congressional leadership
through procedural maneuvers, despite clear majorities in
both houses in favor of a capital gains rate reduction.
Unfortunately, capital gains cuts are incorrectly
perceived by many in the Congress as benefitting only the
wealthy. You and I and millions of Americans know that
this is not true. A reduction in the capital gains tax
rate benefits all Americans because it encourages saving,
investment, business creation, and economic growth.
Your situation underscores the need for a reduction in
this tax and heightens the awareness that capital gains
reduction can dramatically affect all Americans.
Though the future may be uncertain, you and your family
will face it together. Barbara and I greatly admire your
courage and strength. We feel sure that your example is
the greatest gift that you can give your children for the
future.
Once again, thank you for your support and for your
moving letter. You have our warmest wishes for this
holiday season and for the coming year.
Sincerely,
NOT SENT
Mrs. Patricia A. Gunn
3314 Wrenn House Court
Herndon, Virginia 22071
GB/RPorter/CK/SMG/efr (12PRESE)
CC: Speechwriters w/copy of inc.
to
WHOLES
September 18, 1990
Dear Mr. President,
IF Two years ago my husband
suffered a stroke : a non -hemorrhagic
stroke to the right parietal loke. He
returned to work after extensive
physical, speech, and occupational
therapy He could drive but is now
epiliptic and subject to Jacksonian
March seizures.
We moved to this area as my
husband works for the government.
His former boss wrote, "that in order
to compete with your perio "he
needed to return to the D.C.area
We were living in Cincinnati, ohio
a third less than here. Our
where the cost of living is about
most gage in 1986 was $430.07.
We bought a modest home in
Herndon for 55, 000.
We also had a baby with
Down Syndrome, our fourth child,
-2-
born two months after my husbands
stroke Medical bills and therapy have
been astronomical I would like to
reduce our $ 1200.00 mortgage Cker
financial advisor recommended buying
down to a home costing # 150,000-
In this area that is a toronhouse
or a 3- bedroom slab further out
R-T 50 or Rt. 66. To move to
a lower cost-of-living area and
buy 0. home at that amount
is possible. But there is a
trimandous added financial
burden we cannot afford: the
capital gains tax.
Ourpresexexthome is asswed
at #245, OCC. We would probably
sellet for 230,000. a 10%
real estate fee is about average
for have. We would lose a tremen-
dous amount of money P aying
a capital gains tax, however
My husband will not be
aged 55 ef ass for another eight
-3-
years. His health is not allowing
him to maintain his present job as
he takes heavy doses of medication.
ment at a 60 % reduction in his
He is considering disability retire-
salary. That is less than $30,000,
Please tell Congress for me
that a cut in the capital gains tax
will not benefit big business Dt
will enable a once' middle income
family suffiring two major Catas- -
trophes to buy dozon "to a lower'
cost- of living and enable a dio
abled husband to support his wife
and form children, one of whom
has additional physical, spuch,
and educational expenses. I am a
Democrat, also who noted Ee-
publican for the first time in nuj
life when you ran for President
We need a better capital gains
tax law that the "little guy will
be able to line in this area much
not be penalized for We may not
-4-
longu because the cost-of-living is too
high for us. To move is no solution
because of the excessively high capital
gains Tax and the unfair age
restriction of age 55.Winsoda a
capital gains tax reduction now
Thank you, Mr President, for
your efforts to see this is reduced.
Please tell Congre 1s there are other
people, people who suffer a real
need, than large businesses who
would benefit from their
support reduction of a capital gains tay
Sincerely yours,
Patricia a. Gunn
3314Wrenn House Court
Herndon, Ua.22071
(703) 476 - 8018
THE WHITE HOUSE
WASHINGTON
Thank you, xxxx.
I'm happy to be here today. It's an honor and a pleasure to
talk to a group that stands for success -- a group that admits
people based on their success. I'd like to talk today about this
administration's plan for generating more Great American Success
Stories -- for making it possible for more Americans to pursue
their dreams in a marketplace -- to build a better America while
they build their own fortunes.
Our successes in the Gulf War helped rekindle Americans'
awareness of their strengths and virtues. It banished the
haunting specter of Vietnam. It restored Americans' faith in
their better selves.
That spirit already has produced some economic returns.
Consumer confidence has soared recently. The stock market has
begun climbing toward the 3,000 mark. Most economists predict
that the recession soon will give way to a new cycle of growth.
But as you know, good news is only a start. We can't rest
on war laurels: There's an entire world of competition out there.
This administration has proposed an economic growth package
that can get America working again /
That can inspire people to pursue their ideas and dreams.
I need your help in persuading our politicians that growth
is better than decline / that innovation is better than
regulation / that we can assume our rightful role as the world's
great economic power by letting people like you do what you do
best -- create jobs, create new opportunities, create wealth.
2
THE WHITE HOUSE
WASHINGTON
Let's start with the capital gains tax. I can't think of
any issue that's been more badly misrepresented than this one.
Our critics say a capital gains cut helps only the rich. They're
dead wrong.
Here are the facts: More than a quarter of all capital gains
are declared by people with annual incomes of less than $20,000 a
year. More than three-quarters are declared by families who make
less than members of Congress. A capital gains cut isn't a sop
to the rich. It's a lifeline to the poor and middle class.
Let's talk about what a capital gains cut can do:
A capital gains tax cut helps people in need.
When times get tough, people of modest means must sell
things to make ends meet. They move into smaller houses. Trade
7
new cars for used ones. Sell off furniture, heirlooms. Yet they
can't get around to paying their bills until they've paid the
taxman. And lots of times, they are being taxed on so-called
gains that only reflect the effects of inflation. In the end,
they sell precious possessions, and get to keep only pennies.
I recently got a letter from a woman in Virginia whose
husband has suffered a stroke -- whose fourth child suffers Downs
syndrome -- whose family needs to move into a less expensive
home. Yet because of the capital gains tax, they can't afford
to. Once they have paid their taxes / their realtor / their
lawyer / and whomever else gets involved, they don't have enough
3
left to purchase a cheaper Ehome! She included this plea in her
WASHINGTON
letter: "Please tell Congress form me that a cut in the capital
gains tax will not benefit big business. It will enable a once-
middle-income family suffering two major catastrophes to 'buy
down' to a lower cost of living and enable a disabled husband to
support his wife and four children."
The rich don't have to worry about such problems. They
usually have enough set aside to weather the bad times. Poor and
middle-class Americans don't.
It
Here's a second advantage A capital gains cut rewards
people who turn good ideas into good deeds.
It makes the American dream accessible to people who don't
have lots of money, but who do have ideas.
Consider the effects of the cuts enacted in 1978 -- in part
because of the efforts of Jim Jones here. Jim, you helped lead a
bipartisan effort back then; we need more people like you now. //
When that tax cut took effect the pool of money for start-
up businesses had virtually dried up. Until then, our tax code
actually punished people who risked money on new businesses.
They paid high taxes for success, and received no help in the
event of failure.
The capital gains cuts restored a measure of sanity to the
tax code. We suddenly made it After the rate cuts, things
changed. We rewarded people who took intelligent risks. They
supported people with visionary ideas. The pool of money for new
businesses grew tenfold THE WHITE taking inflation into
WASHINGTON
account.
Most of this money went to small start-up companies. These
companies supplied 80 percent of the new jobs during our recent
economic boom. As those firms thrived, investors made money. As
investors made money, they paid capital gains taxes. Federal
capital gains receipts also increased tenfold during this period.
This is not unusual. Every time in our history that we have cut
capital gains taxes, new companies have blossomed and capital
gains receipts have increased dramatically.
A capital gains cut will encourage savings and discourage
debt.
We destroyed that investment incentive during tax reform.
We started taxing capital gains like any other form of income and
any investment, no matter how safe. Worse, we encouraged people
to take on debt rather than to invest in new homes, businesses,
properties. The home equity loan is a perfect example of this.
People who can't afford to sell their homes now resort to
home equity loans. These loans are loans on the value of their
homes -- on what you would call an unrealized capital gain.
Since we don't tax home equity loans, people buy debt.
This hurts many sectors of our economy. The construction
industry suffers. Potential small businesses go wanting for
help. The economy just doesn't grow as much as it could.
S
A capital gains cut canWsh the eost of saving our
WASHINGTON
financial industry.
If we restore incentives by lowering the capital gains tax,
we can produce a host of benefits. Consider one that gets
virtually no attention:
An increasing number of studies show that a reduction to 15
percent could restore $500 billion in commercial and residential
property values. That jump would strengthen the portfolios of
lending institutions, including troubled savings and loans. That
strengthening in turn could chop $20 billion or more off the cost
of rescuing the savings and loan industry right away, and could
slash the long-term costs of recovery even further.
A capital gains cut will make us more competitive in the new
world economy.
It ought to be obvious that we cannot afford not to cut our
capital gains taxes. If you want to understand why our people
save less than the Germans and Japanese, start by comparing
capital gains rates. None of our major competitors imposes a
high tax on capital gains. And most of the emerging democracies
in Eastern Europe have decided from the start not to tax them at
all.
If we want to compete effectively in a world marketplace, we
should cut the capital gains tax.
If we want to encourage investment, rather than
WASHINGTON
debt and hoarding, we should cut the capital gains tax.
If we want to reward enterprise, not envy, we should cut the
capital gains tax.
High capital gains taxes are taxes on the American dream.
They punish the people who stand to gain the most from growth,
the poor, the middle class. They protect the rich from
competition and prevent the poor from pursuing their dreams.
If there's a fairness problem, this is it. If we want to
unleash the creative power of the American people, we should
ignore those who would rather be righteous than right. We should
slash the tax on the American Dream.
Let's turn to a second pillar of growth -- free trade:
I need Congress's help on an equally important growth issue,
trade. As you know, I have asked Congress to extend my "fast-
track" trade authority. Fast-track is a sort of misleading term.
We ought to call it "good faith" authority.
Fast-track simply guarantees that we will not change trade
agreements that our negotiators have reached. Congress will
accept them or reject them just as they were negotiated.
This doesn't weaken Congress' power to review agreements; it
simply prevents 11th hour changes that would force negotiators
from all countries to return to the table and start from scratch.
7
Fast-track is not just WHITE HOUSE etiquette. Our trading
WASHINGTON
partners consider it a vital test of our reliability. Three
impending trade initiatives could stand or fall, depending on
whether Congress permits the fast track process to continue. The
North American Free Trade Agreement, the Enterprise for the
Americas Initiative and the Uruguay Round of trade talks all
depend on fast track.
When the Cold War ended, so did the old world of military
competition. Economic competition will play an increasingly
important role in world affairs. We can play a leading role if
we engage that new world by seeking free and fair trade.
I know you support free trade. And I know you are just as
excited as I am about a world in which economic competition
replaces military conquest. But we can't take full advantage of
our opportunities without fast-track. Today I ask your help in
getting Congress to join us in reaching out to this new and
vibrant world.
I just mentioned the savings and loan industry. That brings
to mind a third crucial element in our growth package -- banking
reform.
We have proposed a comprehensive series of reforms designed
to put our financial services industry on sound footing. In many
ways, our banking industry strains under the weight of ancient
regulations and restrictions. We have proposed a package that
modernizes our banking system, makes it safer for consumers, and
increases its competitive fitness.
Let me touch just a few of its major points:
8
Our package would limit the of insured deposits to
WASHINGTON
no more than $200,000 per person per institution. This
restriction obviously protects small savers.
It would encourage insurance premiums based on risk, thereby
punishing prodigal institutions, while rewarding those that do
well.
It would eliminate the current "too big to fail" policy, and
send the message that institutions no longer can consider the
government as the lender of last resort.
It would strengthen the financial services industry by
limiting new-service delivery to institutions that are
financially sound. It also would prevent unfair banking
practices in this area.
It would authorize nationwide banking for bank holding
companies, after a three year phase-in period.
In short, it strives to strip away laws that invite lending
institutions to take unwise risks. It strips away barriers that
prevent banks from competing nationwide and worldwide. And it
gives banks the freedom to improve consumer services without
subjecting depositors to unnecessary risks.
Our banking system is like an irrigation system for the
economy. When it works properly, it cultivates the seeds of
economic growth. When it doesn't, companies like the ones
represented here can wither and die.
You may have noticed that I have been talking a lot about
the future. That's only logical: talk of growth naturally forces
us to look ahead.
9
THE WHITE HOUSE
WASHINGTON
The fourth pillar of our growth package involves investing
in the future.
Our budget this year calls for significant emphasis on
education, for instance. And our new Education Secretary, Lamar
Alexander, has outlined four great reform themes:
Better and more accountable schools/
A new generation of American schools/
A nation of students/
And communities where education can happen.
His strategy really involves common sense. Schools work when
teachers teach,
When parents support the schools/
When schools welcome help from people with skills --
businesses, industries, academics, retirees
When communities eliminate the barriers -- crime,
corruption, inefficiency, boredom -- to education.
Your Vital Link program offers a perfect example of the kind
of partnership Lamar seeks to build, and I'm sure he'll be
seeking out your advice and help in the future.
Our invest in the future strategy also emphasizes the
importance of preventive health care -- staying fit, staying
healthy.
10
It encourages research WHITE Velbpment in basic and applied
WASHINGTON
science.
It seeks to improve our transportation system -- the roads,
the airports, the railways that take people to and from work.
It strives to protect our national heritage and environment
by creating a system of incentives that reward stewardship
without choking off economic growth.
It tries to create real competition in all areas of
government service -- education, health care, housing,
employment. It lets people choose their futures.
I know I have covered a lot of ground here. But I thought
it was important to emphasize a point I consider vitally
important. Our domestic agenda has some very clear and important
points of emphasis. We want to promote growth by cutting the
capital gains tax, encouraging trade, reforming our banking
system, and investing in the future.
We want to unleash the power of American imagination and
innovation by cutting the capital gains tax, encouraging trade,
reforming the banking system and investing in the future.
We want to show ourselves and the world that Americans
define themselves in terms of their capabilities, not their
disabilities. We want to reward those capabilities by cutting
the capital gains tax, encouraging trade, reforming the banking
system and investing in the future.
11
America has gained in itself of late. We
WASHINGTON
have rediscovered the virtues, the skills, the goodness that all
of us knew was within us. And now, we all can feel a sense of
expectation:
Many people have talked of the 20th Century as The American
Century. Well, we should not be content with that. We are about
to enter the next American Century, the 21st Century. In that
century, Americans will create products and industries that would
boggle all our minds.
They will engage in the world -- and the
heavens -- in ways that our dreams cannot fully imagine. They
will accomplish spectacular things because we decided to reward
genius instead of taxing it. They will build a new society
because we decided to let them chart their destinies, rather than
forcing them to follow our own blueprints.
They will stand tall
because we decided to encourage growth, imagination, goodness,
decency, education, skill -- because we decided to uphold the
traditional American dream.
This is a great nation because men and women like you
believed in yourselves. Believed in your ideas. And trusted the
public to render a sound judgment. The same virtues can propel
us to future greatness as a nation. I ask your help in pursuing
that quest. With it, we cannot fail.
Thank you, and God bless this great land.
THE URUGUAY ROUND
An Engine of Growth for the 21st Century
Global Trade Talks Would Spur U.S. Growth by Opening Markets
And by Creating New Rules for Over One-Third of World Trade
Trade Without Rules:
(Trillions,
Commercial
1989 Dollars)
Services
$ 1.1 Trillion, estimated
$640 billion
gain in output over 10 years
$7.4
US Output
With Successful Uruguay Round
Goods, incl.
$7.2
Agriculture,
$618 billion
Current Trend
Trade with
Developing
Countries
$320 billion
$5.0
90
91
92
93
94
95
96
97
98
TAL
99
2000
Total World Trade 1989 - $3.7 trillion
Source: USTR, Centre for International Economics
Source: USTR GATT
That is why
President Bush has made the successful conclusion of the Uruguay Round of
global trade negotiations by December 1990 his top trade priority. Our objective
in these talks is to ensure continued economic growth by opening markets
worldwide, and by establishing rules of fair play in areas vital to U.S. competi-
tiveness - services, investment, agriculture, and high technology.
A successful Uruguay Round would mean:
Lower tariff and non-tariff barriers to manufactured products and other goods, which could
increase U.S. output by over $1 trillion over the next 10 years, meaning an additional $16,000 for every
American family of four.
Rules to protect the intellectual property of U.S. entrepreneurs, who lose $60 billion annually
through the theft and counterfeiting of their ideas.
New markets for U.S. service firms, which export $90 billion annually and generate 90% of new
U.S. jobs.
An agreement opening world markets to investment, which helps generate over $240 billion, or two-
thirds of total U.S. goods exports.
Fair competition and open markets in agriculture, creating new opportunities for American farmers,
who lead the world with more than $40 billion in annual exports.
The full participation of developing countries in the global trading system, which could increase
U.S. exports by $200 billion between now and the year 2000.
Effective rules on dispute settlement, anti-dumping, subsidies, and import safeguards, to expand
access to foreign markets and to ensure fair trade in the U.S. market.
"The results of the Uruguay Round of negotiations can be the engine that drives the United
States and world economies into the 21st century. The agreement we reach will be the
ultimate competitiveness initiative."
President George Bush,
August 20, 1990
For More Information Contact: Office of the U.S. Trade Representative, 600 17th St. N.W., Washington, D.C. 20506, (202) 395-3350
(over)
THE URUGUAY ROUND
An Engine of Growth for the 21st Century
Global Trade Talks Would Spur U.S. Growth by Opening Markets
And by Creating New Rules for Over One-Third of World Trade
Trade Without Rules:
(Trillions,
Commercial
1989 Dollars)
Services
$ 1.1 Trillion, estimated
$640 billion
gain in output over 10 years:
$7.4
US Output
With Suppaneful Uruguey Round
Goods, incl.
$7.2
Agriculture,
$618 billion
Current Trend
Trade with
Developing
Countries
$320 billion
$5.0
90
91
92
93
94
95
96
97
98
99
2000
Total World Trade 1989 - $3.7 trillion
Source: USTR, Centre for International Economics
Source:
USTR
GATT
That is why
President Bush has made the successful conclusion of the Uruguay Round of
global trade negotiations by December 1990 his top trade priority. Our objective
in these talks is to ensure continued economic growth by opening markets
worldwide, and by establishing rules of fair play in areas vital to U.S. competi-
tiveness — services, investment, agriculture, and high technology.
A successful Uruguay Round would mean:
Lower tariff and non-tariff barriers to manufactured products and other goods, which could
increase U.S. output by over $1 trillion over the next 10 years, meaning an additional $16,000 for every
American family of four.
Rules to protect the intellectual property of U.S. entrepreneurs, who lose $60 billion annually
through the theft and counterfeiting of their ideas.
New markets for U.S. service firms, which export $90 billion annually and generate 90% of new
U.S. jobs.
An agreement opening world markets to investment, which helps generate over $240 billion, or two-
thirds of total U.S. goods exports.
Fair competition and open markets in agriculture, creating new opportunities for American farmers,
who lead the world with more than $40 billion in annual exports.
The full participation of developing countries in the global trading system, which could increase
U.S. exports by $200 billion between now and the year 2000.
Effective rules on dispute settlement, anti-dumping, subsidies, and import safeguards, to expand
access to foreign markets and to ensure fair trade in the U.S. market.
"The results of the Uruguay Round of negotiations can be the engine that drives the United
States and world economies into the 21st century. The agreement we reach will be the
ultimate competitiveness initiative."
President George Bush,
August 20, 1990
For More Information Contact: Office of the U.S. Trade Representative, 600 17th St. N.W., Washington, D.C. 20506, (202) 395-3350
(over)
MARKET ACCESS
AND THE IMPORTANCE OF THE URUGUAY ROUND
Removing Barriers to U.S. Manufactured Exports
is a Key to Growth
Uruguay Round Aims to Lower World Trade Barriers by at Least One-third..
Which Could Raise U.S. Output by $1.1 Trillion Over the Next 10 Years.
(Trillions,
1989 Dollars)
$ 1.1 Trillion, estimated
gain in output over 10 years
$7.4
1989=100
US Output
With Successful Uruguay Round
$7.2
Current Trend
Current Tariff &
Post Uruguay Round
$5.0
Non-Tariff Barriers
Goal
90
91
92
93
94
95
96
97
98
99
2000
Source: USTR. Centre for International Economics
OBJECTIVE: We aim to reduce world barriers to trade in goods by one-third
or more in the Uruguay Round, which could increase U.S. output by over
$1 Trillion over the next 10 years, meaning an additional $16,000 for every
American family of four.
Although past rounds of international trade negotiations have lowered tariffs by an
average of 75%, significant tariff barriers remain:
In key sectors of developed country markets, and
In developing countries, many of which still maintain tariffs of 100% or higher.
Moreover, new, non-tariff barriers to imports - such as quotas and voluntary export
restraints - have sprouted to replace falling tariffs.
That is why the United States is working to negotiate lower tariff and non-tariff barriers
to trade with nearly 100 other countries in the Uruguay Round of international trade
negotiations.
The United States challenges its trading partners to envision a tariff-free world, and
we stand ready to achieve this in key sectors in the Uruguay Round."
U.S. Trade Representative Carla A. Hills,
Address before the Town Hall of California,
January 25, 1990
DEVELOPING COUNTRY TRADE
AND THE IMPORTANCE OF THE URUGUAY ROUND
Developing Country Markets Are Vital to U.S. Exports
Developing Countries Purchase One-Third of U.S. Exports
Which Would Grow If Trade Talks Succeed.
$ Billions
Developing
Other $7
$ Billions
Countries 32%
= $200 + billion
Automotive $7
Capital Goods
300
added to U.S. exports
$46
Consumer Goods $11
Foods, Feeds
250
& Bev. $13
200
With Successful Uruguay Trend Round
Current
Indust. Sup.
150
Commercial
Services $32
& Mat. $34
Rest of World 68%
100
1989
2000
U.S. Exports of Goods & Services to World
U.S. Exports to LDCs
Estimated U.S. Exports of Goods & Services
$467 billion (1989)
$150 billion (1989)
to Developing Countries
Source: Dept. of Commerce
Source: USTR
OBJECTIVE: The United States wants to ensure that international trade
rules apply fully to developing countries, whose complete participation in
the global trading system could increase U.S. exports by as much as 50%,
or $200 billion, between now and the year 2000.
Developing countries buy nearly a third of U.S. exported goods and services - - about
$150 billion a year.
Yet the international rules of fair trade often do not apply to developing countries.
Developing countries need to be fully integrated into the world economy by:
Opening their markets to goods, services, and investment; and by
Following the same rules of fair, open trade as all other countries.
Integrating developing countries into the global trading system will accelerate economic
expansion and development in those countries, and create new opportunities for U.S.
exporters.
"A vibrant trading system is a global ticket to prosperity. But that means every
country
must assume responsibility for that system, a responsibility that if
shouldered, will provide enormous benefits to all our citizens.
U.S. Trade Representative Carla A. Hills,
Address before the Organization of American States,
June 4, 1990
INVESTMENT
AND THE IMPORTANCE OF THE URUGUAY ROUND
The Ability to Invest Abroad Strengthens U.S. Industry
By Generating Income for U.S. Firms:
By Generating U.S. Exports:
$ Billions
Exports from
50
U.S. firms with
foreign affiliates
34%
$240 billion
30
10
66%
0
1982
140
84
86
88
in
89
U.S. Net Earnings from
Total U.S. Goods Exports, 1989
Foreign Direct Investments
$363 Billion
Source: Department of Commerce
Source: Department of Commerce, USTR
OBJECTIVE: In the Uruguay Round the United States seeks an agreement
opening world markets to investment, which contributes $40 billion
annually to U.S. net income, and helps generate over $240 billion, or two-
thirds of total U.S. annual exports of goods.
An international investment agreement would help businesses to expand and sell
abroad in the most efficient way possible.
Through such an agreement, the United States aims to:
Prohibit the most trade-distorting government restrictions on foreign
investment; and
Impose clear rules curbing the use of other investment-limiting measures.
"American entrepreneurs should be able to invest overseas without being forced to
take a local partner, export a mandated portion of their output, use local content, or
meet any one of a dozen other government-imposed investment restrictions."
U.S. Trade Representative Carla A. Hills,
Address at the National Press Club,
May 24, 1990
SERVICES
AND THE IMPORTANCE OF THE URUGUAY ROUND
Services Spur Growth in the U.S. and World Economies
Services Account for:
Goods
Goods
Goods
Services
Services
Services
66% of U.S. Output
76% of U.S. Jobs
90% of New U.S. Jobs Since 1980
Source: Dept. of Commerce, Coalition of Service Industries
Services Are Increasingly Important to World Trade:
$ Billions
Leading Exporters of Services, 1988 ($ billions)
800
World Exports of Services
United States
$89
600
France
$58
Britain
$47
400
West Germany
$42
Italy
$35
200
Japan
$34
0
1970
1975
1980
1985
1989
Source: GATT
Trade in Services Has Skyrocketed
U.S. is the World's Leading Exporter of Services
OBJECTIVE: The United States seeks international rules of fair play gov-
erning trade in services, a sector in which the United States leads the
world with nearly $90 billion in exports annually.
Services - such as insurance, law, accounting, telecommunications, banking, advertising, and
tourism — are a large and growing component of the U.S. and world economies.
In the Uruguay Round, the United States seeks to establish a set of clear, fair, and non-restrictive
rules to:
- Expand market opportunities for U.S. service providers by removing foreign service trade
barriers;
- Enable service firms to set up shop overseas and be treated as fairly as local firms;
- Prevent governments from interfering in services trade through discriminatory and
burdensome regulations; and
- Ensure that countries administer their services laws and regulations in an open manner.
"Competitive industry demands competitive services. You can't design world-class
chips without engineering, manufacture them without financing, or export them
without insurance."
U.S. Trade Representative Carla A. Hills,
Address before the Town Hall of California,
January 25, 1990
AGRICULTURE
AND THE IMPORTANCE OF THE URUGUAY ROUND
Open Agricultural Markets Mean U.S. Exports:
The U.S. Is the World's Largest Agricultural Exporter
But U.S. Farmers Face High Barriers Overseas.
$ Billions
Percent
100
45
40
80
35
U.S. Agricultural Exports
30
60:
25
20
40
15
10
20
5
0
0
1950
1989
EC
Austria
Sweden
Finland
Japan
In 1990, U.S. Agricultural Exports Totaled $40 Billion
Agricultural Protection - Subsidies, Tariffs,
and Non-tariff Barriers - as a Percent of Farm Income
Source: Dept. of Commerce
Source: USDA
OBJECTIVE: The United States seeks the fundamental reform of world
agriculture in the Uruguay Round of global trade talks, which could expand
world agricultural exports by roughly one-third, or $100 billion.
Growth of U.S. exports is impeded by protectionist agricultural subsidies and trade barriers,
which cost consumers and taxpayers in the United States, Europe, and Japan $220 billion in
1989.
The United States believes farmers should be able to grow what they want, when they want, and
prosper without government interference.
In the Uruguay Round the United States wants to:
-
Open agricultural markets so that trade can expand;
-
Phase-out agricultural export subsidies that governments unfairly use to buy market share;
-
Substantially reduce domestic subsidies and price supports that produce artificial surpluses,
which are then dumped on world markets, hindering fair competition; and
-
Ensure that health and safety regulations are based on scientific evidence and not used as
trade barriers.
The United States is prepared to put its own restrictions on the table, but we will not unilaterally
reform.
"We want improved market access for all agricultural producers, wherever they live, and we want to
eliminate the trade-distorting effects of all subsidy programs. We are determined to move toward
agricultural trade policies that allow farmers all over the world to become attuned to market prices."
Secretary of Agriculture Clayton Yeutter,
Speech before the OECD,
May 30, 1990
INTELLECTUAL PROPERTY RIGHTS
AND THE IMPORTANCE OF THE URUGUAY ROUND
Global Rules Protecting Intellectual Property
Would Safeguard American Ingenuity
U.S. Creativity Generates Income..
But Billions Are Lost Due to Theft.
$ Billions
Chemicals 6%
12
Other 20%
Pharmaceuticals 8%
Entertainment 9%
8
Motor Vehicles
& Parts 9%
U.S. Earnings from Fees and Royalties Overseas
4
Scientific and
Photographic 21%
Electronics 10%
0
Computers & Software: 17%
1982
84
86
89
Foreign Fees and Royalties, just one source of
World-wide Revenue Losses to U.S. Industries from Inadequate
income from U.S. ideas, are growing
Protection of Intellectual Property: $ 60 Billion (1986 est.)
Source: U.S. International Trade Commission
Source: Dept. of Commerce
OBJECTIVE: In the Uruguay Round of global trade talks, the United States
seeks international rules to protect the creativity of American entrepre-
neurs, who lose over $60 billion annually from the global theft and
counterfeiting of their ideas.
American patented, copyrighted, and trademarked products are a growing source of
foreign earnings to the U.S. economy. Yet American innovations are often pirated
abroad.
The U.S. victims of international piracy are a Who's Who of innovative industries:
automakers and moviemakers; chemical and aviation companies; songwriters and
software-writers; inventors of cellular telephones and authors of books on cellular
biology.
The United States seeks an international agreement that establishes rigorous rules
protecting intellectual property, and provides for enforcement of those rules.
Strong intellectual property protection is a spur to innovation, which creates jobs and
new enterprises, and increases U.S. competitiveness.
"We want a system that protects the intellectual property on which our high technology and
entertainment industries depend. From Apple's Maclntosh to Disney's Mickey Mouse, from
Pfizer's newest drug to Michael Jackson's latest record, companies throughout the United
States depend on the ability to take a good idea, develop it, and reap the rewards."
U.S. Trade Representative Carla A. Hills,
Address before the Town Hall of California,
January 25, 1990
(over)
Key U.S. Intellectual Property Objectives in the Uruguay Round:
The United States seeks an agreement that protects intellectual property rights world-wide
through:
Global standards protecting intellectual property rights in the areas of patents,
trademarks, copyrights, trade secrets, and layout designs for semiconductors.
Effective enforcement of intellectual property rights, both internally and at the border.
Patent protection of all technologies for a term of at least 20 years from filing of an
application.
A clear definition of the limited circumstances under which governments may compel
the issuance of licenses allowing others to use a patent.
Copyright protection for computer programs, treating them as literary works and
entitling them to the same level of protection as books.
International recognition and precise definition of trade secrets and the right to protect
them.
GLOBAL TRADE RULES
AND THE IMPORTANCE OF THE URUGUAY ROUND
Tougher World Trade Rules Will Help
U.S. Business Compete
OBJECTIVE: The United States seeks to strengthen the rules of inter-
national trade to expand U.S. access to foreign markets, and to ensure fair
trade in the U.S. market.
In the Uruguay Round of global trade talks, the United States seeks more effective rules
in the following areas:
Dispute Settlement: A swift, sure, and effective mechanism to resolve trade
disputes, so that when countries violate international rules and raise new trade
barriers, the United States has recourse to a speedy remedy.
Anti-Dumping: Improved rules that deter countries from "dumping" their
products at unfairly low prices in the U.S. market, thereby injuring U.S. producers.
Subsidies: Stronger rules to rein in the use of government subsidies that distort
trade and give companies an unfair competitive advantage.
Import Safeguards: Stronger rules that prevent countries from arbitrarily erecting
temporary barriers against surges in imports. Governments should be required to
follow clear, objective procedures-such as those followed in the United States —
before erecting such barriers.
Product Standards: Stronger, more comprehensive rules ensuring that countries
do not use product standards to unfairly keep out imports.
"This round of the GATT is an ambitious undertaking. It is the last best chance for
the world to enter the next century with free and fair trade for all."
President George Bush
Address in the Rose Garden,
May 23, 1990
Some Background on the Uruguay Round:
The Uruguay Round of global trade negotiations is taking place under the auspices of the
General Agreement on Tariffs and Trade, or GATT.
The GATT was created in 1947.
-
Through the GATT - the Constitution of trade - the countries of the world began a process
of opening global markets and developing the rules of international trade.
-
Today, more than 97 nations, accounting for more than 85 percent of world trade, are
members of the GATT.
Under GATT sponsorship, the world's trading nations have held seven successful rounds of
negotiations to cut tariff rates. As a result, tariffs have been slashed by 75% and the U.S. and
world economies have grown faster in the last forty years than in any similar period of world
history.
Trade Drives the Growth of the U.S. Economy...
And Creates Jobs
1950 100
1950 - 100
400
1000
800
300
600
200
Export Related Employment
1400
Exports
Total Employment
100
Output
200
0
0
1950
1989
1950
1989
U.S. Economy
U.S. Employment
Source: Dept. of Commerce, USTR
Source: Dept. of Commerce, USTR
However, continued growth is threatened:
Manufacturers still face high tariff and non-tariff barriers, such as quotas and import bans,
overseas
In addition, over one-third of world trade - more than $1 trillion - is inadequately covered
by agreed rules of fair play.
The affected sectors - agriculture, investment, services, and industries such as high
technology and entertainment that rely on the protection of intellectual property - are ones
in which the United States is highly competitive and vital to our future prosperity.
Finally, international trade rules often do not apply to developing countries, which purchase
one-third of all U.S. exports.
Thus, in 1986 in Punta del Este, Uruguay, the United States helped launch the most ambitious
round of GATT negotiations ever undertaken to expand the scope of international trade rules and
to further open markets.
Uruguay Round negotiations are scheduled to be completed in Brussels in December 1990.
Administration of George Bush, 1989 / Apr. 4
attend the NATO summit in Brussels, as
force around the world today, most particu-
well as to visit allied leaders in Rome, Bonn,
larly in Europe. On this anniversary, I join
and London. This will be an historic occa-
my fellow Americans and citizens of the 15
sion not only for the anniversary it com-
other allied countries in saluting what has
memorates but also for the hopeful changes
been accomplished. Equally, we salute a
il can mark, changes made possible by the
bright future and recommit ourselves to the
strength and solidarity of the Atlantic alli-
shared vision of a Europe undivided in
ance.
which security and peace are assured for all
Today in a changing world, our alliance
the nations of the continent on the basis of
not only keeps the peace and freedom of
freedom, true democracy, human rights,
the Atlantic world, it has made possible the
and the rule of law, fulfilling the dream and
common effort to build a more constructive
vision of 40 years ago.
relationship with the East. Europe is enter-
And now I would like to invite the NATO
ing a period of unprecedented change and
Ambassadors to come forward for a group
enormous hope. Without our moral and po-
photo, and then I hope we'll all have a
litical unity over four decades, this would
chance to say hello. Please?
never be happening.
Our values of freedom and democracy
Note: The President spoke at 11:04 a.m. in
turn out to be the most powerful political
the Rose Garden at the White House.
Designation of Joseph E. DeSio as Acting General Counsel of the
National Labor Relations Board
April 4, 1989
The President today designated Joseph E.
Law, the Appeals Branch, and as a field
DeSio to be Acting General Counsel of the
attorney in the Kansas City Regional Office.
National Labor Relations Board. He would
In 1979 Mr. DeSio became a charter
succeed Rosemary Collyer.
member of the Senior Executive Service.
Since 1972 Mr. DeSio has been Associate
General Counsel in the Division of Oper-
He is a recipient of the President's Meritori-
ous Rank Award for Senior Executives.
ations-Management of the National Labor
Relations Board in Washington, DC. He has
Mr. DeSio graduated from Fordham Uni-
served in several capacities for the National
versity (A.B.), Fordham University Law
Labor Relations Board since 1955, including
School (LL.B., 1947), and New York Univer-
Deputy Associate General Counsel in the
sity Law School (LL.M., 1955). He was born
Division of Operations-Management Assist-
October 11, 1916, in Geneva, NY. He has
ant General Counsel of the Time and Per-
four children and currently resides in
formance Branch; serving in the Division of
Springfield, VA.
Remarks at a White House Briefing for Members of the American
Business Conference
April
4, 1989 almost 2 years ago, met with
same group
The President. Welcome. Thank you for
be with you again. I think I've met three
the welcome, and welcome to all of you.
times with this group over the last 8 years.
Roger Porter told me he'd had a chance to
As far as I'm concerned, at least, every
visit with you all, and I'm just delighted to
meeting has been, for me, helpful, either
351
Apr. 4 / Administration of George Bush, 1989
from garnering what's on your mind from
ing it, we have a sensible approach to eco-
the question or, in one or two more kinder
nomics. And I can just tell you that I al-
and gentler meetings, we had a chance to
ready have valued the advice and experi-
visit around a little bit.
ence we're getting from him. And I'm glad
But among the friends-I think many
that tomorrow you can have a give-and-
friends-that I have in this organization, I
take.
want to single out your former Vice Chair-
Now, you run these high-growth business-
man, now the Secretary of Commerce, Bob
Mosbacher. And like everyone in this room,
es that do represent the most dynamic en-
he knows what it means to take risks, start a
trepreneurial segment of our economy. And
business, make it grow, and keep competi-
we know better than to try to fix that
tive. And I am just delighted that he is here
which is not broken. So, this afternoon, let
in Washington with us, giving up his private
me just mention a couple of areas: the eco-
enterprise, for a while at least, to be Secre-
nomics of enterprise and then the need for
education reform.
tary of Commerce. He's on the cutting edge
of our national effort to build a better
You know the same lessons that I learned
America. And for those of you who were
as a businessman. You've got to have capital
with him in this organization-that's most
to grow. And what you don't need, in my
in the room-he's really doing a superb job.
view, is higher taxes on the earnings or
To be sitting in this room today, you've
higher taxes on the workers or higher taxes
had to keep your earnings at three times
on those who invest money in the business-
the growth of the economy, I'm told-three
es. And right now the Government is
times the growth of the economy plus infla-
making too big a claim on America's capital
tion-a tremendous goal. I hope that last
to cover our deficit. And that capital should
category will not make it more difficult for
be invested in American businesses. And
you to achieve-[laughter]-but we can talk
the best way to channel more capital into
about that later on. But now we're relying
productive investment is not through
on Mosbacher to make that happen not just
higher taxes.
for ABC but for every business in America.
And we're going through a real struggle
And so, in a time where the United States
right now: trying to have enacted a budget
creates positions of czar-something that es-
which I sent to the Hill a while back that
capes me as to why we turn to that nomen-
did hold the line on taxes. And it's tough;
clature to solve our problems-we have a
it's a difficult negotiation. But I can tell you,
drug czar-we will anoint Bob Mosbacher
I have been pleased with the way the
as the business czar, and then the rest of us
budget document was received by the Con-
can all pursue our favorite pastimes. Mine is
gress. Nobody jumped up and seconded the
fishing, and you guys can speak for your-
motion and agreed that it ought to be
selves. [Laughter]
passed exactly as it was presented by me
I don't know-Mike, have you talked to
and then by Dick Darman. But the re-
this distinguished group yet?
sponse has been good. And I think that sig-
Dr. Boskin. Tomorrow morning.
nifies that the Congress, as well as the exec-
The President. Tomorrow morning. I see
utive branch, are listening to the American
Dr. Michael Boskin [Chairman of the Coun-
people-people saying we've got to do
cil of Economic Advisers] here, and I am
something about the deficit.
very proud to have him on our team. He
So, the answer: spending restraint. And
and I have a very direct relationship, a per-
again, I would readily tell you that it's very,
sonal relationship. And he calls them as he
very difficult. The working paper that you
sees them, as the umpires over in Baltimore
released last month was another reminder
said yesterday. And he's very knowledgea-
that the deficit ought to be brought under
ble on how the private sector works. So, he
control. Accountability in government de-
combines that knowledge and the gut in-
mands that we put an end to the spending
stincts that come from that with his enor-
spiral.
mously good credentials in academia. And
You know, when George Kaufman, that
so, I think here in this CEA, with him head-
famous wit from the Algonquin Round
352
Administration of George Bush, 1989 / Apr. 4
ble approach to eco-
Table, was at a party, he heard a self-made
for the rich. That's a fair shake for every
t tell you that I al-
millionaire boasting to a circle of people, "I
American. And they all come after me,
advice and experi-
wish I was born into the world without a
saying this is a tax break for the rich. And
n him. And I'm glad
single penny." And Kaufman answered,
I'm going back saying, Steiger amendment,
in have a give-and-
"Oh really? When I was born, I owed $12."
19-what was it, 78-worked just the oppo-
[Laughter]
site: it brought in more revenues to the
high-growth business-
Well, we don't have to let the deficit play
Federal Government and created more
e most dynamic en-
a cruel joke on future generations. Next
jobs.
of our economy. And
year alone, fiscal year 1990-and most of
We want to build on the energy and the
to try to fix that
you are familiar with this figure-but Fed-
initiative of American business without bur-
0, this afternoon, let
eral revenues will rise by more than $80
densome mandates that only enforce solu-
ole of areas: the eco-
billion with no tax increase-$80 billion
tions of uniform mediocrity. Now, we don't
d then the need for
more coming into the Government just
want to limit the flexibility of managers and
under the existing tax structure. And so,
workers, who are trying to find their own
essons that I learned
what we're going to do is meet or beat the
best solutions. Many are already succeeding,
e got to have capital
Gramm-Rudman targets.
as you know.
1 don't need, in my
Our budget consultations with Congress
The Chamber of Commerce estimates
on the earnings or
so far have been going well. We're deter-
suggest that workers are receiving more
rkers or higher taxes
mined to work with the Congress, as I said,
and we're going to continue to approach
fringe benefits than ever before. Total ben-
oney in the business-
the matter in one of cooperation. There will
efits in 1987 were up 163 percent in a
the Government is
be some tough, you know, dividing points
decade. And it is the market, in our
on America's capital
d that capital should
along the way. But I think Dick Darman
system-it is the market, not government,
can businesses. And
[Director of the Office of Management and
that is responsible for most of this growth.
Budget] would tell you that so far we've
Nearly 70 percent of growth in benefits is
el more capital into
been pleased.
due to voluntary action by employers, only
t is not through
To spur greater investment, there is one
30 percent mandated government require-
area where we need to bring taxation
ments. And I want to keep it that way. Our
ough a real struggle
down-and I remain convinced that'll mean
friends in Europe have tried mandated ben-
ve enacted a budget
more revenues to the Federal Govern-
efits, and they haven't had much success.
ill a while back that
ment-and this is our proposal to bring
And I've talked to the political leaders, and
axes. And it's tough;
down the rate on capital gains. We've got to
I'm sure you've talked to many of the busi-
n. But I can tell you,
get it more in line with our trading part-
ness leaders. And I expect almost to a
with the way the
ners. In the budget we've proposed, we
person, man or woman in business, they
received by the Con-
want to restore the differential to 15 per-
agree with that. They're now looking for
up and seconded the
cent on long-held assets.
ways over there to free up enterprise
hat it ought to be
And I think many of you know, as you
American-style and make it more flexible,
as presented by me
built your businesses, that you could not
not less. And for us to go toward mandated
arman. But the re-
walk up to a bank and automatically get
benefits would be, as Yogi Berra put it,
And I think that sig-
startup costs. You can't do that-or at least,
"Like deja vu all over again." [Laughter]
5, as well as the exec-
you couldn't when I started a small busi-
America is going to be more competitive
ing to the American
ness. Most of you probably raise capital by
if we continue to resist the temptation to
; we've got to do
offering people a share of the business, a
heap burdensome mandates on the produc-
ficit.
stake in the outcome.
tive private sector. And so, they go after me
nding restraint. And
And cutting the capital gains rate means
for an unwillingness to support a wide
ell you that it's very,
more of that can happen. It'll give business-
menu of mandated benefits. But I don't
rking paper that you
es much more of the capital they need to
think there is anything kinder and gentler
as another reminder
grow, and it'll bring in $4.8 billion-this is
about rendering businesses noncompetitive
to be brought under
the estimate now, with no arm-twisting, I
in world markets, because that will mean
in government dei
might add, of the Treasury-this is their
fewer jobs. And that is the worst thing that
end to the spending
estimate-that'll bring in $4.8 billion more
we need in economic times such as these.
in tax revenues in 1990. It will in the proc-
A hallmark of this administration, I hope,
eorge Kaufman, that
and this is preaching to the choir-
will be our focus on the future: the impor-
Algonquin Round
create new jobs. And that is no tax break
tance we attach to making the right kinds
353
Apr. 4 / Administration of George Bush, 1989
of investment. There can be no investment
tive effort from all directions, but it holds
of our soci
more urgent than education. And in this, all
the promise of real progress.
interest red
of us have a stake. So, a word about that.
Many of you have been prime movers,
Education
As labor markets continue to get tighter
spending a remarkable amount of your own
make if We
in the coming years, many of you are going
time making good on that promise. Moro
America. A1
to be facing shortages of skilled people.
than a third of you serve on local school
that
Some managers are already worried about a
boards, public or private, on the board of a
Thank yo
scarcity of science and engineering gradu-
local college or a university. We talk about
to take a fe
ates. And you've all read the surveys that
funds at the Federal level. The Federal
Baltimore 0
show many foreign students outperforming
Government puts up 7 percent of the total
our own. Although our best students can
Q. Mr. P₁
tab for educational funding, and the total-1
compete with anyone in the world, the
ern Californ
just came from lunch with Larry Cavazos,
The Presic.
challenge we face is to adapt our education-
our Secretary of Education-I believe the
al system so that all of our students receive
Q. Was ti
figure he used, the amount that's being
the skills they need to share in that prosper-
spent on education today, is something like
yesterday?
The Presio
ity.
$330 billion.
My administration has made, rhetorically,
the Baltimo
So, it isn't necessarily a shortage of funds,
and now wants to make in terms of action,
the locker
and that's what some of these ideas that I'm
education a national priority. Our program
Mickey Net
talking about here take into consideration.
is based on four principles: rewards excel-
Sixty-four-y
Several of you have established a program
lence; helps those most in need; demands
little looser.
with a local community college or you've
accountability; and supports greater flexibil-
But here's
ity in parental choice. And tomorrow, we're
adopted a school or taught part-time or pro-
stepped in fr
moted science education across a school dis-
break down
going to send to the Congress our education
trict. And that is the kind of involvement
package. We want to reward merit schools
side of it, as
that make progress in terms of raising stu-
that, while it isn't always easy, leads to the
I'll tell you
kind of educational reform that lasts. And it
dent achievement and reducing drug use
me, and I've
and dropout rates. We're promoting paren-
places you among the Thousand Points of
there, and y
tal choice and educational quality through
Light that I talk about that do spread hope
getting boo
these magnet schools of excellence that
and opportunity. We're not going to whip
goes to a bal
some of you are familiar with in your own
the educational problem in this country by
verted here,
communities. We want to provide alterna-
everybody running over to the Department
tion. So, last
tive certification of teachers and principals
of Education. It is a Thousand Points of
in Cincinnati
to broaden the pool of talent that's avail-
Light. It is parents that care and school
the campaig)
able, President's awards to outstanding
boards and PTA's and good administrators
what are yo
teachers, urban emergency grants to pro-
and teachers at the local level.
know you're
vide comprehensive help in fighting drugs
And so, I would simply encourage you to
there as I wa
for school districts that are literally under
continue an active role in your communi-
little leaguers
siege today, and then a National Science
ties. There isn't a better answer. By invest-
guy, you kr
Scholars program for high school seniors,
ing your time and talents towards the edu-
blonde girl.
and additional endowment matching grants
cation of our young, you're helping to bring
And they sai
for these historically black colleges and uni-
about something vital: a fundamental cul-
leaguers. The
versities which do occupy-I believe we
tural shift that reasserts the value of learn-
with them, ai
would all agree-a unique and vital position
ing in this country. You're breathing new
[Laughter] Ai
in American higher education.
life into an idea that's always been a testa-
all walk out
We're committed to a program of reform
ment to the American spirit: that doing
wasn't a boo
that will give our young people a solid foun-
well demands doing good. So, nothing I
worked!
dation for the future. But to make lasting
might tell you would say it better than your
Okay. Sir?
improvements, we need to get all of the
(own mission statement, which says ABC ex-
Minimum anc.
players-administrators, school boards, local
ecutives "believe their own business success
business leaders, parents, teachers' unions-
carries with it a responsibility to help
Q. Mr. Pr
around the table working together, and this
expand economic opportunity throughout
training wage
will demand accountability from all of us.
the economy." As leaders not only in busi-
The Preside
It's going to require the best kind of collec-
ness but all across the board in every sector
training wage
354
Administration of George Bush, 1989 / Apr. 4
tions, but it holds
of our society, you know that the national
differential-is getting strong support on
SS.
interest requires us to invest in the future.
both sides of the aisle. The problem I face
'n prime movers,
Education is the best investment we can
as President is that I went up with a 6-
nount of your own
make if we really want to build a better
months training wage and a $4.25 mini-
at promise. More
America. And I want to do my part in all of
mum wage. And we've talked about it, Mi-
e on local school
that.
chael Boskin and I and Roger Porter and
on the board of a
Thank you all for coming, and I'd be glad
others, and we wrestled with the economics
ity. We talk about
to take a few questions. Who is first?
of it. And we figured this is the best offer.
vel. The Federal
Baltimore Orioles Opening Game
And so, unlike the normal trading that goes
ercent of the total
on here, we said, let's-and our Secretary of
g, and the total-I
Q. Mr. President, Red Scott from south-
Labor wanted us to do it this way, too-
th Larry Cavazos,
ern California.
Liddy Dole, a very able woman-let's go
on-I believe the
The President. Yes, sir?
with our best shot, and let's make very
ount that's being
Q. Was that pitch a curve or wasn't it,
clear in the testimony that that is our best
is something like
yesterday?
shot. Now, what we saw in the Congress
The President. That pitch-you mean at
was a pretty good bipartisan support for our
the Baltimore game? [Laughter] I got into
shortage of funds,
proposal-not enough to get it through, but
the locker room and warmed up with
hese ideas that I'm
I've got to hold the line on the grounds of
Mickey Nettleton [Tettleton], the catcher.
into consideration.
economics, on the grounds of making
Sixty-four-your old arm gradually got a
blished a program
people understand that I was serious about
little looser. But it was high and outside.
college or you've
that being the best offer.
But here's my problem. [Laughter] He
it part-time or pro-
And so, I think that if I do what I've just
stepped in front of the plate before it could
across a school dis-
break down across the inside. That's my
told you I will do, that there is a good
nd of involvement
side of it, and I'm going to stick with it.
chance to get a differential with a reasona-
easy, leads to the
I'll tell you, there's a little Walter Mitty in
ble increase on the minimum wage. But I
m that lasts. And it
talked here about-I don't want to see a
me, and I've always loved sports. Walk out
Thousand Points of
there, and you're always wondering about
proliferation of new mandated benefits.
hat do spread hope
getting booed when-any politician that
This is a-you might say mandated, but I
not going to whip
goes to a ballgame. I don't want to get di-
think we've got to be very concerned about
in this country by
verted here, but Reggie asked a good ques-
the inflationary aspects. I think we have to
to the Department
tion. So, last year, I go to the All Star Game
be concerned about the counter-job aspects
housand Points of
in Cincinnati-and we're in the middle of
in some of these low-paying, labor-intensive
it care and school
the campaign-saying this is suicide, man,
businesses, particularly in the service sector.
good administrators
what are you doing going out here? You
And I think our proposal would make a
level.
know you're going to get booed. So, right
necessary adjustment, but having the mini-
y encourage you to
there as I was about to walk out, I saw two
mum wage would lessen the likelihood of
in your communi-
little leaguers-one 11-year-old kid, big, tall
more unemployment. So, I hope it works. I
answer. By invest-
guy, you know, and a little 8-year-old
know we're going to have to go through
ts towards the edu-
blonde girl. And I said, "Who are these?"
some kind of a disagreement with Congress,
i're helping to bring
And they said, "Well, these are the little
because the House has passed a bill that
a fundamental cul-
leaguers. They're going out first." So, I got
frankly is unacceptable to me. But at least
the value of learn-
with them, and I said, "You guys nervous?"
we told them the truth ahead of time: look,
u're breathing new
[Laughter] And I said, "Well, why don't we
we can't go with that.
always been a testa-
all walk out together?" [Laughter] There
1 spirit: that doing
Relations With Congress
wasn't a boo in the house-[laughter]-it
good. So, nothing I
worked!
Q. Mr. President, it's been suggested by
y it better than your
Okay. Sir?
some of our meetings with Members of
which says ABC ex
Congress that a far greater use of the Presi-
own business success
Minimum and Training Wages
dential veto might be exercised, particularly
ponsibility to help
Q. Mr. President, do you believe the
when spending plans are proposed that ob-
ortunity throughout
training wage proposal will pass?
viously are going to not meet either
ers not only in busi.
The President. For the first time, the
Gramm-Rudman or your own targets. Like,
board in every sector
training wage-well, I refer to it also as a
as I understand it, President Reagan only
355
Apr. 4 / Administration of George Bush, 1989
vetoed 5 bills out of 170 in 8 years.
compromise-but when there is no room
But as I weigh thei
The President. I'm not sure that's cor-
for compromise, be very frank about it, and
to say what kind of
rect-the numbers. I do know that-as a
be up front about it. I hope that we can get
to: have on this b
member of the previous administration, a
along together. But it's going to take doing
and that's a job. AI
proud member-that part of the problem
some of what you talked about here.
some of the call fo
was the size of the bill that comes down
have good titles if 1
here. The one that comes to mind that he
President's Agenda
damental thing, v
did veto was the defense appropriations bill.
Q. Mr. President, is there any chance that
create jobs. So, I wi
And there were all kinds of statements of
your administration might lead the way to.
philosophy in min'
concern that that would unravel the mili-
wards a tax on consumerism rather than
these pressing socia
tary and all of that. And it didn't; the Con-
taxes on savings, such as a value-added tax
One word on
gress went back and made an adjustment.
or something of that type?
promise to go peac
So, we do not control-my party-either
The President. Well, I don't want to even
Kilberg, Deputy A
side of the Congress. And I think there will
discuss the tax on consumerism. There's a
for Public Liaisor
be times when we have to say, look, this is
wide array of suggestions been made, in-
know, business an
what I believe, and then rally our third to
cluding a horrendously prolific value-added
family groupings
defend the President's position, and then go
tax, which kind of is painless at first, and
started moving p
back.
child-care business.
then you wake up and realize that you've
I was using some rhetoric that was kinder
ent family structur
increased the cost of a lot of goods out
and gentler than veto when I described my
two-parent workfc
there. You have the suggestion that people
standing on the minimum wage just a
band and wife at "
put a fuel tax on, or an import tax on oil
minute-but let the Congress not misunder-
this, and I recogni
coming into this country. But I really don't
stand my determination. And this one will
care. But as we fo
believe we should do that.
be one where we have said, this is what we
wanted to get SO'
I have got to get this 1990 budget down
can do. And I, with respect, would recog-
within the budget
without increasing taxes. There's a lot at
nize the position of other Members of Con-
something that wo
stake. I think, in fairness, most Members of
gress on it, but I've got to stay with this.
verse answers that
And I'm going to stay with it. And I hope
Congress, whether they agree with me or
ginning: crowd bus
it'll send the kind of signal that will have an
not, recognize that; and thus they'll under-
had to turn to high
ameliorating effect on other pieces of legis-
stand my fighting for a budget that does not
child-care centers.
include a consumer tax or a tax on invest-
lation.
you can't do this ar
I'll tell you, there is an ingredient out
ment-saving capital or anything else. If you
ABC child care act
there today that's quite different. There's a
want to have a philosophical discussion, I
ents in a neighborh
recognition on the part of Members-both
take your point, because I think it is impor-
care of the kids, y
sides of the aisle-that the deficit really has
tant that if you presented me a hypothe-
because you're no
to be brought down and that some of the
sis-you've got to do that, or you've got to
tion. And so, what
programs-we're going to have to constrain
do that-and I would accept it and under-
thing-a mandated
the spending growth.
stand the political risk I'd be involved if I
you will, is keep
Now, I was in Congress 20 years ago, and
showed any flexibility at all in even discuss-
preserve parental (
I really see a different mood on the Hill.
ing it. [Laughter]
genius of diversity
And the Secretary-again, the Secretary of
I would have to say that you make a very
way.
Education and I had lunch-we talked
valid point in your question, because as I
And it's not ju
about the propensity of Congress to add,
tried to indicate in my remarks, it's job cre-
whole array of othe
you know-if you're for education, you pro-
ation-and that is subtraction of capital-
pose $1 billion; if you're really for educa-
that is really the best antidote to poverty.
tion, make it $2 billion; you're for clean
The best poverty program is a job in the
water, where you propose $11 billion, make
private sector, where a family can hold
Nomination of
it $12 billion. I mean, there's a tendency
their heads up with a certain dignity.
And so, I have got-and that's why when
Land Manager
now on both sides to recognize we cannot
go down that road. I will have to do some
these mandated benefits come down here
April 4, 1989
of what you suggest, I know, because
they have good titles on them, they have
they're not going to, obviously, want to do
things we're concerned about: parental
The President to
it just exactly my way. But if we demon-
leave or child care, whatever it is. And I'm
tion to nominate
strate a fairness, in some areas, a place for
sympathetic with many of the objectives.
356
Administration of George Bush, 1989 / Apr. 4
is no room
But as I weigh them, I have a responsibility
are coming down the pike that we have to
to-say what kind of an effect are they going
address ourselves to. Some we just say, look,
bout it, and
t we can get
to have on this best antidote to poverty,
we can't do it; we can't afford that. And
and that's a job. And so, we've got to resist
others we're going to have to say, well, we
take doing
ere.
some of the call for these good things that
can do a little here, but it's got to preserve
have good titles if they undermine the fun-
this diversity, and it's got to strengthen
damental thing, which is our ability to
family. I am tremendously concerned about
chance that
create jobs. So, I will keep trying, keep that
the erosion of the family unit in this day
philosophy in mind, as we try to answer
and age. And when you look at some of the
the way to-
these pressing social problems.
troubles we have on dropouts or look at
rather than
e-added tax
One word on child care, and then I
some of the troubles we have in keeping
promise to go peacefully, Bobbie [Bobbie G.
our kids out of the grips of these crack
Kilberg, Deputy Assistant to the President
pushers, you really have to go right back to
vant to even
n. There's a
for Public Liaison]. [Laughter] But you
the fundamentals in terms of the family
know, business and religious groups and
unit.
n made, in-
value-added
family groupings and communities have
And you know, people say, well, you're
started moving pretty actively into the
privileged; you're blessed in that area. I am.
at first, and
that you've
child-care business. And you have a differ-
And so, I can't profess to know what it is
if goods out
ent family structure now. You have many
just from firsthand experience in the inner
that people
two-parent workforce people there-hus-
city, when a family is divided and there's
band and wife at work. And so, I recognize
only one parent. But whatever we do at the
rt tax on oil
this, and I recognize the demand for child
government level has got to see that we
[ really don't
care. But as we formulated our policy, we
don't diminish family units and, frankly,
wanted to get something that would fit
find a way to strengthen them. And that's
budget down
within the budget, but we wanted to get
why this concept of parental choice, I think,
re's a lot at
something that would not rule out the di-
is absolutely essential, that it be woven into
Members of
verse answers that I mentioned in the be-
everything we do, wherever possible.
with me or
ginning: crowd businesses out because they
Listen, thank you all very much. Didn't
they'll under-
had to turn to highly regulated, centralized
mean to end with a sermon, but thanks a
that does not
child-care centers. Say to a religious group,
lot for coming.
ax on invest-
you can't do this any more; that violates the
g else. If you
ABC child care act. Say to a cluster of par-
Note: The President spoke at 2:10 p.m. in
discussion, I
ents in a neighborhood that alternate taking
Room 450 of the Old Executive Office
k it is impor-
care of the kids, you can't do any of that
Building. In his opening remarks, he re-
e a hypothe-
because you're not subject to our regula-
ferred to Roger B. Porter, Assistant to the
you've got to
tion. And so, what I want to do on some-
President for Economic and Domestic
it and under-
involved if I
thing-a mandated benefit of this nature, if
Policy. The President also referred to the
you will, is keep it as flexible as possible,
Algonquin Round Table, an informal liter-
even discuss-
preserve parental choice, and recognize this
ary circle that met at the Algonquin Hotel
genius of diversity that is our American
in New York City. Charles R. (Red) Scott,
1 make a very
way.
president and chief executive officer of the
because as I
And it's not just child care; there's a
Intermark Corp. in La Jolla, CA, asked the
ks, it's job cre-
whole array of other mandated benefits that
first question.
1 of capital-
te to poverty.
; a job in the
nily can hold
Nomination of Delos Cy Jamison To Be Director of the Bureau of
dignity.
at's why when
Land Management
ne down here
April 4, 1989
em, they have
out: parental
The President today announced his inten-
Director of the Bureau of Land Manage-
it is. And I'm
the objectives.
Non to nominate Delos Cy Jamison to be
ment at the Department of the Interior. He
357
TIMES 02-21-91
Concerns Raised on Mexican Trade
18/15/20
as companies struggled to meet the
By CLYDE H. FARNSWORTH
will have successful negotiations."
low-wage Mexican competition.
A number of other concerns, involv-
Representative Frank J. Guarini,
ing items ranging from steel and beer
Special to The New York Times
Democrat of Jersey City, said Mexico
to fruits and vegetables, were high-
WASHINGTON, Feb. 20 - The
had a "lax track record" in enforce-
lighted as the committee, which has
United States trade representative,
ment of environmental regulations
jurisdiction over trade matters in the
Carla A. Hills, today ran into a fusil-
and that as a result more American
House, held its first hearing on Presi-
lade of hostile questions at a House
companies might move south of the
dent Bush's request for authority to
Ways and Means Committee hearing
border to cut regulatory and other
negotiate a trade agreement with
on a projected free trade agreement
costs.
Mexico.
with Mexico, signaling a tough battle
While expressing their concerns,
ahead in selling an accord to Con-
North American Trade Zone
many of the lawmakers still voiced
gress.
general support for the free trade
The goal is a comprehensive North
The principal concerns were about
idea. As Representative Richard T.
American trade agreement linking
weaker Mexican environmental rules
Schulze, Republican of Pennsylvania,
360 million people who produce $6
and lower Mexican wages that under
put it: "While I have said at this early
trillion of goods and services a year in
free trade conditions, several law-
stage that I support a U.S.-Mexico
what would become the largest free
makers said, might erode standards
Free Trade Agreement, I cannot
trade zone in the world. Canada
in this country.
stress enough that my support is not
would participate in the negotiations,
unconditional."
which could lead to certain modifica-
Representative Donald J. Pease, a
Sam Gibbons, Democrat of Florida,
tions - what officials are calling "en-
Democrat representing an industrial
chairman of the Ways and Means
hancements" - in its two-year-old
area outside of Cleveland, said he
feared the agreement would cause
Committee's Trade subcommittee,
free trade agreement with the United
told Mrs. Hills that despite the an-
States.
factory wages to slide in his district
tagonistic questioning, "I think you
Provided the Bush Administration
gets the authority to negotiate a pact
that would be submitted to Congress
for approval or disapproval without
amendments, the United States would
start talks with Mexico in June and
expects to wind them up by the end of
the year.
Mrs. Hills, who spent nearly four
hours fielding questions at the packed
hearing, said those who do not sup-
port freer exchanges with Mexico
view trade as a "zero sum game" and
did not take into account mutually
reinforced growth that would make
both Mexico and the United States
more prosperous.
'Win-Win Situation'
"Reduced barriers will improve
the efficiency and productivity of U.S.
and Mexican industry and enhance
their competitiveness in international
markets," she stressed, calling a free
trade agreement a "win-win situa-
tion."
She strongly disputed assertions
that jobs would be lost or standards
slide in the United States as a result
of a trade agreement.
A number of Government studies,
including ones published by the Labor
Department and the International
Trade Commission, have projected
overall benefits for the economy.
On the question of environmental
standards, she said environmental
issues might needlessly complicate
an agreement about lowering tariffs
and other trade matters, but stressed
that the Administration still "wants
to insure that Mexico does as much as
is humanly possible to protect the en-
vironment."
She pointed to commitments on en-
vironmental improvement made by
President Carlos Salinas de Gortari
of Mexico, including a requirement
that all new cars be equipped with
catalytic converters this year, and
noted that the Environmental Protec-
tion Agency was already assisting the
Mexicans with their environmental
programs.
Department
to:
Bob Simon
of the Treasury
Office of the
room:
date: 3-28-91
Assistant Secretary
Public Affairs
I hope the enclosed materials on banking reform will
be helpful in preparing remarks for President Bush.
Please call me if you have any questions or need
further assistance.
Desiree Tucker-Sorini mp for
room 3442
phone 566-8773
TREASURY NEWS
THE DI TRREASURY
1789
Department of the Treasury
Washington, D.C.
Telephone 566-2041
MODERNIZING THE FINANCIAL SYSTEM:
RECOMMENDATIONS FOR SAFER, MORE COMPETITIVE BANKS
FEBRUARY 5, 1991
FACT SHEET
The Need for Reform
It is time to modernize our financial system to make banks
safer and more competitive:
We must modernize our banking system, updating outmoded
laws that date back to the 1930s.
Banks must be sound to protect depositors and
taxpayers.
A strong, internationally competitive banking system is
essential to a strong, growing economy.
The Banking System is Under Stress
Technology has revolutionized the way financial
institutions do business, but our banks are hampered by
out-of-date rules.
Weak banks shrink lending when the economy slows,
hurting businesses and costing jobs.
Our banks are falling behind international competitors:
Only one of the 30 largest banks in the world is
American, compared to nine of 30, including the top
three, just 20 years ago.
NB-1112
2
The Benefits of Reform
A modern, safe and internationally competitive banking
industry will protect depositors and taxpayers, serve consumers,
benefit workers and businesses, and strengthen our nation.
Protect depositors and taxpayers:
Depositor confidence and taxpayer protection will
result from:
-- A safe, competitive, well-capitalized banking
system;
-- limitations on taxpayer exposure to losses from
bank failures;
-- and a strong, well-capitalized insurance fund.
Serve consumers:
An efficient, integrated financial services system will
mean:
--- Consumers will have access to a wider range of
services at the least possible cost.
-- Consumers also will enjoy the convenience of
nationwide access to services.
Benefit workers and businesses:
A healthy banking system with strong, competitive banks
will ensure:
--
Jobs are preserved because loans are not called at
the first sign of economic downturn.
-- Small businesses that lack access to securities
markets can count on banks in bad times as well as
good.
Strengthen the nation:
A world-class financial services system provides a
foundation for a world-class economy:
--
International economic leadership in the 21st
century will require an internationally
competitive financial services system.
3
The Principles Governing Reform
First, we will preserve deposit insurance for small savers
while protecting taxpayers by reducing the overextended deposit
insurance system. Deposit insurance, originally intended to
protect small depositors who could not protect themselves, has
been expanded so that large, sophisticated investors receive
unneeded protection. This reform will restore market discipline
over risky activities that have increased the possibility of
taxpayer exposure to losses in the banking system.
Second, we will make banks stronger and safer by
strengthening the role of capital -- not by raising capital
standards, but with a plan to attract capital to the banking
industry. This will include rewarding well-capitalized banks
with new activities that will attract still further capital, and
taking prompt corrective action to address under-capitalized
banks.
Third, we will make banks more competitive by modernizing
outdated laws. Technological advances and other innovations in
financial markets have put banks at a competitive disadvantage --
at home and abroad -- that has weakened the system and hurt the
economy. Changes will allow banks to engage in a broader range
of financial services and to operate nationwide.
Fourth, we will strengthen the banking system by making the
regulatory structure more efficient. Currently, overlapping
regulatory responsibilities lead to confusion and uneven results.
4
RECOMMENDATIONS
PART ONE: DEPOSIT INSURANCE AND BANKING REFORM
The Administration's deposit insurance recommendations go
well beyond the narrow issue of deposit insurance and encompass
the entire range of safety, soundness and competitiveness issues
facing the banking system. They form a balanced, integrated
package that must be considered as a whole. No single
recommendation will be effective by itself, and indeed, could be
counterproductive if adopted in isolation.
I. Strengthen the Role of Capital
The single most powerful tool to make banks safer is
capital. Capital standards need not be raised, but the role of
capital can be strengthened. This will discourage excessive
risk-taking, reduce the possibility of bank failure, and provide
a cushion to absorb losses ahead of the insurance fund and,
ultimately, the taxpayer.
Well-capitalized banks are better able to keep lending,
rather than shrinking loans to build capital ratios, during
economic declines. And they are better able to meet competitive
challenges and to take advantage of new opportunities.
Specific Recommendations:
Capital-based supervision, capital-based deposit insurance
premiums and capital-based expanded activities (each described
further in other sections of the report) will provide incentives
for banks to build and maintain strong capital bases and make
bank franchises more attractive. In addition, interest rate risk
will be added to credit risk as a criterion for risk-based
capital standards.
II. Reduce the Overextended Scope of Deposit Insurance
Deposit insurance, originally intended to protect small
depositors who could not protect themselves, has been expanded so
that large, sophisticated investors receive unneeded protection.
This has increased the exposure of taxpayers to possible losses
and decreased market discipline on risky banks.
By returning deposit insurance to its original purpose, we
5
can reduce the possibility that taxpayer funds will be needed to
cover depositor losses, while simultaneously reintroducing market
discipline that will help curb excessive risk.
Specific Recommendations:
Insured deposits:
"Pass-through" coverage of many types will be eliminated,
reducing government protection for large, sophisticated
institutional investors.
Brokered insured deposits will be eliminated, ending a
practice that has given banks access to large pools of below-
market-rate funds that are deposited without concern on the part
of the depositor about the safety of the investment.
Individual insurance coverage will be limited to $100,000
per institution after a two-year phase-in period, plus another
$100,000 per institution for a retirement account. This change
will reduce taxpayer exposure to losses from coverage for
wealthier individuals with multiple accounts, including
individual, joint and revocable trusts, in a single failed
institution.
The FDIC will be required to undertake an 18-month study of
the costs and benefits of moving toward a systemwide $100,000 per
person insurance limitation. This would more effectively limit
taxpayer exposure to losses resulting from coverage of multiple
accounts, but should not be implemented until it can be shown
that the benefits would outweigh the potentially large
administrative costs.
Uninsured deposits:
The government must preserve its ability to protect the
banking system and the economy in genuine systemic risk
circumstances. But protection of uninsured deposits as a matter
of course both expands taxpayer exposure and encourages excessive
risk-taking by banks. To limit coverage of uninsured depositors,
the FDIC will be permitted to cover uninsured deposits only if
that would be the least costly approach. To protect the system
in rare instances of systemic risk, the Treasury and Federal
Reserve could step in and order that uninsured deposits be
covered. This policy would be implemented after three years to
allow for an appropriate transition.
Non-deposit creditors:
While protecting uninsured deposits should be the rare
exception, coverage of non-deposit creditors should be
eliminated.
6
III. Risk-Based Deposit Insurance
Flat-rate premiums subsidize high-risk, poorly run
institutions at the expense of well-run institutions and the
taxpayer. There is a perverse incentive to take risks because
there is no cost to offset the upside potential.
Specific Recommendations:
First, in the short-term, premiums based on capital levels
will reward institutions that build capital to act as a buffer
ahead of the insurance fund. In the longer term, a demonstration
project may lead to premiums set by private insurance.
IV. Improved Supervision
Even with deposit insurance limits, the insurance fund and
the taxpayer remain exposed to possible bank losses. Effective
bank supervision can help. Capital standards need not be
increased. But because well-capitalized institutions are the
safest, regulation should be reoriented towards a system of
capital-based supervision that provides rewards and penalties
that encourage banks to hold adequate capital.
The rewards of capital-based supervision would be much
greater regulatory freedom for well-capitalized banks to expand
and engage in new financial activities. The sanctions of
capital-based supervision would involve "prompt corrective
action" to address problems as capital levels decline, well in
advance of insolvency.
Specific Recommendations:
Capital-based supervision would establish five zones for
banks based on their capital levels. Those with capital in
excess of minimum requirements will be eligible to engage in a
broad range of new financial services. Those with less than
minimum capital would be subject to increasingly stringent
corrective action -- including dividend cuts or even forced sale
of the bank -- aimed at preventing failure.
V. Restrictions on Risky Activities
State-chartered banks with federal deposit insurance may be
authorized by charter to engage in risky activities that are
precluded for national banks. It is important to protect federal
taxpayers from such excessive risks while maintaining state
regulatory responsibilities under the dual banking system.
7
Specific Recommendations:
Federal deposit insurance qualifications would prohibit
direct investment activities by state banks and limit activities
not permitted for national banks.
VI. Nationwide Banking and Branching
Nationwide banking and branching would lead to safer, more
efficient and more competitive banks, decreasing taxpayer
exposure to losses. The U.S. is the only major industrialized
country without a truly national banking system. After 1992,
members of the European Community will permit international
banking throughout the EC. Not only do we put our banks at an
international competitive disadvantage, but we also forego
significant safety, efficiency and consumer benefits.
Already, 33 states permit nationwide banking and another 13
permit regional banking. Only four prohibit all interstate
banking. So the trend is clearly toward interstate banking. Yet
there is almost no authority for interstate branching. Given the
cost savings and efficiency arguments for interstate branching,
the advantages to consumers and taxpayers of interstate branching
are clear.
Specific Recommendations:
Full nationwide banking will be authorized for bank holding
companies following a three-year delay. Interstate branching
will be authorized for national banks in any state in which the
bank's holding company could acquire a bank. Thus, after the
three-year delay, full nationwide branching will be permitted.
VII. Modernized Financial Services Regulation
Banks are no longer the protected and steadily profitable
businesses they once were. Technological advances and
innovations by competing financial services providers have ended
their monopoly on transaction accounts and certain types of
business credit. They no longer enjoy protected access to low-
cost funds from interest rate controls. And old laws that once
protected them from competition have become barriers that impede
banks from responding to changing market conditions. The result
has been declining profitability and increasing bank failures.
The losers are not just banks, but also depositors, taxpayers and
the overall strength of the economy.
Out-of-date laws must be adapted to permit well-capitalized
banks to reclaim the competitive opportunities they have lost to
changing markets. Banks with expertise in other financial
8
services should be allowed to provide them for consumers, and
other financial services companies with natural synergies with
banking should be allowed to invest in banks. This will provide
new sources of capital for the banking system and help promote
safe, strong, well-capitalized banks.
The proposed changes will be accompanied by safeguards to
prevent exposure of the federal deposit insurance fund to these
new activities.
Specific Recommendations:
In order to strengthen the banking system, new rules will
permit financial affiliates for well-capitalized banks. A new
financial services holding company structure will permit a single
company to own affiliates engaging in banking, securities, mutual
funds and insurance. The new rules will allow commercial firms
to own financial services holding companies.
To protect the deposit insurance fund and the taxpayer, only
well-capitalized banks will be permitted to engage in new
financial activities. Only the bank will have access to deposit
insurance, strict regulation will be focused on the bank, and the
new financial activities will be in separately capitalized
affiliates.
VIII. Credit Union Reforms
The law required a study of adequacy of capital in the
credit union industry and insurance fund and of the regulatory
structure governing the credit union industry.
Specific Recommendations:
To ensure adequate capitalization of the credit union
insurance fund, the double counting of fund assets will be
eliminated over 12 years. To provide Administration
accountability for credit union regulation, the federal banking
regulator will serve on the National Credit Union Administration
Board.
PART TWO -- REGULATORY RESTRUCTURING
The current regulatory structure is complicated, overlapping
and confusing. Individual institutions often are supervised by
several regulators, and bank holding companies rarely have the
same regulator as their subsidiary banks.
A redesigned structure should reduce duplication and
9
improve consistency, accountability and efficiency. It should
also separate the insurer from the regulator.
Specific Recommendations:
The present four-regulator model (the Federal Reserve,
Office of the Comptroller of the Currency, Federal Deposit
Insurance Corporation and Office of Thrift Supervision) will be
simplified to two, with the same regulator responsible for a bank
holding company and its subsidiary bank.
The Federal Reserve will supervise all state-chartered banks
and their holding companies. A new Federal Banking Agency under
Treasury will supervise all national banks and their holding
companies. When a holding company owns both state-chartered and
national banks, jurisdiction over the entire organization will go
to the charterer of the largest subsidiary bank. The Federal
Banking Agency will take over OTS responsibilities on the date it
completes assigning thrifts to the RTC.
The FDIC will be focussed on insurance and resolution of
failed institutions.
PART THREE -- RECAPITALIZATION OF THE BANK INSURANCE FUND
The Bank Insurance Fund (BIF) has experienced losses in each
of the last three years due to increasing numbers of bank
failures. FDIC projects additional losses over the next two
years that, under the most pessimistic assumptions, could exhaust
the fund's net worth. The FDIC must exercise the authority given
to it in the FDIC Assessment Rate Act of 1990 to recapitalize the
BIF fund in the near term. Because the FDIC has the authority
and because industry participation is essential, a plan to
recapitalize the fund ought to be worked out with the industry by
the FDIC within the following parameters:
Goals of Recapitalization
1. The plan should provide sufficient resources.
2. It should take into account any impact on the health of
the banking system.
3. It should rely on industry funds.
4. It should use generally accepted accounting principles.