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American Business Conference 4/7/92 [OA 7571] [2]
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American Business Conference 4/7/92 [OA 7571] [2]
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Records of the White House Office of Speechwriting (George H. W. Bush Administration)
Speech Backup Chronological Files
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This is not a textual record. This is used as an
administrative marker by the George Bush Presidential
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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 File, 1989-1993
OA/ID Number:
13806
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13806-009
Folder Title:
American Business Conference 4/7/92 [OA 7571] [2]
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26
22
4
3
04/06/92 10:43
OMB LEG. AFFAIRS
001/006
MA
EXECUTIVE OFFICE OF THE PRESIDENT
STINE
OFFICE OF MANAGEMENT AND BUDGET
STATE
STATES
WASHINGTON, D.C. 20503
FAX COVER SHEET
NUMBER OF PAGES 5
DATE 3/6/92
(excluding cover sheet)
TO:
Bob Simon
Office:
Office Phone Number: 7750
Fax Number:
6218
FROM:
Kerry Early
Agency: OMB Legislative Affairs
Office Phone Number: 395-4790
Office Fax Number:
395-3729
Additional Information:
following is a list of the bills transmitted by
the President to the 101ˢᵗ and 102nd
Congresses. one addition to this list
is 0 bill transmitted on friday, April 3, 1992 -
"freesbm for Russia and Emerging Eurosian Democracies
and open Markets support Act of 1992"
04/06/92
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February 28, 1992
INDEX
Page
101st Congress - First Session
1.
Clean Air Act Amendments of 1989
1
2.
Comprehensive Compaign Finance Reform Act of 1989
2
3.
Comprehensive violent Crime Act of 1989
1
4.
Educational Excellence Act of 1989
1
5.
Government-Wido Ethics Act of 1989
1
G.
Head Start Amendments of 1989
1
7.
Honoraria Reform Act of 1989
2
8.
Judicial Salary Act of 1989
1
9.
Senior Executives Salary Act of 1989
1
10. Working Family Child care Assistance Act or 1989
1
101st Congress - second Session
11. Andean Trade Preference Act of 1990
2
12. civil Rights Act of 1990
2
13. Enterprise for the Americas Initiative Act of 1990
2
14. Line-Item Veto Constitutional Amendment
2
15. National Tree Trust Act of 1990
2
16. Savings and Economic Growth Act of 1990
2
04/06/92 10:43
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Page
102nd Congress - First Session
17. AMERICA 2000 Excellence in Education Act
2
18. California Public Lands Wilderness Act
2
19. Comprehensive Violent crime control Act of 1991
2
20. Enterprise for the Americas Initiative Act of 1991
2
21. Health Care Liability Reform and Quality of Care
Improvement Act of 1991
2
22. Post-Employment Restriction Technical Correction
Act of 1991
2
202nd Congress - second session
23. Access to Justice Act of 1992
3
-2-
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201at Congress - First Session
1.
Clean Air Act Amendments of 1989
-- Transmitted by the President on 07/21/89
-- Enacted, with substantive modifications, in P.L. 101-
549, Clean Air Amendments of 1990, signed 11/15/90
2. Comprehensive Campaign Finance Refurm ACL of 1989
-- Transmitted by the President on 09/26/89
3. Comprehensive Violent Crime Act of 1989
-- Transmitted by the President on 06/15/89
4. Educational Excellence Act of 1989
-- Transmitted by the President on 04/05/89
5. Government-Wide Ethics Not of 1989
-- Transmitted by the President on 04/12/89
6. Head Start Amendments of 1989
-- Transmitted by the President on 03/15/89
-- Enacted, with substantial modifications, in P.L. 101-
120, signed 10/23/89
7. Honoraria Reform Act of 1969
-- Transmitted by the President on 07/07/89
8. Judicial Salary Act of 1989
-- Transmitted by the President on 04/12/89
-- Enacted, substantially as proposed, in P.L. 101-194,
signed 11/30/89
9. Senior Executives Salary ACT of 1989
-- Transmitted by the President on 07/07/89
-- Enacted, with substantial modifications, in P.L. 101-
194, signed 11/30/89
10. Working Family Child Care Assistance Act of 1989
Transmitted by the President on 03/15/89
-- The major child care provisions enacted in P.L. 101-508,
Omnibus Budget Reconciliation Act of 1990, signed
11/15/90, are based on LIIE President's proposal
04/06/92
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101st Congress - Second Session
11. Andcan Trade Preference Act of 1990
-- Transmitted by the President on 10/05/90
-- Enacted as part of H.R. 1724, signed 12/04/91 --
P.L. 102-182
12. Civil Rights ACL of 1990
-- Transmitted by the Prosident on 10/20/90
-- Enacted, with substantial modifications, in P.L. 102-
100, civil Rights ACL or 1991, signed 11/21/91
13. Enterprise for the Americas Initiative Act of 1990
-- Transmitted by the President on 09/14/90
14. Line-item Veto Constitutional Amendment
-- Transmitted by the President on 04/25/90
15. National Tree Trust ACT or 1990
-- Transmitted by the President on 03/22/90
-- Included in P.I. 101-624, Food, Agriculture,
Conservation, and Trade Act or 1990, signed 11/28/90
16. Savings and Economic Growth Act of 1990
Transmitted wy the President on 02/01/90
102nd Congress - First Session
17. AMERICA 2000 Excellence in Education Act
-- Transmitted by the President on 05/22/91
18. California Public Lands Wilderness Act
-- Transmitted by the President on 07/29/91
19. Comprehensive Violent Crime control Act of 1991
-- Transmitted by the President on 03/11/91
20. Enterprise for the Americas Initiative Act of 1991
-- Transmitted by the President 02/26/91
21. Health Care Liability Reform and Quality of Care Improvement
Act of 1991
-- Transmitted by the Precident on 05/15/91
22. Post-Employment Restriction Technical Correction Act of 1991
-- Transmitted by the President on 07/26/91
-2-
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102nd Congress - second Session
23. Access to Justice Aot of 1992
-- Transmitted by the President on 02/04/92
-3-
276 PROSPERITY
PROSPERITY 277
9. The man who wrongly holds that every. human right is secondary
to his profit must now give way to the advocate of human welfare, who
in expedients. Indebtedness can not be lessened by borrowing more money
or by changing the form of the debt.
rightly maintains that every man holds his property subject to the general
Our currency can not be im-
right of the community to regulate its use to whatever degree the public
proved by the creation of new banks or more issues from those which
welfare may require it.
now exist. Although these devices sometimes appear to give temporary
THEODORE ROOSEVELT
relief, they almost invariably aggravated the evil in the end. It is only by
Speech at Osawatomie, Kan., Aug. 31, 1910; Works, XVII, 17
retrenchment and reform-by curtailing public and private expenditures,
by paying our debts, and by reforming our banking system-that we are
10. We must all recognize that wealth used as capital is the basis of
modern civilization, that the right of property is the most valuable right in
prosperity. to expect effectual relief, security for the future, and an enduring
building up our society, next to the right of personal liberty. The right of
MARTIN VAN BUREN
property develops in men, and developed in men of the Dark Ages, those
Third Annual Message to Congress, Dec. 2, 1839; Ibid., p. 1771
virtues of self-restraint and providence upon which we build all the other
virtues.
6. We shall best promote the prosperity of the new States and Territories
WILLIAM HOWARD TAFT
industrious citizens.
by furnishing them with a hardy and independent race of honest and
Speech at Boise, Idaho, Nov. 3, 1906; Problems, p. 124
See also Banks 6, Conscience 4, Government 26, 40, Honor 2, Religion
JAMES BUCHANAN
2, Republics 1, Rights 13, Slavery 5, 12, Wealth 2
7. At the basis of all prosperity
lies the improvement of the intel-
lectual and moral condition of the people.
Prosperity
1. Of all the dispositions and habits which lead to political prosperity,
RUTHERFORD B. HAYES
Religion and Morality are indispensable supports.
Inaugural Address, Mar. 5, 1877
GEORGE WASHINGTON
8. A really great people, proud and high-spirited, would face all the
Farewell Address, Sept. 19, 1796;
disasters of war rather than purchase that base prosperity which is bought
Writings (Fitzpatrick), XXXV, 229
at the price of national honor.
2. Agriculture, manufactures, commerce and navigation, the four pillars
THEODORE ROOSEVELT
of our prosperity, are the most thriving when left most free to individual
Address at Naval War College, June 2, 1897; Works, XIII, 184
enterprise.
9. I understand prosperity to be the abundant, intelligent, economic de-
THOMAS JEFFERSON
velopment of resources possessed by the country itself.
First Annual Message to Congress, Dec. 8, 1801; Writings, III,
is using the plow, engines, mills, and water powers of this Prosperity country
337
just as you would use your own intellectual and physical resources.
3. Canals, railroads, and turnpikes are at once the criteria of a wise
WOODROW WILSON
policy and causes of national prosperity
a want of them will be a
Speech in New York, N.Y., Jan. 3, 1912; Ideals, p. 53
reproach to our republican system.
10. The originative part of America
JAMES MADISON
the class that saves
To Reynolds Chapman, Jan. 6, 1831; Letters, IV, 150
spreads its enterprises until they have national scope and character plans
-that middle class is being more and more squeezed out by the processes
4. Perhaps of all the evidences of a prosperous and happy condition of
which we have been taught to call processes of prosperity. Its members
human society the rapidity of the increase of population is the most un-
are sharing prosperity, no doubt; but what alarms me is that they are not
equivocal.
originating prosperity. No country can afford to have its prosperity
JOHN QUINCY ADAMS
originated by a small controlling class.
The treasury of America lies
First Annual Message to Congress, Dec. 6, 1825; Messages and
Papers, p. 880
favored class.
in those ambitions, those energies, that cannot be restricted to a special
5. Let it be indelibly engraved on our minds that relief is not to be found
WOODROW WILSON
1912; New Freedom (Hale), p. 17
STATEMENT OF ROGER COLEMAN
PRESIDENT
RYKOFF-SEXTON, INC.
PREPARED FOR DELIVERY AT HEARINGS ON
H.R. 3185
(POSTPONED: NOVEMBER 14, 1991)
(ENTERED FOR THE RECORD: NOVEMBER 21, 1991)
For additional information CONTACT:
Mary Lou McDonald
American Business Conference
(202) 822-9300
My name is Roger Coleman. I am the President and Chief Executive Officer of
Rykoff-Sexton, Incorporated.
Rykoff-Sexton is a public company with annual sales of $1,460,000,000. Based
in Los Angeles, our company manufactures and distributes foods and related
products. You can find our products wherever food is prepared and consumed
away from home. Our customers include restaurants, industrial cafeterias,
hospitals, schools, hotels, and airlines. In addition we offer restaurant
design and engineering services and, until last year, we published a consumer
mail order catalog featuring specialty food items. In all, we produce or
distribute more than 42,000 products.
We employ over 5,400 women and men in manufacturing and distribution centers
around the country. Whether as plant workers, truck drivers, designers, or
sales personnel, all of them have collectively contributed to our company's
strong performance and growth.
As chief executive officer, I am the steward of their jobs. I hold ultimate
responsibility for key decisions regarding the future of Rykoff-Sexton. One
such decision, regarding the settlement of a class-action securities
litigation, brings me here today.
I have come to Washington to ask that you amend H.R. 3185. Specifically, I
ask that you consider adding to the bill provisions to address the problem of
frivolous and harassing securities suits.
1
The problem of frivolous securities suits has been well-documented in the
popular press and in law journals. Casual observers associate these suits
with high-tech firms along Boston's Route 128 and in the Silicon Valley in
California. As serious as the problem is for such companies, other firms are
not immune. I should know.
Rykoff-Sexton had record earnings in 1989. I made a statement to my
corporate community that 1990 performance should be even better. Due to
declining economic conditions in some geographic regions of the country and
other business conditions, we did not achieve that level of performance. As
a result, I was sued in a shareholder class-action litigation, along with the
Company, some of my fellow officers and the directors of Rykoff-Sexton.
At our first meeting with plaintiffs' counsel I learned a lesson that was
confirmed again and again throughout the entire process. This suit was not
about whether we were right or wrong. Plaintiffs' counsel focused at that
meeting on only two concerns: Rykoff-Sexton's solvency and the nature of our
insurance policies for directors and officers. And the merits of the case?
Not one word. The issue was the depth of our pockets.
After that meeting I had little doubt who was driving this suit: the lawyers.
Class-action plaintiffs, I found, often had no real interest in righting any
wrong. Their passive participation simply gives lawyers a license to hunt.
This creates a situation in which the plaintiff's lawyer is acting more for
his own interest rather than for either the interests of his supposed client
or for the shareholder group at large.
2
My own lawyers advised me not to expect the courts to rule quickly on the
merits of the case. To be sure, I was told, there are rules designed to
deter the filing of frivolous suits. But there is such a huge grey area as
to what constitutes frivolous and malicious cases that forcing counsel for
plaintiffs to demonstrate proof of merit usually is postponed until the very
end of a long and expensive process.
Then there is the matter of discovery. Once it was determined this case
could proceed as a class action, which required no showing of any strength to
the case or even any basis for it, we became mired in an expensive and
invasive discovery process. Discovery in federal court suits, I learned, is
extremely broad and virtually limitless. We were required to turn over
company files, to submit our officers and directors for days and days of
deposition testimony, all without any requirement that the plaintiff at any
time prove any merit to his case.
For a company like ours, which has a relatively lean management structure,
time lost in the deposition process can be devastating. We simply could not
afford the diversion of managerial attention away from company affairs. Many
commentators bewail the supposedly short-term outlook of American management.
I can tell you that nothing in my experience so shortens the time horizons of
management more than becoming entangled in one of these suits. It brings
everything to a stop.
Morale at the company was taking a beating, sometimes in unexpected ways.
For example, because he was named in the complaint and therefore was
3
potentially liable, a Rykoff-Sexton vice president was unable to obtain a
home mortgage. More broadly, SO long as the suit was pending, our prospects,
our reputation, our ability to bring our stockholders full value for their
investment were all in jeopardy.
I faced a difficult dilemma. The company could continue to endure a
crippling and expensive discovery process, in the hope of eventually
convincing a judge to give us summary judgment. But achieving summary
judgment was by no means certain. If we failed, we would then face the
expense of trial preparation, followed by the uncertainties of a protracted
jury trial. During that time, the case would continue to hang over our
heads. Moreover, I was hearing from our insurers that they preferred a
settlement instead of going to trial and risking greater liability.
Ultimately, I swallowed hard and decided to settle. Plaintiffs' attorneys
readily agreed provided that we did not contest their fee application. In
all, I calculate that this legal nightmare cost Rykoff-Sexton and its
insurance company in settlement in excess of $8.7 million, of which at least
25% will go into the pockets of plaintiffs' lawyers. That's over $8.7
million that was diverted from new investments in jobs and facilities.
And what countervailing benefits were realized? None that I can see. Anyone
who believes that the Securities and Exchange Commission determines what I
and other CEO's can and cannot tell the investing public about our companies
is mistaken. It's the trial lawyers and their professional plaintiffs who
increasingly govern corporate disclosure policies, and that means less rather
4
than more information to the public. Perhaps that is why SEC Chairman
Breeden supports legislation to curtail frivolous suits.
I think this subcommittee has before it a real opportunity to achieve
substantive reform. By adopting provisions to minimize frivolous suits, you
can better direct the legal system toward assisting legitimate victims of
fraud.
How could this system be improved SO as to not sap the strength of the
American business system at the whim of a plaintiff's lawyer? We must act
to take the weapons of expense and delay from these extortionists. In my
view, the changes that are needed are relatively straightforward.
Plaintiffs should be required to show some merit and some basis for
process. the claims they make before they can start in motion the discovery
There should be reasonable time and cost limits on pretrial
discovery SO that discovery becomes a method for pursuing facts
rather than a bludgeon for pursuing a quick settlement.
Attorneys should be prohibited from paying "finders' fees" or
"bounties" to induce potential plaintiffs to sue.
Plaintiffs attorneys or the plaintiffs themselves should face some
risk if they lose. If the loser were required to pay attorneys'
fees, we would see fewer frivolous suits.
I note that in a recent Sunday New York Times, an aide to this subcommittee
said that the aim of H.R. 3185 is fairness toward those who have been
defrauded in the securities markets. My recommendations are wholly consis-
tent with that purpose. It seems to me that the only people who could
5
oppose these or similar ideas are the people currently profiting from the
legal system's inordinate complexities.
We all read stories every day about the financial excesses of the past
decade, stories associated with the S&L crisis and certain Wall Street
frauds. What I have tried to talk about today is my direct experience with
another form of wasteful, fraudulent behavior. It is the shakedown of
corporations through the abuse of class-action litigation. While legal, it
is no less cynical and no less destructive than some of the more notorious
examples of financial corruption.
So I say, let's kill two birds with one stone. Use H.R. 3185 as the vehicle
to help victims of fraud make the con artists accountable. But let's also
use it to end another kind of scam: the class-action shakedown. The goals
are complimentary: indeed, they are intertwined.
I strongly urge that in the name of protecting business, serious consid-
eration be given to limitations of the type I have suggested. To level the
playing field will allow American business to go on with its objectives of
creating jobs and making profits without distractions from baseless liti-
gation.
6
CROWELL & MORING
1001 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20004-2595
(202) 624-2500
CABLE: CROMOR
FACSIMILE TRAPICOMN 202-528-0116
W.W.I. INTERNATIONAL) 64244
w.w. IDOMESTIC 00-2440
THIS MESSAGE IS INTENDED ONLY FOR THE USE OF THE INDIVIDUAL TO
WHOM, OR ENTITY TO WHICH, IT IS ADDRESSED AND MAY CONTAIN
INFORMATION THAT IS PRIVILEGED, CONFIDENTIAL AND EXEMPT FROM
DISCLOSURE UNDER APPLICABLE LAW. If the reader of this message is
not the intended recipient or the employee or agent responsible
for delivering the message to the intended recipient, you are
hereby notified that any dissemination, distribution, or copying
of this communication is prohibited. If you have received this
communication in errer, please notify us immediately by telephone
(collect), and return the original message to us at the above
address via the U.S. Postal Service. Thank you.
FACSIMILE COVER PAGE
FAX TELEPHONE NUMBER: (202) 628-5116
TO: John Howard, Counsel
Date: 4/6/92
Firm: Office of the UP
Facsimile Telephone Number:
(
)
456-7044
Telephone number to confirm receipt:
(
) 456-2816
Total Number of Pages (including cover sheet) 13
FROM: Victor Schwartz, ESG.
Originator's telephone number: (
) 624-2540
Re: History of Federal PL
Hard copy to follow: Yes
No
Please complete instruction page on reverse side.
CROWELL & MORING
164:jlb
62410-011
MEMORANDUM
TO:
John Howard, Counsel, Office of the Vice President
FROM: Victor E. Schwartz
DATE: April 6, 1992
RE:
Legislative History of Federal Product Liability Bills
This memorandum will show that product liability legislation
has had a long history of careful consideration in both the Sanate
and House of Representatives. That history actually began in 1976
when President Ford established a Federal Interagency Task Force
on product liability to study the causes of the product liability
"insurance crisis" that was occurring in the mid-1970's.
Following an 18-month study, the Federal Interagency Task Force
published its final report in 1977. The Task Force made two
recommendations. The first was to facilitate self-insurance
alternatives to commercial product liability insurance. That
recommendation led to enactment of the Product Liability Risk
Retention Act in 1981 and the Risk Retention Act Amendments in
1986. The second of the Task Force's recommendations was to
create more certainty in the product liability litigation system
by making product liability laws uniform throughout the United
States. Thus, in 1979, under the aegis of the Carter
- 2 -
CROWELL & MORING
Administration, the Department of Commerce published a model
Uniform Product Liability Act ("UPLA") for implementation by the
states. As it turned out, however, states enacted bits and pieces
of the Act, but no state adopted the model Act as a whole;
uniformity was not created. After it became clear that the states
would not develop uniform product liability laws, efforts arose to
create uniform laws through Federal legislation that would preempt
the individual states' product liability laws,
96th Congress
Extensive hearings were held in the House of Representatives
on the topic of product liability. Non-legislative hearings were
held by Congressman John LaFalce in the Small Business Committee,
and legislative hearings were held by the Consumer Subcommittee of
the House Energy and Commerce Committee by Congressman James H.
Scheuer. Two bills were considered, H.R. 7000 and H.R. 5626.
H.R. 7000 was principally based on the Uniform Product Liability
Act, modified SQ that it could be utilized as Federal legislation.
Following these later hearings, in the Second Session of the 96th
Congress, a new bill was drafted based principally on H.R. 7000.
The bill, H.R. 7921, a Federal Uniform Product Liability Act, was
introduced by Congressman Richardson Preyer (D-NC), James H.
Scheuer (D-NY) and James Broyhill (R-NC). H.R. 7921 was also
based on UPLA, with most of the procedural aspects of the model
Act removed. It was felt that Federal legislation should
concentrate on clear and coherent substantive rules. It was
P00.3968 9115829202
21:51 26, 9 APR
- 3 -
CROWELL & MORING
believed that procedural rules would interfere with local court
operations.
97th Congress
In April, 1981, Senator Kasten asked the staff of the
Consumer Subcommittee to begin with H.R. 7921 and prepare a staff
draft for consideration by the Commerce Committee. In October,
1981, the staff draft was issued for public comment. The
Committee received over 2000 pages of public comment from all
interest groups including consumers, manufacturers, and product
sellers. Based on these comments, the Commerce Committee made
substantial revisions in the draft. Then, the Consumer
Subcommittee held two days of hearings in March, 1982, on the need
to reform product liability law. Senator Kasten introduced
S. 2631 on June 16, 1982. The Consumer Subcommittee held two days
of additional hearings on S. 2631.
On July 15, 1982, the Administration endorsed the concept of
Federal legislation providing uniform product liability standards.
On September 9, 1982, after consideration by the Cabinet Council
on Commerce and Trade, the Administration expressed its support
for S. 2631.
On October 1, 1982, the Senate Commerce Committee adopted
S. 2631 with an amendment in the nature of a substitute and.
ordered the bill, as amended, favorably reported by voice vote.
No further action was taken on S. 2631 in the 97th Congress.
Members of the Commerce Committee were:
500'3948 9115829202
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- 4 -
CROWELL & MORING
Bob Packwood (R-OR)
Russell B. Long (D-LA)
Harrison H. Schmitt (R-NM)
Daniel K. Inouye (D-HI)
Nancy Kassebaum (R-KS)
Donald W. Riegle, Jr. (D-MI)
Slade Gorton (R-WA)
Howell Heflin (D-AL)
Bob Kasten (R-WI)
Howard W. Cannon (D-NV)
Barry Goldwater (R-AZ)
Ernest F. Hollings (D-SC)
John C. Danforth (R-MO)
Wendell H. Ford (D-KY)
Larry Pressler (R-SD)
J. James Exon (D-NE)
Ted Stevens (R-AK)
98th Congress
On January 26, 1983, Senator Kasten introduced S. 44, the
Product Liability Act, in substantially the same form as it had
been reported by the Senate Commerce Committee in the 97th
Congress. Two days of hearings were held on S. 44 in April, 1983,
during the First Session of the 98th Congress. One additional
hearing was held in March, 1984, during the Second Session of the
98th Congress.
In July of 1983, the Administration again endorsed the
concept of Federal Legislation providing uniform product liability
standards and specifically endorsed S. 44.
On May 23, 1984, the Senate Commerce Committee reported
favorably S. 44 with amendments. No further action was taken in
the 98th Congress. The recorded vote was as follows:
Yes
No
Barry Goldwater (R-AZ)
Bob Packwood (R-OR)
John C. Danforth (R-MO)
Ernest F. Hollings (D-SC)
Nancy Kassebaum (R-KS)
Donald W. Riegle, Jr. (D-MI)
Larry Pressler (R-SD)
Howell Heflin (D-AL)
Slade Gorton (R-WA)
Frank R. Lautenberg (D-NJ)
Ted Stevens (R-AK)
Bob Kasten (R-WI)
2026285116 PAGE.006
81:18 26, 9 APR
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CROWELL & MORING
Paul S. Trible, Jr. (R-VA)
Russell B. Long (D-LA)
Daniel K. Inouye (D-HI)
J. James Exon (D-NE)
Present
Wendell H. Ford (D-KY)
99th Concress
On January 3, 1985, Senator Kasten introduced S. 100, the
Product Liability Act, which was substantially the same as S. 44.
The Consumer Subcommittee held a hearing on S. 100 on March 21,
1985, and the Bill was reviewed by the Senate Commerce Committee
on May 16, 1985. On that day, S. 100 was not reported out. The
vote was. 8-8 vote. The recorded vote on S. 100 was as follows:
Yes
No
John C. Danforth (R-MO)
Barry Goldwater (R-AZ)
Ernest Hollings (D-SC)
Nancy Kassebaum (R-KS)
Daniel K. Inouye (D-HI)
Bob Kasten (R-WI)
John D. Rockefeller, IV (D-WV)
J. James Exon (D-NE)
Russell B. Long (D-LA)
Larry Pressler (R-SD)
Slade Gorton (R-WA)
Ted Stevens (R-AK)
Albert Gore, Jr. (D-TN)
Paul S. Trible, Jr. (R-VA)
Bob Packwood (R-OR)
Donald W. Riegle, Jr. (D-TN)
Present
Wendell H. Ford (D-KY)
Prior to the May 16, 1985, vote, two amendments in the nature
of a substitute to S. 100 had been introduced, one by Senator
Christopher J. Dodd (D-CT) and one by Senator Slade Gorton. These
amendments were complete substitutes for S. 100 that preempted
certain aspects of state law and also would have established
200 PAGE 202928519
15.14 26. 9 RPR
10 1 9
CROWELL & MORING
alternative expedited claims systems for limited recovery of
damages in product liability cases. Following the failure to
report out S. 100, hearings on the Dodd and Gorton amendments were
held by the Consumer Subcommittee on June 18 and June 25, 1985.
After these hearings, Commerce Committee Chairman John C. Danforth
directed the Committee staff to draft a proposal that combined
elements of all these measures. The first draft was released for
public comment on July 15, 1985. After review of extensive
comments received from the public, including consumer and business
groups, the Commerce Committee released a second draft on
November 20, 1985. This draft was formally introduced by
Senator Danforth on December 20, 1985, as S. 1999. This Bill was
co-sponsored by Senators Dodd and Kassebaum. The Consumer
Subcommittee held two days of hearings on S. 1999 on February 27
and March 11, 1986.
Witnesses at those hearings, specifically representatives of
the professional consumer groups and representatives of
manufacturer and insurance groups, testified that the alternative
expedited claims system in S. 1999 was too complicated, unworkable
and would not achieve its goals of providing speedy but limited
recovery as an alternative to litigation for product injuries.
On May 12, 1986, Senator Danforth introduced an amendment,
co-sponsored by Senator Dodd, in the nature of a substitute for
S. 1999. This amendment replaced the alternative expedited claims
systems of S. 1999 with an expedited settlement system that
2026285116 PAGE.008
1:51 26, 9 APR
- 7 -
CROWELL & MORING
imposed incentives on plaintiffs and defendants to settle cases.
Those incentives included a limitation on plaintiffs' damage
awards. The Danforth-Dodd amendment made a number of other
changes in S. 1999. On May 20, 1986, Senator Gorton introduced an
amendment in the nature of a substitute for the Danforth-Dodd
amendment. The Consumer Subcommittee held hearings on these
amendments and other product liability measures before the
Committee on May 19 and May 20, 1986.
On June 3, 1986, the Senate Commerce Committee began its
markup of product liability legislation. The markup draft bill
was an original bill containing the provisions of the Danforth-
Dodd amendment to S. 1999. On June 12, 1986, the Senate Commerce
Committee adopted an amendment in the nature of a substitute for
the original markup draft bill. This amendment contained product
liability reform provisions that had been agreed to by Senators
Danforth, Gorton, and Kasten as a "core package" of product
liability reforms. It contained numerous changes and
modifications that had been urged by consumer groups. This "core
package" bill was approved by the Senate Commerce Committee by a
vote of 16-1. The only member voting against the "core package"
was Senator Ernest F. Hollings. On June 12, 19, 24, 25 and 26,
1986, the Senate Commerce Committee continued its consideration of
other amendments to the "core package," and ultimately reported an
original bill, S. 2760, the Product Liability Reform Act. The
recorded vote on S. 2760, which contained the "core package" and
2026285116 PAGE.009
ST:51 26, 9 APR
- 8 -
CROWELL & MORING
additional provisions including a provision to expedite
settlements, was as follows:
Yes
No
John C. Danforth (R-MO)
Barry Goldwater (R-AZ)
Bob Packwood (R-OR)
Nancy Kassebaum (R-KS)
Slade Gorton (R-WA)
Larry Pressler (R-SD)
Ted Stevens (R-AK)
Bob Kasten (R-WI)
Ernest F. Hollings (D-SC)
Daniel K. Inouye (D-HI)
Russell B. Long (D-LA)
Paul S. Trible, Jr. (R-VA)
Wendell H. Ford (D-KY)
Albert Gore, Jr. (D-TN)
Donald W. Riegle, Jr. (D-MI)
J. James Exon (D-NE)
John D. Rockefeller, IV (D-WV)
S. 2760 was brought up on the Senate Floor in September,
1986. Senator Hollings engaged in a filabuster of the bill.
Following a successful motion to proceed, with a vote of 84-13,
S. 2760 was set aside by the Senate leadership because of the
press of other urgent matters that needed to be completed before
Congress adjourned in October. No further action was taken on
S. 2760 in the 99th Congress.
100th Congress
On March 6, 1987, S. 666, the Product Liability Reform Act,
was introduced by Senators Kasten, Inouye, Danforth, Rockefeller,
Kassebaum and Pressler. It was similar to the "core package" that
was approved by the Senate Commerce Committee in the 99th
Congress, but also contained a provision based on Rule 68 of the
Federal Rules of Civil Procedure designed to provide incentives
for settlement of product liability cases. Unlike S. 2760, these
settlement procedures did not place limits on damages. The
010'3988 2029285198
91:51 26. 9 APR
- 9 -
CROWELL & MORING
Consumer Subcommittee, which then was chaired by Senator Albert
Gore, held one day of hearings on the bill. The Senate Commerce
Committee, then chaired by Senator Ernest F. Hollings, took no
further action on S. 666 in the 100th Congress.
The primary activity on Federal product liability legislation
in the 100th Congress occurred in the House of Representatives.
Congressmen Bill Richardson (D-NM) and Thomas A. Luken (D-OH)
introduced H.R. 1115 on February 18, 1987. The Subcommittee on
Commerce, Consumer Protection and Competitiveness, held extensive
hearings on the need for Federal product liability reform and
specific issues including punitive damages reform, joint and
several liability, workplace safety, certain defenses, and the
affordability and availability of product liability insurance.
These hearings were held on May 5, May 20, June 18, July 21,
August 6, October 7, and December 17, 1987. Then, the
Subcommittee on Commerce, Consumer Protection and Competitiveness
met to mark up the bill on November 18, 19 and 20 and December 3
and 8, 1987. H.R. 1115 was reported by the Subcommittee, as
amended, on December 8, 1987, by a vote of 11-3. The Subcommittee
votes were as follows:
Yes
No
Philip R. Sharp (D-IN)
Dennis E. Eckart (D-OH)
James H. Scheuer (D-NY)
Bill Richardson (D-NM)
Henry A. Waxman (D-CA)
William E. Dannemeyer (R-CA)
Jim Bates (D-CA)
Mathew J. Rinaldo (R-NJ)
Howard C. Nielson (R-UT)
Joe Barton (R-TX)
110'398°C
91:51 26, 9 APP
- 10 -
CROWELL & MORING
Norman F. Lent (R-NY)
James J. Florio (D-NJ)
Donald L. Ritter (R-PA)
John D. Dingell (D-MI)
On May 10, 12, 18, 19 and 24, and June 1, 2, 8, 9 and 14,
1987, the full Committee on Energy and Commerce met to mark up
H.R. 1115. On June 14, the Energy and Commerce Committee voted to
report H.R. 1115, as amended, by as recorded vote of 30-12, as
follows:
Yes
NO
Philip R. Sharp (D-IN)
Thomas A. Luken (D-OH)
James H. Scheuer (D-NY)
Al Swift (D-WA)
Henry A. Waxman (D-CA)
Mike Synar (D-OK)
James J. Florio (D-NJ)
W. J. Tauzin (D-LA)
Doug Walgren (D-PA)
Cardiss Collins (D-IL)
Dennis E. Eckart (D-OH)
Ralph M. Hall (D-TX)
Mickey Leland (D-TX)
Bill Richardson (D-NM)
Gerry Sikorski (D-MN)
Jim Slattery (D-KS)
Jim Bates (D-CA)
Jim Cooper (D-TN)
Edward J. Markey (D-MA)
Wayne Dowdy (D-MS)
Frederick C. Boucher (D-VA)
John D. Dingell (D-MI)
John Bryant (D-TX)
Ron L. Wyden (D-OR)
Terry L. Bruce (D-IL)
Norman F. Lent (R-NY)
Edward R. Madigan (R-IL)
Carlos J. Moorhead (R-CA)
Mathew J. Rinaldo (R-NJ)
William E. Dannemeyer (R-CA)
Bob Whittaker (R-KS)
Thomas J. Tauke (R-IA)
Donald L. Ritter (R-PA)
Daniel R. Coats (R-IN)
Thomas J. Bliley, Jr. (R-VA)
Michael G. Oxley (R-OH)
Howard C. Nielson (R-UT)
Daniel L. Schaefer (R-CO)
Joe Barton (R-TX)
Jack Fields (R-TX)
2026285116 PAGE.012
21:12 26, 9 APR
- 11 -
CROWELL & MORING
H. L. Callahan (R-AL)
Michael Bilirakis (R-FL)
H.R. 1115 then received a sequential referral to the House
Committees on Judiciary and on Education and Labor. The Education
and Labor Committee held one day of hearings on September 27,
1988, on provisions in H.R. 1115 that affected workplace safety.
The House Judiciary Committee, then chaired by Congressman Peter
Rodino (D-NJ), took no action on the bill. The sequential
referrals ran through the end of the session, SO the 100th
Congress adjourned without considering H.R. 1115 on the Floor of
the House.
101st Congress
In the Senate, a bi-partisan bill, S. 1400, has been
introduced by Senators Kasten, Inouye, Danforth and Rockefeller.
S. 1400 was referred to the Senate Commerce Committee and was
subject to three days of hearings before the Consumer
Subcommittee. On May 22, 1990, the Commerce Committee voted 13-7
to report S. 1400 favorably. The votes were as follows:
Yes
No
Lloyd Bentsen (D-TX)
J. James Exon (D-NE)
Ernest F. Hollings (D.SC)
Daniel K. Inouye (D-HI)
John B. Breaux (D-LA)
Charles S. Robb (D-VA)
Richard Bryan (D-NV)
John D. Rockefeller (D-WV)
Wendell H. Ford (D-KY)
Albert Gore, Jr. (D-TN)
Conrad Burns (R-MT)
John C. Danforth (R-MO)
John F. Kerry (D-MA)
Slade Gorton (R-WA)
Bob Packwood (R-OR)
Robert W. Kasten (R-WI)
Trent Lott (R-MS)
2026285116 PAGE.013
21:12 26. 9 APR
- 12 -
CROWELL & MORING
John McCain (R-AZ)
Larry Pressler (R-SD)
Ted Stevens (R-AK)
S. 1400 received a sequential referral to the Senate
Judiciary Committee and, upon request, to the Senate Labor
Committee.
In the House, Congressmen Luken, Glickman, Synar and Slattery
introduced H.R. 2700, which is substantially similar to H.R. 1115
as reported by the Energy and Commerce Committee in the 100th
Congress. H.R. 2700 has been referred jointly to the House
Committees on Energy and Commerce and on Judiciary.
FOR IMMEDIATE RELEASE
FEBRUARY 4, 1992
THE PRESIDENT COUNCIL ON COMPETITIVENESS
AGENDA FOR CIVIL JUSTICE REFORM IN AMERICA"
IMPLEMENTATION FACT SHEET
Excessive cost and delay in our civil justice system harm
the American people and impair their ability to compete in
the global marketplace.
Vice President Dan Quayle
Many features of our civil justice system no longer expedite
justice or insure fair results. Instead overuse and abuse of the
legal system impose tremendous costs on American society
To address these problems, the President's Council on
Competitiveness, chaired by Vice President Dan Quayle, developed
50 recommendations for improving the civil justice system.
Reported in the "Agenda for Civil Justice Reform in America,
these recommendations help reduce the inordinate cost and delay
found in the system. As most ofothe proposals have been tested
in federal or state courts and have proven effective the Agenda
presents a comprehensive approach to effect meaningful change in
our overburdened civil justice system.
to
The Administration is committed to the fair, efficient and
early resolution of disputes. This commitment is demonstrated by
efforts to implement reform at all levels: Executive branch
action, Federal legislation, Federal rules changes, and model
state packages.
Executive Action
As a catalyst for civil justice reform, the Administration
has already implemented many of the Agenda reforms in the Federal
government. To promote more efficient litigation in actions
involving the United States Government, on October 23, 1991,
President Bush signed Executive Order 12778. To help make the
Government's litigators a model for the private sector, the
President directed all Federal agencies to encourage voluntary
dispute resolution, limit unnecessary discovery, avoid "junk
science,' and, where appropriate, use the "Fairness" or "loser
pays" rule for attorneys' fees. The directive also provides a
"litigation checklist" designed to reduce legislative drafting
errors that cause uncertainty and unnecessary litigation.
Federal Legislation
ROY
On February 4, 1992, President Bush transmitted the "Access
to Justice Act of 1992" calling upon Congress to enact reforms
requiring federal legislation. Among the Act' provisions are:
Multi-Door Courthouse - Establishes alternative dispute
resolution (ADR) programs to provide effective alternatives
to trials. Parties would gain the opportunity to choose
between several methods of resolving their disputes.
Pre-Complaint Notification Encourages resolution at the
earliest stages, in most cases the right to sue is
conditioned upon giving notice to the intended parties of
the nature of the dispute.
Fairness Rule - Adopts a "loser pays" rule in cases
involving state law brought under the federal courts!
diversity jurisdiction. This rule is grounded in the
equitable principle that prevailing parties should be made
"whole." The loser would pay the winner's legal expenses
subject to limits, including when payment would be "unjust."
Federal Rules of Civil Procedure and Evidence
Through the Supreme Court's rulemaking process, the
Administration is proposing amendments to the Federal Rules of
Civil Procedure and Evidence to help make the system more
rational and efficient:
Discovery Reform - Discovery consumes 80 percent of the time
and money in litigation. Our proposal will require
automatic disclosure of basic or "core information" and
mandate discovery planning conferences. After presumptive
numerical limits are met additional discovery would be
governed by market incentives.
Expert Evidence Reform - Experts, who unlike other
witnesses, are allowed to present their opinions should be
required to base their testimony on "widely accepted"
theories instead of "junk science." Our proposal requires
courts to determine that proposed witnesses are legitimate
experts in their field and bans contingency fees paid to
expert witnesses in return for a successful outcome.
State Legislation and Rule Changes
Most reforms proposed for the Federal system are equally
applicable to the states. As a result, the Administration has
published the Civil Justice Reform Model State Amendments and the
Model State Punitive Damages Act to assist with reforms in the
state systems. Reform at the state level could have a dramatic
effect since that is where most litigation occurs.
INTRODUCTION
In 1971, the U.S. lawyer population was one-third of a million; by 1980, it had grown to half a million;
in early 1988, it had reached almost three-quarters of a million; and, by the turn of the century, will
probably exceed a million. The rate of lawyer population growth has surpassed that of the general
population as reflected in the progressive decline of population/lawyer ratios from 1 lawyer for each
695 persons in 1951 to 1 lawyer per 340 persons in 1988.
Table 1. Lawyer Population Size and Population/Lawyer Ratio in Selected Years
Year
No. of
Population/
Lawyers
Lawyer ratio
1951
221,605
695/1
1960
285,933
627/1
1971
355,242
418/1
1980
542,205
403/1
1985
655,191
360/1
1988
723,189
340/1
1991 Statistical
1989
741,000
- from
abstract
During the 1970s, growth rate accelerated. Fueled by rising law school enrollments, bar admissions
increased from less than 15,000 in 1970 to almost 30,000 by 1980. Since then, the number of yearly
admissions has stabilized at or near the 1980 level. The effect of new admissions on lawyer population
size is, of course, moderated by mortalities. In the 1970s mortalities averaged about 5,000 per year;
since then the yearly average has slightly exceeded 6,000. With yearly admissions at five times
mortalities in most of the last 18 years, however, the net increase in lawyer population size has been
significant. At the start of 1980, the number of lawyers was 50% greater than in 1971. By 1988, there
were twice as many lawyers as in 1971.
Table 2. Relationship of New Admissions and Mortalities to Changes in Lawyer Population Size
No. of Lawyers
Admissions
Mortalities
Net Increase
Start of Period
During Period
During Period
by Period End
1961-70
285,933
120,560
51,251
69,309
1971-79
355,242
231,133
44,170
186,963
1980-87
542,205
231,244
50,260
180,984
1988
723,189
1988 LAWYER POPULATIONS: INTRODUCTION
1
KF301
A75
Suppl
1988
LAW
SUPPLEMENT TO
THE LAWYER STATISTICAL REPORT
The U.S. Legal Profession
in 1988
by
Barbara A. Curran
and Clara N. Carson
American Bar Foundation
WILLARD INTER. CONTINENTAL
WASHINGTON, D.C.
'ntro Jim Jones
80 people
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Date: 4/7/92
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1-92 WFN 17:08 ARC
Bob
update FYI ABC (FYD) ed n. initiatives Par
/
AmericanBusinessConference
1730 K Street, NW Suite 1200
Washington, DC 20006
(302)822-9500
FAX (202) 467-4070
THE VITAL LINK
THE EDUCATION INITIATIVE
President to business
Bob- Following challenge
OF THE
AMERICAN BUSINESS CONFERENCE
community of in 6/89
The American Business Conference, 100 chief executives of America's most successful,
midsize, high-growth companies, asked in 1989 "Can ABC make a difference to the education
challenge" emerging from the decline of skilled laborers entering the workforce? The resulting
ABC education initiative, THE VITAL LINK, was formally launched at three demonstration sites
20f3
in September, 1990: Orange County, CA; Fort Worth, TX (in conjunction with the C3 initiative);
siteshave
and New Jersey. Initially intended for non college-bound students, THE VITAL LINK has
applied to
developed as a component which assists in qualitative education reform in the transition from
school to the workplace.
New American
Schools
THE VITAL LINK functions as a locally-implemented initiative bringing together businesses,
educators, students, and the community and challenges them to collectively define a local plan
Development
of action which includes: the development of entry-level standards necessary for entering the
Corp.
workplace: continued Interaction between business and the education community within an
established and specific structure; a system of testing and assessment of progress (with a
All 3
student portfolio the suggested means of student evaluation); accountability by all involved
(e.g., better entry-level pay for a better qualified student); and a structure for reward.
reportedly
part of
The American Business Conference owns the role of catalyst in that process, managing from
a national level and offering assistance through support, networking, and the communication
AMELICA
of resources and information.
2006
communities
ABC recognizes that businesses must articulate their needs to the education community and
take an active role in student preparation and process if an effective and productive transition
\
to the workplace is to be achieved. At the same time, ABC acknowledges that the critical
ingredient for success is the cooperative communication between business, education and the
community. The ABC commitment to THE VITAL LINK is long-term, recognizing that the
integrity of success requires continued vigilance, dedication, and commitment to excellence.
ABC is optimistic that as educators and businesses share the creative process necessary to
stimulate learning, better qualified and motivated students will be prepared to enter the
workforce.
A Coalition of Growth Companies
APR- 1-92 WED 17:09 ABC
P.03
INDIVIDUAL SITE PROGRESS
FOR
ABC's VITAL LINK INITIATIVE
THE VITAL LINK: 23 in Fort Worth, TX
In Fort Worth, TX, THE VITAL LINK has been implemented as a component of Project
C³ with the unprecedented cooperation of the Fort Worth Independent School District and the
Fort Worth Chamber of Commerce, reaching all students, grades K-12.
Though there are numerous examples of progress, special note should be given to the
summer '91 program which was conducted on three separate levels in the Fort Worth
healthcare community. In TVL Level I, 40 seventh grade students did intensive work in four
medical facilities. 400 seventh grade summer school students visited 21 businesses for a brief
look at the workplace in TVL Level II. In TVL Level III, 20 middle school teachers did
Internships in three medical facilities.
Last summer's program initiated such a positive response that the school district
budgeted an additional $70,000 in funds to promote teacher internships and to provide more
transportation for students. The Fort Worth Chamber of Commerce has matched that sum.
Thirty addition corporations expressed interest in participating in this summer's program.
THE VITAL LINK: Orange County, CA
Launched in September, 1991, TVL: Orange County has structured cooperation among
business leaders and the superintendents and educators in six of the county school districts:
Santa Ana, Newport Beach, Irvine, Anaheim, Huntington Beach and Laguna Beach.
A Steering Committee with over twenty business leaders, superintendents and higher
education representatives has actively solicited involvement from the community, parents,
classrooms, and workplaces, and succeeded in putting in place a volunteer network of
cooperative action. Mentorships and donations of workers for "in-kind" classroom assistance
bring businesses directly to students.
The needs of the business community in Orange County are as diverse as the student
populations at the various participating high schools. For example, specific student populations
have been targeted at schools where high immigrant populations identify language skills and
comprehensive education as top priorities, while at an academically accelerated school, the
term "non college-bound" has been reinterpreted at educators' insistence to include "all
students" in the transition from school to the workplace, whenever it may occur. The needs
of the local business community have been defined in cooperation with educators in such
progressive documents such as business's "Entry Level Skills Requirements" and a document
articulating the long-range commitment required of businesses which participate in THE VITAL
LINK, as well as a draft of a "SMART CARD" of portfolio evaluation, based on ETS's Tampa
model, WORKLINK, but specific to the needs of THE VITAL LINK philosophy and Orange
County's school system and businesses.
APR- 1-92 WFN 17:09 ARC
P.04
3
THE VITAL LINK: New Jersey at pilot sites in Morristown/Montclair and
Somerset/Hunterdon counties.
Program coordinators have planned for Implementation of components of THE VITAL
LINK: New Jersey on two levels: state-wide, and in two local sites, Morristown/Montclair
Schools and Somerset/Hunterdon counties.
Stato wide, large professional associations are being encouraged to participate in VITAL
LINK concepts and activities. Favorable response from the New. Jersey Chamber of Commerce
will help make the state's 200,000 businesses aware of THE VITAL LINK.
THE VITAL LINK: New Jersey's portfolio evaluation component, has paired ETS with the
State Department of Education. The ETS's WORKLINK computer resume program will provide
a etate-wide electronic portfolio system for students to use when applying for jobs. This
program, approved by the State Department of Education, will be introduced to the business
community by the Private Industry Council. New Jersey will be the first state-wide network of
the WORKLINK project, made possible through a special agreement between the State
Department of Education and ETS.
Implementation of THE VITAL LINK has occurred on the local level. THE VITAL LINK
activities in Somerset and Hunterdon counties are coordinated by the Somereet/Hunterdon
Business and Education Partnership. In Somersct county, THE VITAL LINK is currently bringing
record numbers of employers into direct contact with students and teachers. Local businesses
which have had a history of participation in the schools will continue classroom visils but will
work with educators to affect long-term changes In curriculum, focusing on communication
skills, problem-solving and work-related skills.
The Morristown/Montclair site has developed at Montclair High School in collaboration
with a program called 10K, using the Business Department to run employability skills class for
students, grades 10-12. Summer internships and senior work-study programs are planned.
TVL: New Jersey is also included in the New Jerscy Unified State Plan for Workforce
Development. Additionally, the State Department of Vocational Education is continuing work
on a competencies project that has developed competency standards for 25 of 100
occupations.
FOR ADDITIONAL INFO:
CONTACT
MARY Lov MCDONALD
MANAGER, COMMUNICATIONS
302-823-9300
Apr. 9 / Administration of George Bush, 1991
should be finally decreed. But I think we're
pleasure to, as Bob says, talk to a group that
going to win it.
stands for success-a group that admits only
Ambassador Brock. So do I.
medium-sized companies that thrive in the
Q. Mr. President, can Iraq be persuaded
marketplace. But I've got to tell you, I feel
to accept the refugees—
a little funny being here. After all, I'm the
The President. It doesn't have anything to
CEO now of an outfit that's lost money for
do with Fast Track. I want to talk about
33 of the last 35 years. [Laughter]
Fast Track today, and we'll have no more
But in keeping with today's theme-
press conferences today because as I men-
charting economic growth in the nineties—
tioned to an earlier group we've had four in
I'd like to talk about our administration's
the last 3 days, and that's unfair to the
plan for generating more American success
press. [Laughter] Maybe four in the last 4
stories like your own. Our recent success in
days-something like that.
the Gulf has renewed Americans' belief in
themselves. In just the past couple of
Note: The President spoke at 1:21 p.m. in
months, consumer confidence has soared.
the Cabinet Room at the White House. In
And the stock market, of course, has been
his remarks, he referred to William E.
climbing toward that 3,000 mark. Most
Brock and Robert S. Strauss, former U.S.
economists predict that the recession soon
Trade Representatives; Dan Rostenkowski,
will give way to a new cycle of growth.
chairman of the House Ways and Means
And, incidentally, we agree with that assess-
Committee; George J. Mitchell, Senate
ment, inside.
Democratic leader; and Thomas S. Foley,
But we can't rest on our laurels. There's
Speaker of the House of Representatives.
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
Remarks at a Meeting of the American
new opportunities, create wealth.
Business Conference
Let's start with an issue that we all have
April 9, 1991
to address in the next month. And I think
Bob just talked about it; Jim has been par-
Thank you very, very much. And, Bob,
ticipating in a meeting with me in the Cabi-
thank you, sir, for that introduction and for
net Room at the White House about it-I'm
letting this distinguished group use this
talking about the issue of free and fair
meeting room today. It's always a pleasure
trade. As you know, I have asked Congress
to be back here. Let me also salute the
to extend the Fast Track trade authority.
ABC's leader, Jim Jones. What a job he's
Fast Track, in my view, is another term
doing. But I remember his effectiveness in
for good faith. It guarantees that Congress
the leadership role in the Congress, and I'm
will accept or reject the very same agree-
glad that those energies that he has are
ments that our negotiators and their coun-
being used and shared by all of you. We
terparts have worked out. And this doesn't
have many distinguished visitors with us
weaken the Congress' power to review
today, and I won't single them out. I was
agreements; it simply prevents 11th-hour
told that Bill Seidman and Richard Breedon
changes that would force negotiators from
were here. But as I look around, unless
all countries to start over-to start from
they're basking way back in anonymity
scratch.
somewhere, they may not have made it.
Our trading partners consider Fast Track
But in any event, I'm delighted to see
a vital test of our reliability. And if we do
this group. Great to talk to the American
not retain the Fast Track process, we jeop-
Business Conference. We did a little home-
ardize three critical foreign trade initia-
work on this, and I've been here four times
tives: the Uruguay round of trade talks, the
in recent years. And then, of course, we're
North American free trade agreement, and
privileged to have two of your own with us
the Enterprise for the Americas Initiative.
in the administration, Bob Mosbacher and
Americans understand the benefits of
Arthur Levitt. And it's an honor and a
free trade. In the last 4 years, exports from
412
Administration of George Bush, 1991 / Apr. 9
ilk to a group that
p that admits only
the United States have increased 55 per-
talent, our retirees; when communities fight
that thrive in the
cent, more than twice the rate of import
harder to rip down barriers that prevent
to tell you, I feel
growth. And export business has grown
effective teaching-barriers such as crimes
After all, I'm the
more rapidly than the rest of our economy.
and drugs and community indifference.
it's lost money for
This trade boom has helped everyone in-
volved. A North American free trade agree-
And we also want to encourage entrepre-
ughter]
ment would place us in the largest integrat-
neurship in education. We will support re-
today's theme-
in the nineties-
ed market on Earth: 360 million people, $6
search into the best teaching methods and
administration's
trillion of annual output. It would also give
techniques. We want to help workers im-
our neighbors access to the technologies
prove their knowledge and skills. Your Vital
American success
and products that they need to improve
Link program offers a great way to achieve
recent success in
their standards of living, further clean their
this goal. And we want to ensure that the
ericans' belief in
environments, and create a true community
American people are the best educated,
past couple of
of nations on our continent.
best motivated in the entire world.
ence has soared.
We also believe strongly in promoting
Our economic proposals also sweep away
course, has been
trade. I have asked Bob Mosbacher to lead
obstacles to free enterprise. What we're
000 mark. Most
a governmentwide effort to help small- and
trying to do-we're trying to unleash the
e recession soon
medium-sized companies sell their goods
power of American imagination.
cycle of growth.
and services abroad. I know you support
Your organization understands, I'd say
with that assess-
free trade, which is why I want to help you
better than most, that runaway government
in persuading Congress to extend the Fast
spending steals opportunity from private
r laurels. There's
Track process. Without it, we will surrender
citizens. Last year's budget agreement-
tition out there.
our chance to shape the emerging world
controversial though it was-placed real
onomic growth
economy. Without it, we risk setting off the
and stringent caps on congressional spend-
people like you
kind of protectionist warfare that helped
ing. If Congress wants to spend money now,
eate jobs, create
produce the Great Depression. And with it,
more money on certain programs, it'll have
ealth.
American workers and businesses will be
to make the hard choices. It'll have to raise
that we all have
able to demonstrate their strength in a new
taxes or take the money from other pro-
nth. And I think
and vibrant world market.
grams.
m has been par-
Let me say that we are approaching this
This year, for the first time in years, Fed-
1 me in the Cabi-
Fast Track process on the Hill in a totally
eral spending will actually increase less rap-
ise about it-I'm
nonpartisan manner. The Democratic lead-
idly than the inflation. And I can promise
f free and fair
ers, several of the key Democratic leaders,
you that if Congress sends me these spend-
asked Congress
are as enthusiastic about this Fast Track au-
ing bills that break this budget, I will send
trade authority.
thority granting as I am. And we're ap-
them back, with a veto message.
is another term
proaching it strictly because we believe that
But there's lots more to do. We in gov-
S that Congress
it is best for the United States of America.
ernment must do more. As vice president, I
ery same agree-
And I also know that it's good for our trad-
headed the Task Force on Regulatory
and their coun-
ing partners as well.
Relief. And as President, I remain commit-
And this doesn't
This brings me, then, to a second part of
ted to weeding out regulations that prevent
wer to review
our growth package: creating an educated,
people from creating jobs and opportuni-
vents 11th-hour
innovative work force. Our budget empha-
ties. I see some know what over-regulation
legotiators from
sizes the importance of building an America
means. [Laughter] But we're going to con-
-to start from
that is ready to take its place in an emerg-
tinue to do this, and we must. Last year
ing world economy. It stresses the absolute
regulations-here's why-last year regula-
ider Fast Track
necessity of an educated nation. We want to
tions cost the economy at least $185 billion,
And if we do
reinvent the American school, to create a
or $1,700 for every taxpayer. The Govern-
rocess, we jeop-
nation of students, to make sure that educa-
ment generated more than 5.3 billion hours
n trade initia-
tion offers opportunity to everyone.
of paperwork last year. And that's enough
trade talks, the
Our education strategy starts with some
to keep 2 million people busy doing nothing
agreement, and
very obvious truths: that schools succeed
but filling out forms.
ricas Initiative.
when teachers teach; when parents support
Our Council on Competitiveness, as
he benefits of
the schools; when schools accept help from
chaired by Vice President Quayle, attacks
S, exports from
people with skills-local businesses, commu-
the scourge of unnecessary regulation. We
nity colleges, that huge pool of untapped
want to let people turn their attention to
413
Apr. 9 / Administration of George Bush, 1991
the more important and rewarding work of
dream. And similarly, we should foster inno-
building a prosperous future. We've fol-
vation wherever we can.
lowed the same approach in looking at our
Our budget advocates increased Federal
Tax Code. We want a tax system that re-
support for R&D, for research and develop-
wards enterprise. I have repeatedly asked
ment, in basic and applied science. It also
the United States Congress to cut our high
encourages private-sector innovation by ex-
capital gains tax. And I can't think of any
tending the research and experimentation
issue that's been more badly misrepresent-
tax credit. Our administration understands
ed than this one. Our critics say that a cap-
the power of knowledge, and we want the
ital gains cut helps only the rich. And in my
Tax Code to reward people who turn their
view, they are dead wrong.
big dreams into revolutionary new goods
Here are the facts on it. More than a
and services.
quarter of all families who file capital gains
And finally, this administration believes
have annual incomes of less than $20,000 a
in protecting workers' earnings and savings.
year. More than three-quarters of all fami-
Our banking reform proposals-they try to
lies who declared make less than Members
modernize the laws that affect our banking
of Congress. A capital gains cut isn't a sop
system. Let's face it: 1930's regulations and
to the rich. It rewards people who turn
restrictions don't cut it in the 1990's.
good ideas into goods and services-goods
To pick just one example, under our cur-
and services that people need.
rent laws, a California bank can open a
When taxes on entrepreneurship are
branch in Birmingham, England, but not in
high, investors have no incentive to risk
Birmingham, Alabama. Think of the bank-
money on untried businesses and entrepre-
ing system as an irrigation network for the
neurs. Before Congress cut the capital gains
economy. When it works properly, it nour-
rate in 1978, the pool for start-up businesses
ishes the seeds of economic growth. And
had virtually dried up. And after the cut,
when it doesn't, companies like the ones
we experienced an investment boom. Be-
represented here can wither and die. Our
tween 1978 and 1986, the number of initial
reform package tries in a very comprehen-
public offerings increased nearly 1600 per-
sive way to make our banking system more
cent, from 45 to 719. The amount of invest-
competitive, up to date, safe and sound.
ment seed money increased nearly a hun-
We also believe in protecting retirees
dredfold, from $250 million to $22.5 billion.
from undue hardship. Eight years ago, Con-
Capital gains payments to the Federal Gov-
gress adopted measures to guarantee the
ernment quadrupled. This is what happens
short-term solvency and long-term stability
when you reduce the cost of capital.
of the Social Security system. Congress
We must encourage savings and discour-
should resist any temptation to undermine
age debt. And for the past 4 years we've
that stability by permitting raids on the
taxed capital gains like any other form of
trust fund balances. We need to honor our
income. And at the same time, we have
promises to the workers and retirees. I
encouraged people to take on debt. Not sur-
know we've got a fight on this one. But I
prisingly, people have borrowed more and
believe we're going to prevail.
invested less. Home equity lines of credit
I know I have covered a lot of ground,
offer a perfect example. These devices,
touching on a lot of different issues here,
which let homeowners borrow against their
but I wanted to make a point. Our growth
increased home values, have nearly tripled
package addresses the challenges posed by
in volume since tax reform.
a new, exciting, rapidly changing world.
No other major industrial power taxes
Our themes: We want to promote growth.
capital gains at nearly the rate we do. Ger-
We want to create jobs for all Americans.
many and Japan enjoy much higher savings
We want to unleash the power of American
and investment rates in part because they
imagination. We want to ignite people's am-
don't punish successful investment.
bitions, rather than inciting their fears.
My point is simple: Taxes on growth are
Many people call the 20th century the
taxes on the American dream. We should
American century. Well, we shouldn't be
clear away obstacles to the American
content with that. The stunning collapse of
414
Administration of George Bush, 1991 / Apr. 10
communism in 1989 was no accident.
a friend of education, Governor Caperton,
should foster inno-
During the 1980's, the Communist world
who you met earlier.
learned that no wall, no barrier can fend off
I'm told that a former Member of Con-
increased Federal
powerful ideas. It saw our prosperity and
gress, Harley Staggers, is here. I'm not fo-
earch and develop-
our vitality. It saw that our way is better.
cusing too well from up here, but if he-
ed science. It also
The prosperity of the 1980's, which began
they're pointing out here. But anyway-
innovation by ex-
with tax cuts and progrowth policies in the
way back over there. But Harley, nice to
d experimentation
United States, transformed the entire world.
see you, sir-a man that served his State
ration understands
Our challenge now is to shape the revolu-
with great distinction. I want to single out
and we want the
tion that we started to make the 21st centu-
Commissioner Benedict and Superintend-
ole who turn their
ry the next American Century.
ent Marockie; John Quam, the director of
ionary new goods
And so, I ask your help in that quest.
the National Teacher of the Year Program;
Together, with business working coopera-
and of course, your own principal-and now
nistration believes
tively with government, we cannot fail.
that I feel a part of this school, our own
rnings and savings.
Thank you all very much for coming to
principal-Gary Kidwell.
posals-they try to
Washington. And may God bless our great
Let me say that I'm especially pleased, on
affect our banking
country.
this whole broad national education front,
)'s regulations and
to be side-by-side with Lamar Alexander-a
the 1990's.
Note: The President spoke at 2:07 p.m. in
former Governor, a man that is committed,
le, under our cur-
the Great Hall at the Department of Com-
a former head of a great university system,
bank can open a
merce. In his remarks, he referred to Secre-
now our Secretary of Education-a man
ngland, but not in
tary of Commerce Robert A. Mosbacher; L.
who has made it his mission, his sacred mis-
hink of the bank-
William Seidman, Chairman of the Federal
sion, to join with the teachers of this school
n network for the
Deposit Insurance Corporation; Richard
and others all across this country to make
properly, it nour-
Breedon, Chairman of the Securities and
mic growth. And
America's schools second to none. And very
Exchange Commission; and Arthur Levitt,
ies like the ones
soon, back in Washington, we are going to
nominated to be a member of the Defense
her and die. Our
unveil our National Education Strategy. It's
Base Closure and Realignment Commission
very comprehen-
a long-term strategy to make America all
and former chairman of the American
king system more
that it can be-to spark a nationwide move-
Stock Exchange.
afe and sound.
ment that touches every school and every
student in America.
rotecting retirees
at years ago, Con-
But today I want to focus on the fact that,
to guarantee the
in the end, everything we try to do in edu-
ong-term stability
Remarks at the Presentation Ceremony
cation comes down to teaching and learn-
system. Congress
for the National Teacher of the Year
ing, to each teacher and each student in our
on to undermine
Award in Slanesville, West Virginia
classrooms. There's no better way to make
ng raids on the
April 10, 1991
that point than to come here to honor
eed to honor our
someone Slanesville knows so well, the 1991
and retirees. I
The President. Well, please be seated.
National Teacher of the Year, Rae Ellen
n this one. But I
Kids, it's great to be with you. And you
McKee.
vail.
ought to be very happy that I'm here be-
You know, the last time I went to a
a lot of ground,
cause you don't have to be in school work-
school, it was just a few miles away from
rent issues here,
ing hard, you see. [Laughter] To all those
the White House, and I had a third-grade
oint. Our growth
who handled the arrangements for a com-
kid, a boy ask me to prove that I was the
illenges posed by
plex visit like this, let me at the very begin-
President. [Laughter] I finally showed him
changing world.
ning express my sincere thanks to you, and
my American Express card. [Laughter] And
promote growth.
we promise to leave right on time so things
this time I came prepared, though. I
or all Americans.
can get back to normal in this beautiful part
brought the Secretary of Education so there
wer of American
of our country.
can be no doubt. And then I flew down
nite people's am-
I want to thank Secretary Alexander for
here on Marine One. And third, when
their fears.
his remarks, for his kind words. Thank all of.
we're done here, just to prove it, I'm going
0th century the
you for this West Virginia welcome. It's
to take Mrs. McKee back up to the White
we shouldn't be
good to see the Governor of this State here,
House with me.
uning collapse of
415
We must work together to establish a business climate that
encourages growth and investemtn, that lets American business do
its thing. That lowers the cost of doing business -- cutting
taxes and the deficit to cut the cost of capital.
I ask businessmen to make their decisions on the basis of
international competitiveness.
We are the most productive nation on earth, we enjoy the
highest standard of living. With one-twentieth of the world's
population, we produce one-fourth of the world's goods and
services.
Why? Because of our resiliency; because we changed as
conditions changed. We've never been afraid of the future, to
innovate, to take risks, to test the untested. Because of that
America has been the agent of change, led the world, never
fearing to be out front.
But this edge is not a birthright. We will only continue to
lead, to provide a better life for our children, if today we take
steps that guarantee our power to shape the world.
That means change: it means reform. The world is changing,
and we must change with it. We must recongnize that there are
trends that endanger our leadership.
You feel them everyday, in the most immediate way -- the
cost of doing what you do, business.
Our system has become distorted by forces that only
comprehensive reform can alleviate. These forces force you to
divert expenditures into non-productive tasks, investments with
no return.
The Five Pillars of Reelection:
1) health care reform
2) legal reform
We must close those loopholes that litigants can exploit,
deprive the system of the instruments used to delay the
administration of justice and the resolution of disputes.
The lawsuit in the wrong hands has become an instrument of
social engineering, used by special interests unable to enact
their agenda -- often an agenda hostile to business -- through
normal democratic processes. Much litigation is fueled by an
animus toward free enterprise itself.
Engineers sitting around to testify in court cases.
Fear of frivolous lawsuits can discourage innovation without
a compensatory addition to the public welfare.
We have ceased to look on the lawsuit as a grim last resort,
because our system of civil litigation makes lawsuits preferable
to more informal efficient and less rancourous means of resolving
disputes. It is extraordinarily easy to initiate a lawsuit, and
extraordinarily difficult to finish one. The system must be
changed.
You're called upon to put r&d on hold. The costs of
complying with catch-all discovery requests in which, to use the
words of one judge, the parties simply exchange filing cabinets.
Would that it were that simple.
We must offer alternatives to litigation, the multi-door
courthouse.
Loser pays -- we have called for a limited, experimental
application of this, ot weed out frivolous claims or discourage
them from ever being initiated.
FEar of medical malpractice suits alone generates up to $20
b a year in added medical costs
the Philadelphia woman who sued her doctor because a cat
scan distorted her psychic ability to communicate with John
Milton; or the litigant who sued a state lottery because she
didn't win the grand prize, and was awarded $400,000 for
emotional trauma.
All entertaining, but you understand the seriousness of
this issue, and how much it costs -- how much it costs all of us.
"Almost half of all U>S> manufacturers have wihdrawn products
from world markets, according to a recent survet by the
Conference Board
A quarter of US companies have discontinued
some fors of product research. Approximately 15 percent of
companies have dismisse dworkers because of stringent product
liability laws.
20 yrs. ago, 13 companies did research on fertility. 11
years later there was one
We have 20 times the number f lawyers as Japan per capita.
whole industries have been destroyed -- for example, the
light aircraft industry; once employed 22,800 workers, now 6,000
after a decade.
Talk about lost opportunities: 94,2000 people applied to law
school last year -- human capital driven into a profession whose
addition to the commonwealth is highly dubious. a huge reservoir
of human capital drained into an enterprise whose use is
increasingly dubious.
I leave aside the for now the rancor and ill-feeling that
litigation inspires, the disruptions to the civility of our
common life that come from drawn-out duels between lawyers. I can
focus instead on the costs to you, on the drain on our
productivity and hence on our competitiveness.
These costs are passed along to the consumer in the form of
higher prices, with the dampening effect higher prices
necessarily entail. Or you have to absorb the higher costs
yourselves, lowering your profit margins and increasing your
expenses.
3) education reform
English is now the language of international business.
April 1, 1992
MEMORANDUM FOR ANDY FERGUSON
FROM:
BOB SIMON
PR
SUBJECT:
STATISTICS
HEALTH CARE COSTS
Businesses paid $186 billion for health care in 1990 --
almost triple what they spent 10 years ago. This is 29% of
all health care costs.
These costs now represent 45% of all fringe benefits
provided to employees, double the share of benefits in 1965.
EXPORTS
O
Merchandise exports rose 30% over the last three years.
During that time, the trade deficit has been almost cut in
half.
BUSINESS TRAINING
Businesses spend $30 billion a year in formal training for
their employees, 1% to 2% of their payroll costs.
Bob -- --
Here are some possibilities. I'm checking with Education to find the
best "can't even write a complete sentence" statistic.
Only one-third of our students leave grade 12 "competent" in
mathematics (1990 data).
More than two-thirds of our sevetnteen-year-olds were unable to
date the Civil War within the corrent half-century (1986 data).
Only [ %] could find France on a map.
Only about half leave high school understanding government
structures and function (e.g., the separation of powers).
Roe
April 1, 1992
NOTE TO RAE NELSON
As requested, attached are some facts which illustrate the poor
state of U.S. education:
o From international studies of academic achievement we find:
- Americans rank progressively worse on international
comparisons. On a 1986 study of science achievement, the
U.S. ranked 8th (out of 15 countries) in grade five; 14th
in grade 9; and last in grade 12.
- A 1982 study of mathematics found that the most able U.S.
students scored the lowest among comparable students from
lowest in calculus.
all participating countries in algebra and were among the
- Despite our poor showing on international mathematics
comparisons, about two-thirds of 13-year-old U.S. students
felt that they were good at math. Only 23 percent of
Korean students, the highest achievers, felt this way.
O
that: From the National Assessment of Educational Progress, we know
-
Less than 3 percent of 17-year-olds can write a persuasive
letter applying for a job.
letter and only 20 percent can write a simple two-paragraph
- Only 12 percent of 17-year-olds can arrange a series of
simple fractions in order of magnitude.
- Less than one-third of 17-year-olds know in which half
century the Civil War occurred.
O
On an international test of geography knowledge, the U.S. was
the only country tested in which young adults know less
geography than do older adults. In addition, only about one-
third of Americans ages 18-24 could locate Vietnam on a map
and 45 percent did not where Central America was. Finally, a
greater percentage of young adults in Japan, Canada, Mexico,
U.S. Sweden, and Central America knew the correct population in the
The 1991 average score on the verbal portion of the SAT sank
to an all-time low of 422, while the average math score dipped
for the first time since 1980 to 474.
Alan Ginsburg
04/01/92 16:57
202 5350514
1001
U.S. Department of Labor
Employment and Training Administration
200 Constitution Avenue, N.W.
Washington, D.C. 20210
E THE
Facsimile Transmittal Form
Date: 4-1-93
Pages to Follow:
To: Bob Simon
From: Dolores Battle
Fax #: 456-6218
Tel #: 535-0236
Of: WHITE HOUSE
Subject:
Distribution:
Normal
Urgent/Hand Carry
Confidential
Comments:
As promised.
04/01/92
16:58
202 5350514
002
TRAINING PARTNERSHIPS
INTRODUCTION
Training Partnerships: Linking Employers and Providers
A
merican employers spend
employers are turning to outside training providers for
about $30 billion, or 1 to 2
assistance.
percent of their payrolls an-
This report looks at the provider community and
how employer-provider relationships are developed
nually on formalized training
and sustained over time. Through checklists and
for their workers. About 69 percent or $21 billion is in-
decision-trees, it also attempts to assist employers in
vested in training that companies design, develop, and
making more informed decisions regarding the pur-
deliver using in-house resources. But, 31 percent or $9
chase of provider training: and it aims to help pro-
billion is expended on training that is purchased from
viders understand more fully what drives employers
outside providers.
to reach the "make or buy" decision.
Several large players have slices of the $9 billion
Partnerships between employers and training pro-
training provider pie. Four-year colleges and univer-
viders such as educational institutions, unions, public
sities get the largest slice at about $2.9 billion. Com-
job training underwriters, and private training sup-
munity colleges and technical institutes ring up about
pliers are common. Over the years, they have become
$1.4 billion, while vocational and other schools provide
widely recognized as an important tool for cost-
about $760 million in training. Investment in training
effectively meeting the evolving training needs of
provided by community organizations and private in-
employers.
structors, are underwritten by government funding ac-
As employers have become more sophisticated about
counts for another $928 million. Professional, trade,
the availability, quality, and services of outside train-
and labor organizations
ing providers, they have
provide about $1.3 billion.
moved to build new and
And the training industry,
more flexible partnerships.
composed of large and
Often, they have taken the
small suppliers of train-
initiative in developing
ing assistance, provides
cost-effective, long-term
about $1.5 billion in train-
relationships that spawn a
ing services to employers
renewable source of skills
annually. (See Figure 1).
and knowledge.
Providing training to
Providers have done
companies is big business.
their part as well to foster
And it's growing. Techno-
and sustain partnerships.
logical and process innova-
They have worked hard to
tions are driving skill re-
be flexible and adaptable
quirements upward as
in response to employer
workers struggle to adapt
needs. And, they have ag.
to changing times. Com-
gressively moved to por-
plicating this picture is a
tray their services in terms
shifting demographic land-
of return on investment for
scape that has America's
both an employer and its
existing workforce aging
community.
and its entry-level labor
In fact, the idea of part-
pool shrinking, creating a
nerships has become SO
whole new set of challenges around basic skills defi-
popular and grown so quickly in all fields that it has
ciencies and learning styles. The massive job of pre-
spawned a litany of terms to capture the essence of
paring workers to fine-tune their existing skills and
these endeavors. One of the most well-known and
acquire new ones is often too big for an in-house train-
popular phrases to describe relationships between
ing department to handle alone. So, increasingly,
employers and outside providers is linkages. Linkages
1
INTERNATIONAL STATISTICS
8
INDUSTRIAL PRODUCTION AND CONSUMER PRICES-MAJOR
a
INDUSTRIAL COUNTRIES
Industrial production = 100; seasonally adjusted)
Consumer prices (1982-84 = NSA)
Period
United
United
United
United
Canada
Japan
France
States
Germany
Italy
Canada
Kingdom
Japan
France
States 1
Germany
Italy
Kingdom
1982
81.9
76.5
82.9
97.3
90.3
'91.7
86.4
96.5
94.9
98.0
91.7
97.0
87.7
95.4
1983
84.9
81.5
85.5
96.5
90.9
'88.9
89.6
99.6
100.4
99.9
100.3
100.3
100.8
99.8
104.8
1984
92.8
91.4
93.4
97.1
93.5
91.8
89.7
103.9
104.8
102.1
108.0
102.7
111.5
1985
94.4
96.5
96.8
97.2
97.7
92.9
94.6
107.6
108.9
'104.1
114.3
'104.8
121.1
111.1
1986
95.3
95.4
96.6
98.0
99.6
96.2
96.9
109.6
113.4
'104.8
117.2
104.7
128.5
114.9
1987
100.0
100.0
100.0
100.0
100.0
100.0
100.0
113.6
118.4
'104.9
121.1
104.9
134.4
119.7
1988
105.4
105.5
'109.2
104.7
103.9
105.9
103.6
118.3
123.2
105.7
124.4
106.3
141.1
125.6
1989
108.1
105.3
'115.9
108.9
108.7
109.2
104.0
124.0
129.3
'108.0
128.9
109.2
150.4
135.4
1990
109.2
100.8
121.4
110.2
114.6
'109.4
103.4
130.7
135.5
111.4
133.2
112.1
159.6
148.2
1991 P
107.1
124.2
100.4
136.2
143.1
115.0
137.2
116.0
169.8
156.9
1990:
Nov
108.3
97.4
'124.3
108.0
116.6
106.8
100.8
133.8
138.2
'113.1
135.0
113.2
163.6
152.7
Dec
107.2
96.4
'123.8
106.0
116.2
109.6
100.2
133.8
138.1
'113.0
134.9
113.3
164.2
152.6
1991:
Jan
106.6
'96.2
'125.8
110.4
119.1
108.6
'99.7
134.6
141.7
'113.8
135.5
114.0
165.4
153.0
Feb
105.7
95.4
'125.7
109.4
118.3
108.4
'101.3
134.8
141.7
'113.5
135.7
114.3
167.0
153.8
Mar
105.0
95.1
123.0
106.8
118.3
108.2
'101.3
135.0
142.3
'114.0
135.8
114.2
167.4
154.4
Apr
105.5
96.3
123.3
109.8
117.8
103.3
98.7
135.2
142.3
'114.7
136.3
114.7
168.2
156.4
May
106.4
'96.9
126.0
109.6
116.9
104.6
'98.5
135.6
143.0
'115.3
136.6
115.2
168.8
156.9
June
107.3
97.4
122.8
109.7
121.6
110.5
'101.5
136.0
143.7
'114.8
136.9
115.8
169.7
157.6
July
108.1
'97.8
126.6
'110.9
119.5
106.3
101.6
136.2
143.8
'114.7
137.4
116.8
169.9
157.2
Aug
108.0
97.5
122.8
'110.9
117.3
104.1
'100.0
136.6
143.9
'114.9
137.7
116.8
170.4
157.6
Sept
108.4
98.1
123.7
'109.3
117.5
'107.6
'100.2
137.2
143.7
'115.1
138.0
117.0
171.1
158.1
Oct
108.4
97.5
123.9
'110.6
'117.5
105.5
'100.9
137.4
143.4
'116.4
138.6
117.4
172.6
158.7
Nov
r 108.1
97.5
'123.8
109.9
119.0
111.1
100.4
137.8
144.0
'116.6
138.9
117.9
173.8
159.3
Dec
107.6
122.6
100.1
137.9
143.4
116.0
139.1
118.0
174.2
159.4
1992: Jan P
106.7
138.1
144.0
118.6
175.5
159.3
1 Data relate to all urban consumers.
Source: National sources as reported by Department of Commerce (Bureau of Economic Analysis
and International Trade Administration, Trade Information and Analysis).
U.S. MERCHANDISE EXPORTS AND IMPORTS
[Billions of dollars; monthly data seasonally adjusted]
Merchandise exports (f.a.s. value) 1
General merchandise imports (customs value) 3
Trade balance
Principal end-use commodity category
Principal end-use commodity category
General
Auto-
Con-
Auto-
Con-
mer-
Indus-
Indus-
Period
motive
sumer
motive
chandise
Exports
Exports
Foods,
trial
Cap-
trial
Cap-
sumer
Foods
(f.a.s) less
(f.a.s)
Total 2
ital
vehi-
goods
ital
vehi-
feeds,
Total
feeds,
goods
imports
sup-
and
goods
cles,
(non-
sup-
cles,
(c.i.f.
imports
less
plies
and
plies
goods
(non-
Other 2
Other
(customs
imports
bever-
except
food)
parts,
food)
value)
and
parts,
bever-
and
except
value)
(c.i.f.)
auto-
and
except
auto-
and
ages
materi-
ages
materi-
except
motive
en-
auto-
motive
en-
auto-
als
als
gines
motive
gines
motive
1982
216.4
31.3
61.7
72.7
15.7
14.3
20.7
244.0
17.1
112.0
35.4
33.3
39.7
6.5
254.9
-27.5
-38.4
1983
205.6
30.9
56.7
67.2
16.8
13.4
20.5
258.0
18.2
107.0
40.9
40.8
44.9
6.3
269.9
-52.4
-64.2
1984
224.0
31.5
61.7
72.0
20.6
13.3
24.0
4 330.7
21.0
123.7
59.8
53.5
60.0
7.8
346.4
-106.7
-122.4
1985
5 218.8
24.0
58.5
73.9
22.9
12.6
27.3
4 336.5
21.9
113.9
65.1
66.8
68.3
9.4
352.5
-117.7
-133.6
1986
5 227.2
22.3
57.3
75.8
21.7
14.2
35.9
365.4
24.4
101.3
71.8
78.2
79.4
10.4
382.3
-138.3
-155.1
1987
254.1
24.3
66.7
86.2
24.6
17.7
34.6
406.2
24.8
111.0
84.5
85.2
88.7
12.1
424.4
-152.1
-170.3
1988
322.4
32.3
85.1
109.2
29.3
23.1
43.4
441.0
24.8
118.3
101.4
87.7
95.9
12.8
459.5
-118.5
-137.1
1989
363.8
37.2
99.3
138.8
34.8
36.4
17.2
473.2
25.1
132.3
113.3
86.1
102.9
13.6
493.2
-109.4
-129.4
1990
393.6
35.1
104.4
152.7
37.4
43.3
20.7
495.3
26.6
143.2
116.4
87.3
105.7
16.1
517.0
-101.7
-123.4
1991
421.9
35.8
109.2
166.8
39.9
46.1
24.1
488.1
26.5
131.4
121.4
84.8
108.0
16.0
509.3
-66.2
-87.5
1990: Dec
33.6
2.6
9.2
13.2
2.8
3.8
1.9
39.9
2.2
11.6
9.8
6.6
8.3
1.3
41.6
-6.3
-8.0
1991:
Jan
34.1
2.7
9.5
13.0
3.1
3.9
1.9
41.5
2.2
12.2
9.9
7.3
8.6
1.3
43.4
-7.4
-9.2
Feb
33.6
3.1
9.7
12.4
2.6
3.9
1.9
39.1
2.1
10.8
9.9
6.7
8.5
1.2
40.9
-5.5
-7.3
Mar
34.0
3.0
8.9
13.5
2.9
3.8
1.9
38.1
2.1
10.1
9.9
6.6
8.0
1.3
39.8
-4.1
-5.8
Apr
35.6
2.9
9.2
14.4
3.4
3.8
1.9
40.1
2.4
11.0
10.4
6.7
8.5
1.3
42.0
-4.5
-6.4
May
35.3
3.0
9.4
13.7
3.5
3.8
2.0
40.1
2.3
11.3
10.1
6.5
8.4
1.5
41.8
-4.8
-6.6
June
35.0
2.9
8.7
14.4
3.5
3.7
1.9
38.8
2.3
10.5
9.8
6.6
8.1
1.4
40.4
-3.8
-5.5
July
35.2
3.1
9.1
13.7
3.6
3.7
2.1
41.2
2.3
10.8
10.4
7.2
9.3
1.3
43.0
-5.9
-7.8
Aug
34.4
2.9
9.1
13.4
3.2
3.7
2.0
40.9
2.1
10.9
9.9
8.0
8.7
1.3
42.7
-6.5
-8.3
Sept
35.3
3.0
8.5
14.3
3.6
3.8
2.1
42.3
2.2
11.2
10.3
7.6
9.6
1.3
44.1
-6.9
-8.8
Oct
37.1
3.2
9.3
14.4
3.8
4.2
2.2
43.4
2.2
11.2
10.6
7.9
10.3
1.4
45.2
-6.3
-8.1
Nov
36.9
3.2
8.8
15.4
3.7
4.1
1.8
41.1
2.2
10.8
9.7
7.2
9.9
1.4
42.8
-4.2
-5.9
Dec
36.1
3.4
8.9
14.2
3.3
3.9
2.4
42.1
2.3
11.0
10.5
7.1
10.0
1.3
43.9
-5.9
-7.7
1 Includes Department of Defense Military Assistance Program grant-aid shipments.
5 Total exports are on 8 revised statistical month basis; end-use categories are on a statistical
2 Includes undocumented exports to Canada through 1988.
month basis.
3 Total arrivals of imported goods other than intransit shipments.
4 Total includes revisions not reflected in detail.
NOTE.-Data shown include trade of the U.S. Virgin Islands.
Source: Department of Commerce, Bureau of the Census.
35
04-01-92 10:22AM 1705 EQUIQABLE HCA 'A
P01/**
FACSIMILE TRANSMI
Health Care Financing Administration
Office of the Actuary
ADDRESSEE: (Name, Organization, Address)
FR
/
Bob Simon
KATHARINE R. LEVIT
Chief, National Health Expenditures Branch
Office of National Health Statistics
Room L-1, EQ05
410
6325 Security Boulevard
(304) 966-7942
Beltimors, MD 21207
FAX (304) 965-6371
Phone: 456-7750
Phone:
410
TOTAL PAGES:
ADDRESSEE'S FAX MACHINE PHONE NUMBER:
DATE:
(Witheut Cover)
(If Knewn)
11
202-456-6218
4/1/92
REMARKS:
If you have any questions, please
call Cathy Cowan (410-966-4880)
or me.
IF FAX MACHINE RETRANSMISSION IS NECESSARY PLEASE CALL:
AT:
(Name)
(Phene)
REQUESTOR'S INSTRUCTIONS TO RECEIVER:
Please cell:
at
(Name)
for pick-up
(Phone)
Mail copies for
Location:
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04-01-92 23AM 1705 EQUIQABLE HCA 'A
P02/**
Health Care Financing Trends
Business, households,
philanthropic contributions to health organizations,
and governments:
income taxes, earnings reduced by increases in
employers' health insurance costs, and higher cost of
Health care costs, 1990
products.
HSS amounted to $643.4 billion in 1990, an increase
by Katharine R. Levit and Cathy A. Cowan
of 10.5 percent since 1989, the third consecutive year
that HSS has grown at double-digit rates. Over time, the
This annual article presents information on health care
primary responsibility for sponsoring health care costs
costs by business, households, and government.
shifted from the household to other sources, such as
Households funded 35 percent of expenditures in 1990,
business and government. In 1965, households paid for
government 33 percent, and business, 29 percent. During
61 percent of all HSS, with business accounting for
the last decade, health care costs continued to grow at
17 percent and public programs accounting for
annual rates of 8 to 16 percent. Burden measures show
21 percent. By 1990, the distribution of payments
that rapidly rising costs faced by each sponsor sector are
changed, so that each of the major components accounted
exceeding increases in each sector's ability to fund them.
for approximately one-third of the health care cost
Increased burden is particularly acute for business.
(Figure 2). Because of these changes, business is
The authors discuss the problems these rising costs pose
becoming extremely concerned over the costs of health
for business, particularly small business, and some of the
care and the amount of resources being consumed. This
strategies businesses employ to constrain this cost
was especially true in 1990, as the United States entered
growth.
a recession. The recession caused growth in consumer
spending for most goods and services to slow down,
Introduction
while spending for health care continued to grow
unabated.
National health expenditures consumed 12.2 percent of
Business paid $186.2 billion for health care in 1990
the gross national product (GNP) in 1990 (Levit et al.,
(Table 1), 29 percent of HSS. Business estimates include
1991) and are expected to rise to 16.4 percent of GNP in
expenditures for all types of organizations-sole
the year 2000 (Sonnefeld et al., 1991). These increases
proprietorships, partnerships, and corporations. These
raise concern over the availability of resources to pay for
payments cover employer contributions to health
upwardly spiraling health care costs-resources that differ
insurance premiums for employees, mandatory employer
by sponsor. By measuring the burden health care costs
contributions to the Medicare hospital insurance trust
impose on each sponsor, we can track mounting pressure
fund, workers' compensation medical premiums,
within the separate sponsor sectors that will trigger
temporary disability medical insurance, and industrial
change. These pressures have been building for both
inplant services.
business and government for several decades; however,
The employer contribution to employee health
for the household sector, increasing health care cost
insurance premiums accounts for the largest portion of
burdens are only beginning to be felt.
private business health spending: $139.1 billion, or
The analysis presented in this article builds on the
75 percent. The second-largest component is the
national health accounts (NHA), which present spending
employer contribution to the Medicare hospital insurance
by health care bill payers such as Medicaid, Medicare,
trust fund, which, at $29.7 billion, holds a 16-percent
and private health insurance. The NHA estimates are
share. Workers' compensation. temporary disability
rearranged and disaggregated to permit an examination of
insurance, and industrial inplant health services comprise
sponsors of health care who provide funding to bill
the remaining $17.4 billion, or 9 percent of private
payers. These major sponsors of health care are business,
business health spending. Since the advent of Medicare
households, government, and non-patient revenues. Their
and Medicaid in 1966, these component shares of private
spending is measured as expenditures for health services
business health care expenditures have remained stable.
and supplies (HSS) that represent the cost of health care
Despite stability of each business components' share of
excluding research and construction. Some payments for
business health spending, business' overall share of HSS
HSS by sponsors pass through health care bill payers
has risen. Each major component contributed to rising
such as insurance and government, while other payments
business health care costs and caused the business share
(e.g., out-of-pocket, non-patient revenues) flow directly
of the total health care bill to grow. The expansion of
into the health care system (Figure 1), In this article, one
employer-paid insurance in both the number of workers
additional level of payer is revealed beyond those
and dependents covered and in breadth of coverage is
presented in NHA. Ultimately, however, the individual
well known. Employers also shared in paying for public
bears the primary responsibility of paying for health care
insurance premiums of their employees through Federal
through health insurance premiums, out-of-pocket costs,
Income Compensation Act (FICA) taxes for Medicare.
The growth in Medicare contributions was the result of
increases in either the annual maximum taxable earnings,
Reprint requests: Anna Long, Office of National Health Statistics, L-1,
on which the employers' and employees' Medicare
EQ05, 6325 Security Boulevard, Baltimore, Maryland 21207.
contribution was applied, or the contribution rates, or
both. In 1966, the maximum taxable earnings level was
Health Care Financing Review/Winter 1991/Volume 13, Number 2
83
04-01-92 0:26AM 1705 EQUIOABLE HCA 'A
P03/**
Figure 1
Flow of funds from sponsors of health care Into the health care system: United States, 1990
(Amount in billions)
Government: $212.9
Business: $186.2
Non-patient revenues¹:
Household: $224.7
$19.6
insurance premiums for individually
Insurance premiums for
Insurance premiums: $139.1
purchased and employer-sponsored
employees: $35.1
Medicare contributions: $29.7
policies: $42.6
Federal programs: $104.7
Workers' compensation and temporary
Medicare contributions
and premiums: 45.9
State and local programs: $73.2
disability insurance: $15.2
Out-of-pocket: $136.1
Industrial inplant: $2.2
Private health insurance:
Public programs:
$216.8
$268.6
Health services and supplies: $643.4
Hospitals
$256.0 Drugs and medical sundries $54.6
Physicians
$125.7
Dental care
$34.0
Nursing homes
$53.1
All other²
$120.0
Private health insurance
Public programs
Other private payments
1 Includes revenues from philanthropy, and income from the operation of gift shops, cafeterias, parking lots, and educational programs, as well as
those 2 Includes home health care, other professional services, durable medical equipment. other personal health care, administration and net cost of
received from assets such as interest, dividends. and rents.
insurance, and government public health activities.
SOURCE: Health Care Financing Administration, Office of the Actuary: Data from the Office of National Health Statistics.
$6,600 with a contribution rate of 0.35 percent; by 1990,
paying for health care of the elderly and indigent. Also,
these had risen to $51,000 and 1.45 percent, respectively.
employer-sponsored insurance grew dramatically
Household spending accounted for $224.7 billion, or
throughout this time period. Insurance is the major cause
35 percent, of expenditures in 1990. This total covered
of business health care cost rising from 17 percent of
spending for health insurance premiums, including the
HSS in 1965 to 29 percent in 1990. Employer-sponsored
employee contribution to employer-sponsored or
insurance plans reallocated health care expenses from the
individually purchased policies, contributions and
household to private and public employers.
premiums to Medicare trust funds, and out-of-pocket
Non-patient revenues, including philanthropic funds,
payments. Out-of-pocket spending includes copayments,
providers' interest income, and revenues from other
deductibles, and payments for services not covered by
non-patient care activities, were $19.6 billion in 1990.
insurance (for individuals with either limited or no
Non-patient revenue estimates transfer directly from the
NHA and have been responsible for 3 percent of HSS
insurance).
Household spending as a share of HSS has felt the
since 1980 (Table 2) and 2 percent from 1965 to 1980.
largest impact, as the sources of health care payments
Public expenditures from general revenues, which
changed over time. In 1965, households accounted for
include spending for some of Medicare and all of
61 percent of all HSS expenditures; by 1990, households
Medicaid. reached $212.9 billion in 1990. This spending
accounted for 35 percent (Table 2). This change is in part
accounts for 33 percent of HSS. Public expenditures in
a result of the advent of Medicare, Medicaid, and other
this payer taxonomy include payments for health care
public programs that increased the government role in
programs such as Medicaid, Medicare, U.S. Department
Health Care Financing Review/Winter 1991/Volume 13, Number 2
84
F
"nith
Non-patient revenues
50
40
Percent
30
20
10
0
1965
1970
1975
1980
1985
1990
Year
SOURCE: Health Care Financing Administration, Office of the Actuary: Data from the Office of National Health Statistics.
of Defense, maternal and child health, and other Federal
These aggregate private business health insurance
and State and local programs. For the purpose of
premiums summarize the experience of business
realigning payments to the sponsors of health care, the
nationally. They represent the experience of all sizes of
estimates for Medicare include only general revenue
establishments in all industries. These premiums for
funds. These funds flow into the Medicare trust fund
hospital, medical, dental, prescription drug, and vision
from taxes. The other sources of funds for Medicare,
coverage include those paid to insurance companies,
premiums and contributions, are allocated to the health
Blue Cross and Blue Shield organizations, and health
care sponsor (households or business) that paid them.
maintenance organizations, as well as the costs incurred
Public expenditures also include insurance premiums for
by businesses that self-insure health care benefits. These
employees of government agencies. In 1990, these
aggregate private business health insurance premiums
insurance premiums amounted to $9.2 billion for Federal
cover only the employer contributions for policies of
employees and $25.9 billion for State and local
current workers, retirees, former workers, and
employees.
dependents. They measure the aggregate financial impact
on business of the provision of health care benefits to
Business expenditures
workers.
Other private sector surveys report growth rates for
In 1990, expenditures by private business accounted for
employer-sponsored health insurance that are higher than,
29 percent of health services and supplies, or
although not necessarily inconsistent with, those
$186.2 billion. Private business financed health care
estimated in this article. A. Foster Higgins (1991) reports
through contributions to the Medicare hospital insurance
growth rates in premiums per covered employee of
trust fund ($29.7 hillion), payments for the medical
21 5 percent for fee-for-sel plans In 1990 and for all
portion of workers' compensation and temporary
plans of 17.1 percent. The Health Insurance Association
disability insurance premiums ($15.2 billion), and
of America (HIAA) survey cites premium increases of
industrial inplant health services ($2.2 billion). The
14 percent per covered worker (Sullivan and Rice, 1991).
primary method of business support of health care is
Close examination of these statistics reveals differences in
through the provision of health insurance for employees.
what these growth rates measure (employer-only versus
The premiums for health insurance cost business $139.1
employer and employee costs; aggregate versus per
billion in 1990, an increase of 10.6 percent from 1989.
employee costs) and scope of business (and governments)
covered.
Health Care Financing Review/Winter 1991/Volume 13, Number 2
85
04-01-92 0:29AM 1705 EQUIQABLE HCA 'A
P05/**
Table 1
Expenditures for health services and supplies, by type of payer:
United States, selected calendar years 1965-90
Type of payer
1965
1970
1975
1980
1985
1986
1987
1988
1989
1990
Amount In billions
Total
$38.2
$69.1
$124.7
$238.9
$407.2
$438.9
$476.8
$526.2
$582.1
$643.4
Private
30.3
50.1
86.2
162.1
278.9
302.9
327.2
362.8
397.5
430.4
Private business
6.5
15.1
28.8
64.8
115.0
127.3
133.6
153.1
169.7
186.2
Employer contribution to private
health insurance premiums
5.4
11.2
20.9
48.4
85.4
93.6
96.7
112.9
125.7
139.1
Employer contribution to Medicare
hospital insurance trust fund¹
0.0
2.1
5.0
10.5
20.3
23.3
24.7
26.3
28.4
29.7
Workers' compensation and
temporary disability insurance
0.8
1.4
2.4
5.1
7.8
8.8
10.5
12.0
13.6
15.2
Industrial inplant health services
0.2
0.3
0.5
0.9
1.4
1.6
1.7
1,9
2.1
2.2
Household
23.1
33.6
54.9
90.3
152.0
162.7
179.8
194.3
210.3
224.7
Employee contribution to private health
Insurance premiums and individual
policy premiums
4.1
4.6
8.9
16.2
28.4
28.9
35.3
34.9
39.2
42.6
Employee and self-employment
contributions and voluntary
premiums paid to Medicare hospital
insurance trust fund'
0.0
2.4
5.7
12.0
24.0
27.6
29.5
31.4
33.8
35.7
Premiums paid by individuals to
Medicare supplementary medical
insurance trust fund
0.0
1.0
1.7
2.7
5.2
5.2
6.1
8.7
11.2
10.2
Out-of-pocket health spending
19.0
25.6
38.5
59.5
94.4
100.9
108.8
119.3
126.1
136.1
Non-patient revenue
0.6
1.5
2.5
7.0
12.0
12.9
13.8
15.4
17.5
19.6
Public
7.9
18.9
38.5
76.7
128.3
135.9
149.6
163.4
184.6
212.9
Federal Government
3.4
10.4
21.3
42.5
69.0
70.4
77.3
84.2
96.2
113.9
Employer contributions to private
health Insurance
0.2
0.3
1.2
2.2
4.3
3,9
4.9
6.4
8.1
9.2
Adjusted Medicare
0.0
2.0
3.3
11.1
20.4
18.5
20.0
20.8
25.5
31.5
Medicare
0.0
7.6
16.4
37.5
72.2
77.4
83.4
90.5
102.6
111.2
Less Medicare hospital trust fund
contributions and premiums
0.0
4.7
11.3
23.7
46.6
53.7
57.3
61.0
65.9
69.5
Less Medicare supplementary
medical Insurance premiums
0.0
1.0
1.7
2.7
5.2
5.2
6.1
8.7
11.2
10.2
Health program expenditures
(excluding Medicare)
3.3
8.2
16.8
29.2
44.3
48.0
52.4
57.0
62.6
73.1
Medicald
0.0
2.9
7.4
14.5
23.1
25.4
27.9
31.0
35.4
42.9
Department of Veterans Affairs
1.2
1.8
3.5
5.9
8.6
9.1
9.6
10.0
10.6
11.4
Department of Defense
1.0
1.8
2.8
4.3
7.6
8.4
9.3
9.8
10.4
11.5
Other programs²
1.2
1.8
3.0
4.4
4.9
5.2
5.6
6.2
6.2
7.4
State and local government
4.5
8.5
17.2
34.2
59.3
65.5
72.3
79.1
88.4
99.1
Employer contributions to private
health insurance
0.3
0.6
1.9
6.7
16.0
16.7
17.9
20.2
23.4
25.9
Employer contributions to Medicare
hospital insurance trust fund
0.0
0.2
0.7
1.3
2.2
2.7
3.1
3.3
3.7
4.1
Health expenditures by program
4.2
7.6
14.6
26.3
41.1
46,1
51.4
55.6
61.2
69.1
Medicaid
0.0
2.5
6.1
11.6
18.6
19.8
22.9
23.9
26.8
32.3
Hospital subsidies
2.6
3.4
5.2
6.2
7.8
10.0
11.2
12.4
13.1
14.1
Other programs³
1.6
1.8
3.3
8.5
14.7
16.3
17.3
19.3
21.3
22.7
Includes one-half of self-employment contribution to Medicare hospital insurance trust fund.
2Includes Maternal and Child Health, Vocational Rehabilitation, Alcohol, Drug. and Mental Health Administration, Indian Health Service, Office of Economic
Opportunity (1965-74), and other miscellaneous general hospital and medical programs and public health activities.
Includes other public and general assistance, Maternal and Child Health, Vocational Rehabilitation, and public health activities.
SOURCE: Health Care Financing Administration, Office of the Actuary: Data from the Office of National Health Statistics.
Employers' role in providing insurance
Business accepted the function of primary provider of
health insurance for the non-elderly population,
Private health insurance became established as a fringe
encouraged by insurance companies, government, and
benefit of employment during World War II. During this
employees. First, insurers preferred employer groups
period of labor shortages, employers began to use fringe
because they reduced private health insurers' risk of
benefits, including health benefits, to entice marginal
adverse selection and provided insurance companies with
non-workers into the labor force and to discourage
a mechanism for reducing their marketing, enrollment,
existing workers from changing jobs (Starr, 1982). Since
and premium collection costs below those encountered
World War II, private health insurance has grown to
when selling to individuals.
become an acknowledged and accepted "responsibility"
Second, government supported employer-sponsored
of business, a role that continues today.
private health insurance by offering tax incentives that
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Table 2
Percent distribution of expenditures for health services and supplies, by type of payer:
United States, selected calendar years 1965-90
Type of payer
1965
1970
1975
1980
1985
1986
1987
1988
1989
1990
Percent distribution
Total
100
100
100
100
100
100
100
100
100
100
Private
79
73
69
68
68
69
69
69
68
67
Private business
17
22
23
27
28
29
28
29
29
29
Household (individual)
61
49
44
38
37
37
38
37
36
35
Non-patient revenue
2
2
2
3
3
3
3
3
3
3
Public
21
27
31
32
32
31
31
31
32
33
Federal Government
9
15
17
18
17
16
16
16
17
18
State and local government
12
12
14
14
15
15
15
15
15
15
NOTE: Columns may not add to totals shown because of rounding.
SOURCE: Health Care Financing Administration. Office of the Actuary: Data from the Office of National Health Statistics.
encouraged business to assume this role of health
went for the employer share of private health insurance
insurance sponsor. Government tax rules treated health
premiums. These premiums financed 22 percent of costs
insurance premiums as a business expense that reduces a
for HSS in the United States in 1990 and provided
business' gross taxable income. It also excluded these
coverage to 140.4 million workers and their dependents
benefits from workers' taxable gross income, raising the
and another 11.4 million non-workers and their
effective wage rate to the employee without incurring
dependents (Fu Associates Ltd., 1991).
additional cost to the employer. These tax incentives
The burden that health care imposes on business has
promoted public policy objectives of making health care
soared over the past 25 years (Table 3). In 1990,
accessible and affordable without direct government
employer health care costs consumed 3.9 percent of the
intervention.
gross private domestic product of the Nation, almost four
Third, employees continue to view health insurance
times the share these costs represented in 1965. As a
benefits as a major factor in their decisions to change or
share of total compensation of labor, business health care
remain in a job (Katz, 1991). Insurance companies,
spending climbed to 7.1 percent in 1990, up from
government, and workers have reinforced business'
4.9 percent in 1980 and 2.0 percent in 1965. In 1990,
historical role as providers of health insurance. Therefore,
health care costs represented 45.5 percent of all fringe
businesses today believe that employers should be the
benefits provided to employees, more than double the
source of health insurance benefits for their employees
share of fringe benefits in 1965 (22.4 percent). To gauge
and dependents (Woolsey, 1991).
the size of health care expenditures, business health care
Whereas both employers and employees derive
expenditures can be compared with profits. These
advantages from employers' role in sponsoring health
statistics show that health care spending by business
insurance, pressure for change is mounting, as recorded
equaled 61.1 percent of corporate profits¹ before tax and
by recently conducted polls. A Robert Wood Johnson
was greater than the amount of corporate profits after tax
Foundation survey of business executives found that,
(107.9 percent) in 1990. These comparisons highlight
despite its positive aspects, changes would be required to
business concerns about the burden that rising costs are
enhance the health care system, particularly in the area of
placing on their ability to continue providing these
value received for expenditures (Johnson, 1991). In
benefits.
addition, more than one-third of large employers surveyed
Rising health care costs have had a profound effect on
by the Washington Business Group on Health would
the coverage of workers. The U.S. Bureau of the Census
favor a national health system if medical costs grow over
conducts the Current Population Survey that collects
the next 3 years at rates of 15 percent or more (Woolsey,
information on the health insurance status of individuals
1991). As health care costs reach the projected
each March. Data for 1990 reveal that three-quarters of
16.4 percent of GNP by the year 2000 (Sonnefeld et al.,
the uninsured population, 25.0 million persons, reside in
1991). the burdens borne by business will have an
families in which the greatest income earner works full
ever-increasing impact. The rising costs, in addition to
time. These data show an estimated increase of
these attitudes expressed by business, will be instrumental
28 percent in the number of uninsured full-time workers
in triggering any health care reform.
and their dependents since 1980. During this time period,
the number of all full-time workers and their dependents
Rising business health care costs
increased 7.9 percent (Fu Associates Ltd., 1991). This
shows that full-time employment does not guarantee
Employers' role in providing health care coverage has
health insurance coverage and has become less able to
existed for more than half of this century. Both
guarantee coverage over the last decade. If the percentage
employers and employees view this role as an important
of full-time workers and their dependents that were
benefit in attracting and keeping workers. But the cost of
uninsured in 1990 had been the same as in 1980,
health care sponsored by employers has increased almost
threefold over the past decade alone-from $64.8 billion
in 1980 to $186.2 billion in 1990. Three-quarters of 1990
business expenditures for health care-$139.1 billion-
¹A similar concept of "profits" for sole proprietorships and partnerships
is not available.
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Table 3
Expenditures for health services and supplies as a percent of business income, expense, or profit:
United States, selected calendar years 1965-90
Business health spending as a share of
Gross private
Labor compensation
Corporate profits¹
Total business
domestic
Total
Wages and
receipts³
Fringe
product
compensation⁵
salaries⁵
benefits
Before tax
After tax
Percent
1965
0.4
1.0
2.0
2.2
1970
22.4
0.7
8.4
1.7
14.0
3.1
3.5
1975
29.2
0.8
19.8
2.1
36.1
3.9
4.5
1980
28.5
0.9
21.3
2.7
34.3
4.9
5.8
1985
31.7
1.2
27.3
3.3
42.6
6.1
7.2
1986
38.9
1.3
51.3
3.4
89.9
6.3
7.5
1987
40.5
1.3
57.5
3.4
110.4
6.2
7.3
1988
40.8
1.3
48.5
3.6
90.1
6.5
7.7
1989
NA
43.2
3.7
48.3
84.8
6.9
8.1
1990
45.1
NA
55.1
3.9
98.3
7.1
8.5
45.5
61.1
107.9
1 Based on July 1990 data from the U.S. Department of Commerce national income and product accounts.
2A similar concept of "profits" for sole proprietorships and partnerships is not available.
Business receipts for sole proprietorships and total receipts of partnerships and corporations based on Internal Revenue Service data.
income Reflects health costs embedded in the unduplicated value of intermediate and final goods; based on data from the U.S. Department of Commerce national
and product accounts.
For employees in private industry.
Estimated. U.S. Department of Commerce benchmark revisions will not be available until November 1991.
NOTE: NA is not available.
SOURCE: Health Care Financing Administration. Office of the Actuary: Data from the Office of National Health Statistics.
business' share of HSS and the burden that these costs
here. imposed on business would be even greater than shown
(experience rating), rather than pooling all sizes of
employers in an area to share the insurance risk
(community rating). This process segments the insurance
Dilemmas of small business
market into lower risk (i.e., lower cost) large employers
and higher risk (i.e., higher cost) small employers
(Arnett and Trapnell, 1984).
The business share of HSS, 29 percent in 1990, is not
Second, larger companies are also more likely to take
borne evenly across all business. Small employers are
advantage of cost savings resulting from self-insuring
disadvantaged in their ability to provide health insurance
employee health care. Self-insuring reduces costs to
benefits to their workers. The problem of uninsured
employers by eliminating State premium taxes, profits
workers manifests itself most noticeably in small business
paid to insurance companies, and the marketing costs and
with fewer than 100 workers. These establishments
commissions embedded in premiums, while retaining the
employ 40.8 million workers, or two-fifths of civilian
interest earned on reserves held to cover claims.
employees in full-time or part-time jobs. The U.S.
Self-insured businesses also can eliminate State-mandated
Department of Labor conducted surveys on workers in
benefits (McDonnell et al., 1986).
small establishments (fewer than 100 employees) for 1990
Third, small business' competitive disadvantage in the
and in medium and large establishments for 1989. These
acquisition of health insurance is compounded by tax
statistics show that 92 percent of full-time employees in
laws that discriminate against small firms in favor of
medium and large firms participate in employer-sponsored
corporations. Corporations can write off 100 percent of
plans, compared with 69 percent of full-time employees
their medical premium expense. Small businesses that are
in small establishments (U.S. Bureau of Labor Statistics,
classified as sole proprietorships, partnerships, and
1991).
Part of the cause of uninsured employees of small
premiums. S-corporations are permitted to deduct only 25 percent of
businesses can be linked to the health insurance premium
Finally, it is possible that insurers may choose not to
costs faced by these companies. Employer-sponsored
provide coverage for certain industries where small
health insurance premiums paid by small business exceed
businesses are prevalent. Industries include those with
those paid by larger companies for the same benefit
higher risk occupations, higher likelihood of litigation
package. These higher costs affect small business' ability
(e.g., physicians and lawyers), or higher incidence of
markets. to compete with larger firms in both labor and product
drug and alcohol abuse or of acquired immunodeficiency
syndrome (AIDS). These exclusions constrain many small
Higher costs in the provision of health insurance
employers by reducing the number of companies from
benefits for small business result from several factors.
which they can seek coverage.
First, the health insurance marketplace is becoming more
High insurance premiums frequently force small
fragmented. Increasingly, insurers are basing insurance
businesses to change policies in search of more
rates on an individual company's claims history
favorable rates. New policies subject employees to
pre-existing-condition exclusions, jeopardizing access to
care for employees most in need of coverage.
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Small businesses face additional problems from the
1985 Consolidated Omnibus Budget Reconciliation Act
one-half the cost of medical care services up to a certain
(COBRA) that forces employers with 20 or more
limit before stop-loss coverage kicks in. These plans
provide employees with an incentive to use services
employees to make available group insurance protection
judiciously, as they must contribute one-half of the cost
to former employees for 18 months after separation and
for their dependents for 3 years. COBRA mandates that
from out-of-pocket sources. These plans can mean
premiums charged by employers equal no more than
premium reductions of 10-20 percent from those charged
102 percent of the premiums paid by similar active
for conventional plans that require employees to
contribute 20 percent of the cost of services
workers. According to recent studies, COBRA claims per
(Landes, 1991).
worker exceeded those of active employees by
The rising cost of retiree health care and the new
33-100 percent, (Huth, 1991) and smaller companies
reported higher claims costs per beneficiary than do larger
FASB requirements have caused employers to re-evaluate
ones (Towers Perrin/The National Association of
their retiree health benefit programs. Business has
Manufacturers, 1991). COBRA drives up employer
employed or is considering strategies to minimize future
premium costs because active workers must subsidize
health care costs by this group of beneficiaries. These
higher costs of former employees. This legislation is
include fixing employer contributions to future health care
particularly adverse to small businesses that not only face
plans; gauging employer contribution to length of
higher costs for their COBRA beneficiaries but that
employment and increasing the basic eligibility
frequently experience higher employee turnover rates.
requirements; offering minimal plans to younger retirees;
increasing deductibles and out-of-pocket maximum
Retiree health care
expenditures by retirees; and requiring active workers to
contribute currently to future health care benefits
(Quinn, 1991).
Employers offering health benefits to current and future
retirees face new challenges that will likely increase their
Business summary
future share of health care costs. Most employers operate
on a pay-as-you-go basis for retiree health care,
purchasing policies or paying claims as they arise. As the
In summary, employer-sponsored private health
number of retirees increases in relation to the number of
insurance has been in existence for half a century in the
current workers, these benefits will become more difficult
United States. Historically, employers believed their role
to fund. Beginning in 1993 and gradually implemented
in sponsorship of health insurance for their workers to be
over many years, the Financial Accounting Standards
appropriate and worthwhile. Prospective workers typically
Board (FASB) will require employers to account for
examine these benefits when choosing a job and often
accrued retiree health benefit liabilities from the date that
make their employment decision based on the availability
employees are hired until they become eligible for
and breadth of these benefits. But rapidly rising health
benefits. Estimates of the accrued cost of these benefits
care costs are forcing businesses to re-evaluate their role
that will enter financial statements range from $400
with regard to private health insurance. Small businesses
billion to $2 trillion (Adler, 1991). FASB will force
in particular face tremendous problems in affording and
employers to recognize future health insurance liabilities
keeping this benefit for their employees, while still
as they are incurred, greatly increasing the current overall
maintaining competitive prices for their products. Many
book value of employer-sponsored health care.
strategies are being used in an attempt to reduce these
costs. Through 1990, however, a reduction in overall cost
Business strategies in containing costs
or in business' share of the Nation's rapidly rising health
care bill does not appear to have occurred.
Employers are taking steps aimed at reducing their
share of health care costs. Elimination of
Households
employer-sponsored health insurance coverage is one
drastic solution to rising health care costs that
Households spent $224.7 billion on health care during
businesses-particularly small ones-have used. Some
calendar year 1990, an increase of 6.8 percent from
large companies have sought temporary relief from the
1989. The largest single category of payments by families
relentless rise of health care costs through self-insurance.
is for out-of-pocket medical expenditures, financing
That option is less viable for small business.
21.2 percent of HSS expenditures in 1990. These
Seventeen States have already instituted and another
expenditures pay for services not covered by insurers and
10 are considering exemptions from State-mandated
for copayments and deductibles required by insurers for
benefits for small firms that have not contributed to
covered health care services. Additional family
health insurance coverage for their workers during the
expenditures for health care include spending for health
past 12 months. State-mandated benefits raise costs faced
insurance purchased individually or through employers,
by business in supplying health care coverage to
contributions to the Medicare hospital insurance trust fund
employees because a specific set of benefits must be
through payment of FICA taxes, a small amount of
included in employer-sponsored health plans. The
voluntary premiums paid by individuals to the Medicare
"bare-bones" policy alternative permits employers to
hospital insurance trust fund, and premiums paid to the
provide basic private health insurance coverage for
Medicare supplementary medical insurance trust fund.
employees who previously lacked employer-sponsored
The spending for which individuals are responsible has
coverage.
grown at a slower pace than overall health care costs for
Some small firms are experimenting with 50/50
most years since 1965, primarily because of the falling
coinsurance plans that require employees to contribute
share of health expenditures paid from out-of-pocket
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sources. Public and private health insurance assumed
greater responsibility for health care costs during this
more care, some of which must be paid from income, but
period. Since 1980, contributions to the Medicare hospital
these out-of-pocket costs affect the elderly's disposable
insurance trust fund and premiums paid to the Medicare
income disproportionately.
hospital and supplementary medical insurance trust funds
Households are insulated from the full costs of health
have risen as a share of total health care costs. These
care. For services covered by private insurance,
increases have offset most, but not all, of the small
households are responsible for copayments and/or
declines in the out-of-pocket share of health care costs.
deductibles, with the insurance paying a substantial
As a result of slower growth than that of overall health
portion of the charges. Families make their decision to
care costs, households' share of the Nation's health care
purchase and utilize services based on a greatly reduced
bill fell from 61 percent in 1965 to 49 percent in 1970,
out-of-pocket perceived price at the point of purchase-
38 percent in 1980, and 35 percent in 1990. Although
prices that only include a portion of the full costs. The
this share continued to fall during the past decade, it fell
average price of the remaining portion of privately
less rapidly than it had previously. It appears that efforts
insured services is more adequately reflected in prepaid
by other sectors to shift some proportion of the costs back
private health insurance premiums. To the extent that the
to households have slowed the decline in share paid by
cost of this premium is shared with an employer, the
households, but not to the point that that share has begun
household may be unaware of and/or unaffected by the
to rise.
true price paid for health care services. Private health
Health care costs financed by households must be
insurance plays an important social function by spreading
funded from available income. Therefore, their share of
one person's excessive medical costs over all similarly
adjusted personal income is used to measure the burden
insured persons. However, the benefits of risk sharing
of such costs on families. After maintaining a stable share
through insurance also provide incentives for overuse of
from 1965 to 1980, households' share of personal income
services and the purchasing of higher priced services than
would otherwise be the case.
devoted to health care began to gradually rise from
4.1 percent in 1980 to 5.0 percent in 1990 (Table 4).
Recent surveys indicate that households in general do
Calculations made using data from the 1989 Bureau of
not currently feel burdened by the costs of health care.
Labor Statistics' Consumer Expenditure Survey show
Results of an Employee Benefit Research Institute (EBRI)
health care spending as a share of income after taxes at
survey of citizens' attitudes toward the health care system
4.9 percent for all households. Households where the
indicated that Americans are satisfied with the health care
reference person is 65 years of age or over show a
system as it currently exists and would balk at major
significantly higher share of income going to health
share increases in their responsibility for financing
care-11.5 percent in 1989. The elderly not only use
employer-sponsored health insurance premiums. Only
one-half of the respondents were willing to pay $2,000
Table 4
for their share of premiums, despite the fact that
Expenditures for health services and supplies as
employers pay considerably more per employee for this
benefit (Shalowitz, 1991).
a percent of household (Individual) Income:
The Federal Government promotes the use of
United States, selected calendar years 1965-90
employers as a mechanism for providing health insurance
Health spending as a share of
through the tax system. By excluding the employer-paid
Individual heatth
income after taxes'
portion of employer-sponsored health insurance premiums
spending as a
Reference
from employees' taxable gross income, the Federal
share of adjusted
person 65 years
Government partially subsidizes health care benefits. It
Year
personal income²
All ages
of age or over³
also achieves policy objectives in providing a mechanism
Percent
for affordable and accessible health care for more workers
1965
4.2
I
than would otherwise be the case. In fiscal 1990, the
-
1970
4.1
-
-
Federal Government experienced revenue loss of
1972-73
-
5.1
1975
8.9
4.3
$26.4 billion as a result of the exclusion of this employer
-
-
1980
4.1
benefit from individual's gross income. In other words,
-
-
1985
4.7
4.8
individuals would have paid an additional $26.4 billion in
11.0
1986
4.7
4.9
1987
11.8
taxes if the employer-paid portion of health insurance
4.9
4.6
10.7
1988
premiums were taxable income to individuals (Executive
4.9
5.0
12.5
1989
Office of the President, 1991). This amount is not
4.9
4.9
11.5
1990
5.0
included in the accounting framework presented in this
-
-
article.
Calculated from the Consumer Expenditure Integrated Survey of the
U.S. Bureau of Labor Statistics. In this survey, the institutionalized
population, including nursing home residents, were excluded, so spending
Public sector payments
for nursing home care covers only a small portion of total days of care.
2Personal income adjusted to include personal Medicare contributions and
to exclude certain transfer payments (medical benefits for Medicare,
In 1990, Federal and State and local governments paid
Medicaid. workers' compensation, and temporary disability insurance).
$212.9 billion for the financing and delivery of health
Consumer expenditure data are tabulated by age of reference person.
These households may include some individuals under 65 years of age.
care services. Governments as employers spent
Similarly, individuals 65 years or over who reside in households where the
$35.1 billion providing health insurance coverage for its
reference person is under 65 years of age are excluded.
workers. In their role of promoting public policy and
from the Office of National Health Statistics.
SOURCE: Health Care Financing Administration, Office of the Actuary: Data
redistributing income, governments also target specific
population groups with their health care spending. This
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encompasses expenditures such as those by the U.S.
Departments of Defense and of Veterans Affairs for the
increases in these expenditures in combination with the
operation of their own facilities. Also included are grants
recession in 1990 severely strained State resources
for needy population groups, such as the elderly, the
(Stropko et al., 1991).
poor, mothers and children, American Indians, school
children, and the disabled; expenditures for public health
Non-patient
activities; and State and local government hospital
subsidies. Excluded from government expenditures are
Non-patient revenues funded 3 percent of all health
dedicated tax revenues paid into trust funds for specific
care spending in 1990, a share maintained throughout the
programs, such as Medicare. Only general revenue
past decade. Non-patient revenues consist of philanthropic
contributions in support of programs such as Medicare are
expenditures for health care services and other revenue
included. Government expenditures for health increased
sources of institutions such as hospitals, home health
15.3 percent from 1989 to 1990, 4.8 percentage points
agencies, and nursing homes that are not directly
faster than the growth in overall health spending. This
associated with the delivery of services. The latter
caused the share of expenditures financed by the public
includes revenues from sources such as gift shops,
sector to increase slightly to 33 percent. Increases in
cafeterias, and parking lots. In 1990, $19.6 billion of
general revenue contributions to Medicare contributed to
health expenditures were funded from this source.
this change.
The major cause, however, was increases in the
Methodology
Medicaid program, up 20.7 percent in 1990. Medicaid
expenditures, jointly funded by Federal and State
governments, increased from $62.3 billion in 1989 to
In this article, we look at HSS by who sponsors the
$75.2 billion in 1990. These increases are at least
provision of health care services. HSS covers the cost of
partially attributable to the additional 1.7 million people
all personal health care goods and services, government
on the Medicaid roles in 1990.
public health activities, administrative costs of public
The Federal Government's health spending as a share
programs, and the net cost of private health insurance.
of Federal revenues reached 17.2 percent in 1990, up
The sponsors of health care may be households,
from 15.2 percent in 1989. Since 1965, the proportion of
governments, or business. Spending on health care does
Federal revenues spent on health care rose from
not always flow directly from the sponsor into the health
3.5 percent. prior to the introduction of Medicare and
care system but can pass through intermediaries, such as
Medicaid, to 7.3 percent in 1970 and 11.6 percent in
insurers and governments. These payments in turn are
1980 (Table 5).
allocated to the different types of health care services.
State and local government health spending as a share
For example, households, business, and governments
of revenues increased from 15.4 percent in 1989 to
each pay health insurance premiums: households through
16.3 percent in 1990. Medicaid is the second-largest State
direct purchase of policies or through employees'
government budget component after education, so rapid
contributions to employer-sponsored health insurance;
business and government employers through contributions
Table 5
to employee health insurance plans. These premiums sum
Expenditures for health services and supplies as
to $216.8 billion, the amount of private health insurance
a share of Federal and State and local
premiums in the NHA. Health insurance premiums are
used to pay for the health care benefits or services
government revenues: United States,
delineated in the NHA, plus health insurers'
selected calendar years 1965-90
Federal Government health
earnings. administrative expenses and profits and/or retained
spending as a share of
State and local government
Year
health spending as a share
Federal revenues¹
Most of the estimates (such as workers' compensation
of State and local revenues²
and non-patient revenues) presented in this article come
Percent
directly from the NHA and are reassigned to separate
1965
3.5
1970
7.5
sponsor categories. Other estimates also come from the
7.3
1975
8.3
NHA, although they must be disaggregated before
11.0
1980
10.2
11.6
reassignment. Two NHA estimates are affected by this
1985
12.6
14.4
13.5
disaggregation and reassignment: Medicare and private
1986
14.2
13.9
health insurance. Data sources used in Medicare
1987
13.7
1988
14.4
14.5
disaggregation include the Annual Report of the Board of
1989
14.7
15.2
Trustees of the Federal Hospital Insurance Trust Fund
1980
15.4
17.2
16.3
(1991), Annual Report of the Board of Trustees of the
Federal Supplementary Medical Insurance Trust Fund
from businesses and individuals. These funds are for dedicated purposes
'Excludes contributions to social insurance because these came directly
(1991), and unpublished detailed data on Medicare
and are not part of the general revenue pool of funds from which health
hospital insurance tax liability from the Social Security
spending can be financed. Based on July 1991 data from the
Administration. Private health insurance estimates are
U.S. Department of Commerce national income and product accounts.
2Excludes contributions to social insurance, as explained in footnote
split into private and public employer-paid premiums and
Federal grants in aid, such as Federal Medicaid grants to States. Based 1, and
household-paid premiums using data from the Bureau of
product accounts.
July 1991 data from the U.S. Department of Commerce national income and on
Economic Analysis (BEA), U.S. Chamber of Commerce,
Health Care Financing Administration, the U.S. Bureau
from the Office of National Health Statistics.
SOURCE: Health Care Financing Administration, Office of the Actuary: Data
of the Census, and the Office of Personnel Management.
Health Care Financing Review/Winter 1991/Volume 13, Number 2
91
P11711
Any revisions to these methods are listed in the next
section.
update raised the 1989 non-durable medical product
expenditures estimates by $6.0 billion and lowered
Revisions
durable medical product estimates by $2.1 billion. The
out-of-pocket and private health insurance estimates for
these two components were also revised back to 1978 as
There have been some revisions to the procedures and
a result of the 1982 PCE detail tables. These revisions
data sources used in the preparation of these estimates.
affected the total of health services and supplies and the
Changes affect estimates for 1974 and later. The first
allocation between out-of-pocket and health insurance
change is to the private employer-sponsored health
premiums from 1978 forward.
insurance estimates. The primary source of historic
A more complete description of these and other
estimates of employer contributions to private health
revisions to NHA estimates upon which the payer
insurance premiums is the U.S. Department of
estimates are based can be found in Levit et al. (1991).
Commerce, Bureau of Economic Analysis. The BEA
estimates are used to quantify the private employer
Summary
portion of the health insurance premiums for 1965-77.
BEA will be revising its estimates of employer-paid
premiums as part of its periodic benchmark. These
From 1965 to 1990, the cost of health services and
revisions will affect estimates for 1978 and later, and
supplies grew from $38.2 billion to $643.4 billion. For
were scheduled to be available in late 1991. In the
both business and government, rising health care costs
interim, estimates have been developed that follow BEA's
imposed an ever-increasing burden as growth in their
methods but that incorporate minor methodological
ability to finance these costs failed to keep pace. For
changes and new or revised data sources. For private
households, the impact of rising costs on their ability to
employers, premiums are estimated using the U.S.
pay began to increase slightly in the mid-1980s. By 1990,
Chamber of Commerce survey of employee benefits
the share of personal income devoted to health care
(U.S. Chamber Research Center, 1990) and NHA
reached 5.0 percent, up from 4.2 percent in 1965 and
4.1 percent in 1980.
estimates of insurance premiums. Estimates of insurance
premiums were recently benchmarked (Office of National
While government provided health care coverage for
Cost Estimates, 1990) and current estimates presented
the elderly, poor, disabled, and other special
here reflect those revisions.
disadvantaged groups, business emerged as the primary
Second, the data sources and estimation procedures for
source of health care coverage for workers and their
premiums paid by State and local governments for their
dependents. Small businesses, in particular, have felt the
employees were also revised. The current estimates
burden of health care costs mount. Both insurers and
integrate data from the 1982 and 1987 Census of
governments are developing plans aimed at easing that
Governments (U.S. Bureau of the Census, 1991). With
burden for small employers. For all sizes of companies,
the availability of these surveys, the estimates for State
the pending FASB regulations will make business' retiree
and local expenditures for employee health insurance
health care costs more apparent and will undoubtedly
were revised back to 1978.
alter the type and quantity of retiree benefits offered in
the future.
A third revision affected estimates for household
spending on health insurance premiums. For 1965-90,
estimates of household contributions to health insurance
Acknowledgments
premiums were developed using NHA estimates for
health insurance premiums. The NHA estimate was
This article was prepared under the general direction of
reduced by the amount of revised employer-paid private
Mark Freeland, Director of the Division of Health Cost
and government premiums, resulting in the estimate of
Analysis. The authors wish to acknowledge the assistance
household premium payments for health insurance. New
of Sally Burner in providing disaggregation of insurance
methods and data for estimating employer-paid health
by type of insurer, Patricia McDonnell for researching
insurance premiums for private business and State and
insurance issues that arose during the preparation of this
local governments caused household premium estimates
article and of private employer-sponsored health insurance
to be revised for the period 1974 and forward.
estimates, and Louis Blank for investigating new
Lastly, the estimates for this sponsor taxonomy are
insurance data sources. The authors are grateful to
based on the NHA. The NHA are revised annually to
colleagues in the Office of National Health Statistics for
incorporate newly released data. Because the NHA are
their advice and comments: Ross Arnett, Mark Freeland,
the basis for this article, these annual revisions will affect
Charlie Fisher, Helen Lazenby, Suzanne Letsch,
the payer disaggregation. Recent significant changes in
Dan Waldo, Sally Burner, and Patricia McDonnell.
the NHA resulted from new data from the personal
consumption expenditures (PCE) detail tables, produced
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March 25, 1992
Draft One
BUSINESS
PRESIDENTIAL REMARKS: AMERICAN BUSINESS CONFERENCE
WILLARD HOTEL
TUESDAY, APRIL 7, 1992
2:00 PM
[Acknowledgments]
It is always a pleasure to speak with members of the
American Business Conference, because it is always a pleasure to
speak with the best.
I would like to talk to you today about the future -- the
future of our country generally, and more particularly the future
of our country's business environment. In fact, we cannot
separate the two. The America of the 21st century -- its growth,
its opportunities -- will be determined by how hospitable we make
America for business today.
We can learn from the success your companies exemplify. The
key to your success -- the key to the success of any high-growth
company -- is the wise deployment of your resources. The
successful company channels labor and investment into those areas
with the potential for the greatest expansion and the highest
return. You are free to take the risk; you are free to reap the
reward; everyone, meanwhile, benefits from the wealth you create.
That, in brief, is the genius of entrpreneurial capitalism.
Our system has made America the envy of the world, the most
prosperous country on earth, affording the highest standard of
living to the largest number of people in history. With one-
twentieth of the world's population, we produce one-fourth of the
world's goods and services.
When we ask ourselves what has brought us to this
preeminence, we find the answer, I believe, in our resiliency,
our historic ability to innovate, to change as the world changes.
America's world leadership is not automatic; it is not a
birthright. We must continue to earn it, day by day, quarter by
quarter, year by year. The world now is changing at a pace no
one could have dreamed of a generation ago. And America, which
has led the world's transformation, must change with it.
But we face obstacles. Over the last several years
barnacles have begun to cling to the engine of growth. I have
isolated five areas for reform, five critical ways in which
America must change. I would like to go through those with you
this afternoon. You understand their urgency, for each presents
itself to American companies not as an abstraction but in the
most immediate way: as a cost of doing business -- a cost you
can't control, an expenditure with no possible return.
When our legal system becomes incapable of resolving
disputes in a timely and civil manner, business loses the
incentive to innovate and take risks. When health care costs
skyrocket, business picks up the tab. When government imposes
barriers to trade, businesses pay the costs in lost
opportunities. When our children leave school without
rudimentary skills, business bears the burden in lost
productivity. And when government freezes in gridlock, business
can no longer plan rationally for the future.
Each of our system's failings saps your resources, drawing
away investment and manhours from productive tasks. For America
to continue to lead the world, each must be addressed.
Let me start with the crying need to reform our country's
civil justice system. Every American has heard the stories of
bizarre or frivolous lawsuits; but most of you in this room have
lived them, tales that could have been torn from the pages of
Kafka. I will cite one example, related by one of your members,
Roger Coleman, president of Rykoff-Sexton, a food manufacturer
and distributor.
After a record year of earnings in 1989, Mr. Coleman
publicly expressed his confidence that 1990 would be even better.
When earnings fell short the following year, his hopeful
statement became the cause of a shareholder class-action lawsuit.
Mr. Coleman, his company and its directors were named as
defendants.
First came a meeting with plaintiffs' lawyers, at which the
merits of the case were never even discussed. "The issue," says
Mr. Coleman, "was the depths of our pockets." Next came the
nightmare of discovery: endlessly expensive and invasive. The
attention of the company's managers was diverted from running the
business to preparing for depositions. The lawsuit, he says,
"brought everything to a stop."
In the end, rather than face the bottomless drain on company
resources, Mr. Coleman decided to settle. Total tab for this
fruitless exercise: $8.7 million. As Mr. Coleman says: "That's
over $8.7 million that was diverted from new investments in jobs
and facilities."
The scenario is repeated daily throughout American business.
It is not repeated, let me stress, among our world competitors.
This absurd drain on productivity is a peculiarly American
phenomenon, putting us at an increasing disadvantage in the
international marketplace.
Only the United States has seen a 382 percent increase in
the number of lawyers over a twelve year period. Only the United
States spends XX percent of its GDP on litigation -- more than 80
billion annually in direct costs, perhaps four times that in
indirect costs. Fear of lawsuits have driven almost half of U.S.
manufacturers to withdraw products from world markets. One out
of every four American companies has discontinued certain types
of product research for the same reason. And at least one entire
industry -- light plane manufacturing -- has been all but ruined.
The price of lawsuit madness is too high. It is a
deadweight on our ability to produce and compete worldwide. It
must end. We've been proud to work with ABC in restoring sanity
to our civil justice system. My competitiveness council, led by
Vice President Quayle, has offered 50 recommendations for legal
reform. They would limit discovery to rational proportions,
discourage some frivolous suits through a "loser-pays" rule, and
offer alternative means of resolving disputes.
Some of these 50 comprehensive recommendations I have
instituted by Executive Order; others are contained in our Access
to Justice Act, submitted to Congress earlier this year; and
still others will take place at the state level, using the model
reforms we have proposed.
If we are successful, the effects will be far-reaching,
extending into another area critically in need of reform.
Medical malpractice premiums almost doubled in the second half of
the 1980s, owing largely to the explosion in lawsuits. Doctors
have begun practicing "defensive" medicine, ordering unnecessary
tests and procedures to protect against litigation.
This too drives up health care costs. The trends are simply
unsustainable. From less than 6 percent 30 years ago, total
health care expenditures are today about 13 percent of GDP.
Incredibly, some mid-range estimates put that figure at 30
percent by the year 2030 -- that's thirty cents of every dollar
of national output spent on health care.
It is not hard to imagine what this would mean for American
business. Profits are already swamped in health care costs.
American companies, on average, spend more on health premiums
each year than they earn in after tax profits. And this trend too
is heading inexorably upward.
This is a crisis -- for American business, for every
American. Reform of the system is inescapable. But we face a
crossroads. Some have advocated nationalized care; others
propose the so-called "pay or play" approach, which I am
convinced is merely a step on the road to nationalized care.
Neither is acceptable. Neither will preserve the quality of
our country's health care, which for all its faults is still the
best in the world. I will not let that high quality be taken
away from the American people through some scheme of government
control. Nationalized care means rationed care; its promise of
cost containment is a mirage. Pay or play would increase still
further the mandates on business. The proposed 9 percent payroll
tax, for example, would mean a 34 percent increase to a company's
insurance costs. That money must come from somewhere -- and for
a company unable to pass along the added costs through higher
prices, it will come out of profits.
There is an alternative. My proposed reform of our nation's
health care system is based on sound principles. We will build
on our strengths, preserving the quality of care by avoiding the
chimera of government cost controls. We will preserve consumer
choice. Through tax credits, we will assure access to basic
health insurance for the uninsured, and control costs through
market incentives. And we will not raise taxes on American
employers.
I have targeted a third area for change, one no less
critical to our success in the coming decades. Recently we have
seen a resurgence of the protectionist threat. You well know the
dangers of this siren call, because you understand as well the
opportunities the global marketplace offers the American worker.
ABC's members tell the story. The fastest growing companies
among you -- the ones creating the greatest number of jobs here
at home -- are those with far-reaching involvement in foreign
markets. You understand that for America to succeed economically
at home, we must succeed economically abroad.
I am committed to opening markets to American products,
removing the government-imposed barriers that act as a hidden tax
on American business. Each market by protection is a lost
opportunity to sell your products. A successful conclusion to
the current Uruguay round of trade negotiations, for instance, is
expected to increase world economic output by $5 trillion over
the next decade. More than $1 trillion of that boom will go to
the United States.
Even closer to home, exports to Mexico have more than
doubled over the five years -- creating more than 260,000
American jobs. Our North American Free Trade Agreement will lock
in those gains. Together with Mexico and Canada, we will create
a $6 trillion market of 360 million producers, the largest
marketplace in the world.
ABC proves that American businesses have nothing to lose and
everything to gain by increased international competition. As
world trade exands, the need for a sophisticated, well-educated
workforce will intensify. Yet the fact is grim and undeniable:
our educational system, as currently structured, is simply unable
to produce the workers the highly competitive world market
demands. And make no mistake: a failure to produce a world-
class workforce will only provide an incentive to move new jobs
overseas.
Our educational failures have hit American employers hard.
English is now the language of international business, but XX
young people graduate high school lacking minimal grammar and
writing skills. The same holds for studies in geography, math
and science. Too many businesses are forced to pay twice for the
education of prospective employees -- once through taxes that
support our schools, and again through job training to remedy the
failures of those schools in educating our young. Today American
businesses are spending XX on remedial training.
I greatly appreciate the steps businesses have taken on
their own to correct this national scandal. ABC's Vital Link,
which works with local schools to establish learning incentives
for students, is a perfect example. But there is much for
government to do. In early April, I will submit to Congress a
new strategy, called Job Training 200, to reform vocational
training for young Americans.
This year, seven different federal agencies will spend $18
billion on a patchwork of 60 vocational training programs. Is it
any wonder that so many of our young people who desire training
don't know where to get it? Working with state and local
governments, Job Training 2000 will bring conherence to those
programs. Private industry councils, largely composed of
businessmen, are crucial to the strategy. They would manage
programs tailored to the specific needs of local labor markets.
And they will be accountable for the quality and efficiency of
their programs.
In stressing accountability and local control, Job Training
2000 perfectly complements a revolution that is now taking place
in American education as a whole -- a revolution absolutely
essential if we are to create a world-class workforce for the
future. Our America 2000 initiative aims to reinvent American
schools. How we get there is no secret. We set high standards
for students. We make teacher training a top priority. And we
make schools more accountable, by exposing them to competition.
That means giving parents the opportunity to choose their
children's schools.
I am convinced that each of these steps -- expanding world
trade, reinventing education, restoring sanity to our legal
system, and ensuring quality health care for all -- is essential
to this country's future productivity. Each, I believe, is
essential if American business is to create wealth and jobs,
because each will remove from you burdens that serve only to
divert your valuable resources.
At the same time, each faces powerful opposition from
special interests who profit from the status quo. So I have
targeted a final reform, no less important than the others. If
America is to change, American government must change. Last week
in Philadelphia, I spoke at some length on the paralysis that
grips the federal government. This paralysis prevents Washington
from making even the most rudimentary decisions of public policy.
The results are plain: a deficit that is a fiscal and a moral
outrage, a permanent governing class oblivious to the national
interest, hundreds of wasteful programs that live in perpetuity.
The steps I outlined will restore accountablity and
responsiveness to a system that has been broken for too long.
A responsive government will give the steps I've outlined
here today a fair hearing, even though the special interests are
arrayed against them. These approaches are grounded in basic
principles, a way of looking at the world. Government must trust
the wisdom of markets more than the whims of bureaucrats. The
freely made decisions of businessmen and women must take
precedence over the engineering schemes of government. All of
our institutions -- from the U.S. Congress to the local school
board -- must be accountable to those they serve.
With these principles as our guide, we will meet the
challenges -- and exploit the opportunities -- of the world that
is even now being born.
Commitment
to Growth:
The American Business
Conference and the Challenge
of Economic Policy
Commitment
to Growth:
The American Business
Conference and the Challenge
of Economic Policy
AmericanBusinessConference
Contents
Preface
iv
Foreword
V
Discussion of ABC Anniversary Survey
1
The Competitive Environment
Job Creation
Workforce Competence
International Outlook
ABC and the Washington Business
Community: 1981-1991
8
Emergence of an Agenda
-- Capital Formation
- International Trade and Investment
- Education
Final Thoughts
19
Selected Readings
iii
Preface
This report contains highlights from a recent survey of the
members of the American Business Conference (ABC) and an
interpretive essay about ABC and its place in the Washington busi-
ness community. There are as well throughout the text comments
from individual ABC members that help to illustrate how ABC's
mission relates to the business experience of ABC executives. We
would like to thank all ABC members for their cooperation in the
preparation of this report. We remain struck by their enthusiasm, by
the continuing relevance of their views for progressive economic
policymaking, and by the accuracy of their vision both in founding
ABC ten years ago and keeping it on course for the future.
James R. Jones, Chairman
Barry K. Rogstad, President
The American Business Conference
Washington, D.C., April 1991
iv
Foreword
This report is being issued in conjunction with the tenth anniver-
sary of the founding of the American Business Conference (ABC).
For those who know ABC well, an anniversary celebration may
seem incongruous. ABC members - the chief executives of some of
this country's most successful entrepreneurial firms - are not the sort
of people who look back. As a study of our members by McKinsey
& Company observed, ABC executives have an "eternal dissatisfaction
with the status quo." They thrive on change.
Still, one can learn from the past without living in it. The policy
agenda of ABC for the next decade has been formed and tempered
by political and business developments over the last ten years. By
providing a backward glance over those developments, this report
maps ABC's future.
Regardless of the specific policy challenges ahead, ABC's mission
and methods will not change. We shall continue to promote initia-
tives to encourage economic growth and a higher standard of living
for all Americans. Our members, rather than ABC staff, will be
responsible for communicating our views to policymakers. We shall
ask to be evaluated on the merit of our ideas; ABC will never have a
political action committee. And we shall remain bipartisan.
Pausing to mark an anniversary is a pleasant and appropriate
activity. It must also serve to remind us of how much work lies
ahead. The nation's fiscal house is in disorder, the skills of our
workforce require improvement, and American business has yet to
come fully to terms with economic globalization. These problems,
burdening as they do capital formation, labor productivity, and
international trade and investment, directly threaten the economic
well-being of future generations.
The nation needs a new consensus on the importance of
economic growth as the only practicable means for building - and
paying for - the kind of society we want to bequeath to our
children. Taking the lead in building that consensus is precisely what
ABC hopes to do over the next decade. We expect to be kept busy.
Arthur Levitt, Jr., Founder and Past Chairman
The American Business Conference
V
Discussion of ABC Anniversary Survey
In preparation for the American Business Conference's tenth
anniversary celebration, ABC executives responded to a survey
designed to elicit their views on the competitive environment, the
American workforce, and international economic conditions.
The survey was distributed to ABC executives in late 1990, a time
of discouraging political and economic news. Large numbers of
American soldiers were preparing for battle in the Persian Gulf. The
American economy had fallen into recession, stretching the already
strained resources of the banking system. The Uruguay Round of the
General Agreement on Tariffs and Trade was on the verge of col-
lapse.
Despite these and other grave problems, the seventy ABC
executives responding to the survey were characteristically optimistic.
To be sure, they face their share of competitive pressures, as the
survey revealed. Nonetheless, ABC members were able not only to
look back on a decade of accomplishment but forward toward
further success. The survey, then, is in effect a single snapshot of a
dynamic and continuing process of growth and job creation.
Comments regarding
"Cost containment with quality and service"
key factors for success
Peter McCausland, Chairman & CEO
in the 1990's.
Airgas, Inc.
"People - education and training"
Roland S. Borebam, Jr., Chairman & CEO
Baldor Electric Company
"Adequate financing, motivated associates, clear strategic
direction"
Clark A. Johnson, Chairman & CEO
Pier 1 Imports, Inc.
"Innovation and price"
John W. Brown, Chairman, President, & CEO
Stryker Corporation
"Worldwide skill at exploring new market niches via clever
marketing and technology"
John A. Gilmartin, Chairman, President, & CEO
Millipore Corporation
"The successful adoption of Total Quality Management prac-
tices throughout our company"
Stephen R. Levy, Chairman & CEO
Bolt Beranek and Newman, Inc.
1
The Competitive Environment
As a group, ABC companies face a tougher competitive environ-
ment than they did ten years ago. A look at the importance they
place on key strategic traits demonstrates the point.
Ten years ago, ABC executives emphasized innovation, niche
competition, and value as key components to their success. Price
competition lagged in importance.
Today, innovation, niche competition, and value have become
even more critical. Price competition, while less crucial, has also
grown in significance.
ABC executives are today faced with the job of speeding the
pace of innovation, expanding their share of key niche markets, and
providing more value in their goods and services - all of which
demand increased investment - while simultaneously cutting costs
to meet stronger price competition.
The importance of
Key Strategic Traits,
1980 and 1990.
VALUE
NICHE
COMPETITION
FREQUENT
INNOVATION
1980
PRICE
1990
COMPETITION
O
1
2
3
4
5
Job Creation
Despite tightening competitive pressures over the past decade,
ABC companies achieved a remarkable rate of job creation during the
1980's. According to the survey, for the years 1980-1990, ABC
companies created domestic jobs at a compound annual rate of 8.2
percent, thereby more than doubling their number of U.S.-based
employees in ten years.
Domestic job creation by the subset of ABC companies investing
and hiring abroad surpassed that of ABC companies with no foreign-
based employees. Because of the so-called runaway jobs syndrome,
this point deserves amplification.
Sixty-seven ABC executives provided employment data in their
survey responses. Seventeen reported that their firms had no foreign-
2
based employees. Between 1980 and 1990, the domestic workforce
of these companies increased at an average compound annual
growth rate of 6.6 percent. In contrast, the fifty responding ABC
companies with foreign-based employees, expanded their domestic
employment in the 1980's at an average annual rate of 8.6 percent.
Building on a much smaller base, these same companies more than
tripled the number of employees outside of the United States.
These numbers suggest that, at the very least, investment and
employment abroad do not necessarily reduce domestic employment.
In fact the data indicate that for growing companies, establishing
corporate presence in foreign markets may protect and expand job
opportunities in the United States.
Average Compounded
10
Annual Growth Rate of
Domestic Employment,
8
8.2%
8.6%
1980-1990.
6.6%
6
4
2
0
ALL
ABC FIRMS
ABC FIRMS
ABC FIRMS
WITH
WITH NO
FOREIGN-BASED
FOREIGN-BASED
PERSONNEL
PERSONNEL
Average Domestic
Employment of ABC
Firms, 1980 vs. 1990.
1,877
4,140
Average Non-U.S.
Employment of ABC
405
Firms, 1980 vs. 1990.
1980
1,247
1990
0
1,000
2,000
3,000
4,000
5,000
3
Workforce Competence
Thirty-four percent of ABC executives surveyed believe that the
competence of the American workforce has improved over the past
ten years, 41 percent believe workforce competence has declined, and
25 percent found no substantial change.
The survey asked those ABC executives reporting declining
competence to describe what their companies are doing to compen-
sate.
"Because the nation's
security, economy, and quality
Seventy-one percent of those executives who believe workforce
of life depend on the techno-
competence is declining reported that their companies were becoming
logical literacy of all Ameri-
less dependent upon workers in favor of greater mechanization; that
cans, it is critical that busi-
is, their companies were substituting capital for labor where possible.
ness invest in and help im-
Sixty-eight percent said their firms were redoubling their efforts
prove our education system."
to retrain workers to specific company standards. Other options cited
included instituting remedial education to teach basic skills (32%),
John Rollwagen
looking beyond traditional sources to satisfy labor needs (32%),
Chairman & CEO
outsourcing to other firms (18%), and simplifying work procedures
Cray Research, Inc.
to help less able employees (12%).
Clearly there is no single strategy for dealing with the problem of
declining workforce competence. ABC executives typically cited
multiple tactics.
Most of the tactics are short-term responses to a long-term
problem. Ultimately, development of a world-class workforce will
depend on a world-class educational system at all levels, in all
communities, and for all students. Otherwise, the pressure to export
jobs will grow - not to cut costs but to find competent people.
ABC members' views
regarding changes in the
competence of the U.S.
workforce, 1980-1990.
34%
41%
INCREASING
DECLINING
COMPETENCE
COMPETENCE
25%
NO CHANGE
4
International Outlook
In a characteristic departure from conventional wisdom, and in
the face of the collapse of the Uruguay Round and the rise of
protectionist pressures, the vast majority of ABC executives surveyed
believe that the next decade will be a period of generally liberalized
trade and investment.
From the standpoint of managerial strategy, ABC executives are
looking beyond national borders for increased growth. Sixty-one
percent of the ABC executives surveyed said that by the year 2000,
international business will be indispensable for their firms' overall
success.
International business is already a key factor for the growth of
ABC companies. In 1990, on average 24 percent of the total rev-
enues of ABC firms were derived internationally.
For the years 1990-1995, ABC executives project an average
compound growth in international sales of nearly 20 percent.
Although exporting will remain an important tool for garnering those
sales, ABC companies also plan to expand their production capacity
abroad.
International investment moves in more than one direction.
Forty-five percent of the ABC companies surveyed reported that
they had tapped international capital markets. When asked why
they had looked abroad for financing, ABC executives most often
cited the superior availability and price of foreign capital, the
longer-term perspective of foreign investors, and the need to
minimize risk through foreign exchange hedging. Looking ahead,
most ABC executives expect the international capital markets to play
an increasing role in helping their companies meet their future
financing needs.
ABC members assess the
importance of interna-
tional business for the
10%
11%
8%
success of their firms,
26%
16%
42%
1980, 1990, 2000.
25%
61%
25%
32%
37%
Critical/Indispensable
Substantial
Marginal
1980
1990
2000
Irrelevant
5
A. International revenues
of ABC firms as a percent-
age of total sales, 1990.
24%
38%
B. Exports as a percent-
age of all international
sales, 1990.
A
B
Foreign production
capacity of ABC firms as
9%
a percentage of total
21%
31%
production, 1980, 1990,
2000.
1980
1990
2000
A. Foreign-owned equity
as a percentage of total
equity of ABC firms, 1990.
10%
15%
B. Foreign-owned debt as a
percentage of total debt of
ABC firms, 1990.
A
B
ABC members assess
importance of interna-
60
tional capital markets for
60%
their future financial
50
needs.
40
30
38%
20
10
0
2%
INCREASING
SAME
DECREASING
6
To look at these survey results is to understand immediately
ABC's policy agenda. Today more than ever, low cost and plentiful
investment capital, an able and motivated workforce, and an interna-
tional economic system open to the free flow of goods, services, and
investment are essential if companies like those in the ABC are to
flourish and the economy as a whole is to grow.
Growth is not automatic. Job creation does not just happen.
International competitiveness is not a right. All require cultivation.
While the future of ABC firms appears bright, that future will only be
realized in the appropriate policy environment. Articulating the
necessary ingredients for such an environment is what ABC members
attempt to do.
7
ABC and the Washington Business Community: 1981-1991
The decade of the 1980's was the most active period of federal
economic policy formation toward business since the New Deal.
Private sector efforts to influence that policymaking were correspond-
ingly intense.
One measure of those efforts was the growth of the business
community in Washington. According to the authoritative directory,
Washington Representatives, by the end of the decade there were
permanently installed in the Washington area over 1,900 trade and
professional associations, 1,500 corporate representatives, and nearly
3,200 lawyers and consultants registered as lobbyists or foreign
agents.
These numbers underestimate the private sector presence in
Washington. Business-subsidized think tanks, coalitions, and other
nominally independent organizations have extended business's reach.
Overnight mail, facsimile machines, telephone banks, and computer-
ized mailing lists have enabled companies without permanent
representation in Washington to become, in 1980's parlance, players
inside the Beltway.
From its inception in 1981, the American Business Conference
has faced the challenge of being heard amid the explosion of private
sector participation in governance. To do so, ABC has relied upon
the power of one idea: economic growth.
In the late 1970's - when ABC was taking shape - the
promise of economic growth had dimmed. High energy prices,
inflation, rising unemployment, and declines in product quality and
service all conspired to produce what was accurately described as a
national malaise. For many large American companies preservation
of existing capacity had replaced growth as the prime imperative.
The American economy and American business seemed exhausted.
ABC offered another view. Here was a group of entrepreneurs
whose companies were doubling in size every five years. Between
1975 and 1980, ABC companies had created new jobs at a rate three
times faster than the economy as a whole, enjoyed annualized export
growth rates of 29 percent, and expanded capital spending at a rate
nearly twice that of Fortune 500 companies.
This extraordinary performance during the malaise years was
bound to attract attention. Even the relative obscurity of ABC
executives and their companies contributed to the organization's
reputation. The press and policymakers regarded ABC members as
novelties: they were not the usual corporate "statesmen" surrounded
by public relations advisers. Here were people quite unused to the
ways of Washington, evidently more comfortable at home running
their companies, and yet nonetheless convinced it was worth their
time to try to orient public policy to encourage economic growth and
job creation. Even more surprising, they wanted to concentrate
8
exclusively upon improving aggregate economic conditions rather
than plug the self-interest of their individual companies.
This perception of ABC members and their motives, which
helped SO much to establish the organization's credibility, had the
added advantage of being true. Moreover, it was coincident with a
burgeoning belief in the possibility of economic renewal that was
beginning to sweep the nation in the early 1980's.
Emergence of an Agenda
Capital Formation
ABC's impact was more than just a matter of anticipating and
embodying a change in the national mood. Substantively, there was
- and is - a difference in public policy perspective between
companies that are growing and those that are preserving capacity;
companies that aspire to be king of the hill and those desperately
trying to stay on top.
An early example of that difference involved tax policy. A
"Why should the average
McKinsey & Company study sponsored by ABC in the early 1980's
American who's not an
measured the effective tax rate paid by 1,200 midsize, high-growth
investor be concerned about
companies compared to that paid by the Fortune 100 group of firms.
capital formation? Very
Using 1978 data (the most recent then available), McKinsey discov-
simply, it's in four letters:
ered that the growth companies were paying twice the rate of the
J-O-B-S. There is no way you
larger companies (30% compared to 15%).
are going to have job growth
The difference was best understood as the result of a corporate
unless you have renewed
tax structure that rewarded capital intensive, smokestack industries
vigorous investment of
with generous write-offs while taxing at high marginal rates the
capital, both in physical
income of companies relying on intellectual and technical know-
plant and in buman beings."
ledge. Yet, the latter group of companies - including the members
of ABC - were creating jobs and internationally competitive prod-
James R. Jones
ucts.
Chairman,
American Business
For ABC members a solution to this paradox seemed clear:
Conference
lower corporate tax rates in exchange for the elimination of generous
Chairman,
write-offs for capital intensive companies. Lobbyists for firms
American Stock
profiting from the code's prevailing bias were not impressed. The
Exchange
resulting fissure in the business community persists to this day.
Without the advocacy of growth companies, the debate might never
have occurred at all.
Concern about effective tax rates led naturally to interest in a
larger issue: the cost and availability of capital for business invest-
ment. In a 1983 monograph entitled High Cost of Capital: Handicap
of American Industry, a founding member of ABC, Dr. George N.
Hatsopoulos, demonstrated that American business faced a real cost
of capital three times higher than that in Japan. Dr. Hatsopoulos
argued that this disparity in capital costs, if unattended, would cripple
the ability of American companies to compete in the world market.
The problem of high capital costs was obvious to ABC executives
and business economists. But for Washington, the cost of capital was
an idea neither familiar nor well understood. Before the Hatsopoulos
monograph, differential labor costs were regarded as the primary
9
advantage enjoyed by non-American companies. That assumption
was a product of the hold that big business had on the Washington
policy debate.
For large firms, as ever, the issue was preservation of capacity.
Capital costs were not important because older, larger companies
were not capital hungry.
But growth companies have a voracious appetite for capital; they
must be in the capital markets continually. The predicament of
emerging growth companies is particularly dire. Not established in
the marketplace and with little collateral, such firms must rely on the
equity markets where capital costs are especially high.
Once again, the perspective of growth companies had intro-
duced something new to the Washington debate. In the years since
ABC's release of the Hatsopoulos monograph, America's high cost of
Excerpt from ABC
Be it resolved that the ABC considers the stimulation of
Economic Policy
national savings and the continued reduction of the federal
Resolution
deficit as the nation's leading economic priorities.
(Adopted January 24, 1989)
Be it resolved that the ABC believes deficit reduction is
primarily a matter of reducing the rate of increase in federal
spending. To that end, the ABC urges bipartisan scrutiny of all
federal spending programs, including defense and domestic
entitlements, for possible savings.
Be it resolved that the ABC believes that savings can be
realized without compromising national security, the needs of
low-income Americans, and necessary investments in infra-
structure and education.
Be it resolved that the ABC advocates consideration of
issues of inter-generational equity in order to balance expendi-
tures to meet obligations to older Americans in need while
providing programs to develop the potential of the young and
working population.
Be it resolved that the ABC advocates reform of the budget
process for the purpose of introducing greater discipline and
accountability. A disciplined and accountable budget process is
one that communicates to taxpayers the costs as well as the
benefits of any new programs while insuring that such pro-
grams, if adopted, are adequately financed.
Be it resolved that the ABC believes that, to the maximum
feasible extent, the burden of new federal spending should be
borne by citizens according to their ability to pay, and that
citizens with similar income levels should have similar tax
obligations regardless of the source of their income.
Be it resolved that the ABC, in the event that spending
economies and budgetary discipline are not sufficient to reduce
the deficit, supports imposition of new taxes explicitly and
without exception for the purpose of deficit reduction. The
burden of new levies should fall on consumption rather than
savings.
Be it resolved that the ABC supports longer term tax reform
which removes the bias against savings and investment relative
to consumption.
10
capital has taken its proper place in discussions about improving the
international competitiveness of American business.
Having demonstrated that the declining availability of capital in
general and its high cost to business in particular impeded economic
growth, ABC executives characteristically set about the task of trying
to solve both problems. The solution required two related public
policy strategies, neither of modest proportions: reduction of the
federal deficit and correction of biases in the tax code.
As ABC members saw it, the huge and chronic deficits of the
1980's would have been tolerable had the nation's private saving rate
been robust. But the federal dissavings in the form of deficits had
been coincident with a plunge in the private saving rate.
The amount of capital available for investment declined. By the
late 1980's, the United States lagged major industrial nations in both
net investment and productivity growth. Much of the investment that
was taking place was being financed by a huge influx of foreign
capital, indebtedness that caused the nation's trade deficits to swell
and imperiled the standard of living of future generations of Ameri-
cans.
For ABC, then, the importance of deficit reduction could only be
understood in the larger context of the nation's low level of national
savings. This perspective differed from the traditional hostility of
business to "big government." ABC executives did not venture any
particular view about the optimum size of government; they were
primarily concerned that Americans pay for whatever amount of
government they wished to have.
While seeing deficit reduction as primarily a matter of moderat-
ing the rate of increase of federal spending and establishing greater
overall budgetary discipline, ABC also supported new taxes dedicated
to deficit reduction.
To raise revenues without penalizing savings, ABC called for
larger levies on consumption. In the short-term, that meant excise
tax increases such as a higher levy on gasoline. Longer term, ABC in
the early 1980's supported a national value added tax (VAT) designed
with appropriate exemptions for food, clothing, and shelter. In
recent years, support for a VAT has been complemented by member
interest in a consumption-based income tax. Administered like the
current income tax, a consumption-based income tax exempts from
taxation all forms of net savings.
Along with urging deficit reduction as a means of raising the
level of national savings, ABC also sought policy initiatives to correct
a prevailing bias in the tax code favoring debt over equity and
consumption over savings.
The tax code allows corporations to deduct interest on debt
while simultaneously taxing equity twice, once as corporate income,
later as dividends and the appreciation of corporate shares resulting
from retained earnings. As George Hatsopoulos demonstrated in a
1989 monograph co-authored by Professors James Poterba and Paul
Krugman of the Massachusetts Institute of Technology, this anomaly
has several adverse effects. First, it raises the cost of capital particu-
larly for knowledge-intensive firms and start-up companies that must
11
rely principally on equity financing.
Second, it provides an incentive for companies to exchange
equity for debt, thus making themselves vulnerable in economic
downtums. Finally, the code's bias in favor of leverage propelled a
number of debt-financed takeovers and buy-outs. These deals
resulted in huge, involuntary capital gains realizations for tendering
stockholders. Hatsopoulos and his colleagues estimated that every
dollar paid out in these transactions resulted in 59 cents of additional
consumption. The rash of financial restructuring in the 1980's with
leverage, in other words, had been an important contributor to the
nation's consumption binge.
The code's bias favoring consumption over savings causes
equally perverse results. The flow of money into consumption is
taxed only once as income. Savings are taxed twice: first as income
and then as returns on accumulated savings. ABC executives
believed that this disincentive was at the core of America's chronically
lagging savings rate.
ABC members devoted considerable time to forging proposals to
achieve greater tax neutrality regarding debt versus equity and
consumption versus savings. Of course, a simple way toward neutral
treatment of debt and equity would be to repeal the deduction on
corporate debt. Some in Congress proposed as much.
ABC members demurred. Repealing the interest deduction
would raise the overall cost of capital. ABC members chose instead
to join those calling for corporate tax integration - that is, removing
a layer of taxation on equity.
As an alternative to integration, ABC endorsed enactment of a
capital gains differential applicable exclusively to new equities or new
gains on existing equities. The degree of tax preference accorded
such gains would depend on the length of time the equity had been
owned. For longer-term holdings, the tax on capital gains would
decline to zero.
To correct the code's bias against savings, ABC endorsed tax-
based savings initiatives such as expanded Individual Retirement
Accounts, family savings plans, and an expansion of the current
savings bond program. Recognizing the degree to which American
cultural attitudes promote consumption over savings, ABC members
strongly urged the President and other political leaders as well as
their colleagues in the corporate community to underscore the
importance of saving for the nation.
ABC's ideas for tax neutrality were not without cost. Compensat-
ing for the double taxation of equity and of savings would necessarily
reduce federal revenues. ABC's desire to correct the bias in the tax
code thus collided with its advocacy of deficit reduction.
Confronting this conflict has led to a sense among ABC members
that over the long term, the United States must adopt sweeping tax
reform that raises an adequate amount of revenues, does not discrimi-
nate against savings and investment, and is fair. The consumption-
based income tax theoretically meets all three criteria. For that
reason it has the potential for providing the structural framework for
ABC's capital formation advocacy in the next decade.
12
Like the current income tax that it would replace, the consump-
tion-based income tax can be made as steeply progressive as voters
wish and economic circumstances require. Because all forms of
savings escape taxation until they are drawn down and spent, a
consumption-based income tax obviates any need for targeted
savings incentives. Similarly, corporate income would remain
untaxed unless distributed and used for consumption. The double
taxation of equity would disappear.
Obviously, a consumption-based income tax presents daunting
transition problems (although unlike a VAT it does not necessitate a
new bureaucracy). ABC members believe that the tax's merits
warrant discussion and resolution of these transition problems. The
alternative is continued tinkering with the current tax code - a
process guaranteeing uncertainty, unintended consequences, skewed
business decisions, voter cynicism, and fat retainers for lobbyists,
lawyers, and accountants.
It is within the capacity of the United States to develop a system
of taxation that is equitable, efficient, and neutral. Such a system will
not eliminate all concerns about America's economic competitiveness.
Absent such a system, however, discussions about what government
can "do" for business are futile.
International Trade and Investment
Like ABC's fiscal policy, the organization's perspective on
international trade and investment ran counter to the prevailing views
of the business community in Washington.
Chronic merchandise trade imbalances in the first half of the
1980's prompted Congress to involve itself far more than at any time
since World War II in the formation and management of trade policy.
Congressional participation spurred greater business lobbying on
"Doing business interna-
trade and investment issues.
tionally is not an option for
The greatest share of business advocacy on trade emanated from
most American companies. It
companies seeking protection for their share of the domestic market.
is a necessity. Unless we
For firms more intent upon preservation rather than expansion, this
aggressively establish market
was a rational course. It is also true that protective measures are
presence abroad and unless
easier to devise and their effectiveness simpler to measure than
we are willing to learn from
initiatives to encourage businesses to sell abroad.
our foreign-based competi-
tors, our capacity to control
ABC executives were not among those pursuing protection. The
our market bere at home will
early 1980's had been a period of rapid international expansion for
be irremediably crippled."
member firms. Between 1981 and 1986, the foreign sales of ABC
firms had grown at an average rate of 20 percent a year, compared
J.P. Barger
with 3 to 4 percent for other American companies reporting interna-
President & CEO
tional revenues. The foreign operating income of ABC companies
Dynatech Corporation
had increased 23 percent annually, in contrast to 4 percent for other
companies. ABC companies similarly outpaced their corporate
colleagues in export growth and in the acquisition of foreign assets.
As in tax policy SO in trade policy the line between growth
companies and firms seeking to preserve capacity was stark.
ABC companies made their views known in two publications, The
Challenge of Global Competitiveness: Views of America's High Growth
Companies (1987) and Winning in the World Market (1987). These
13
two monographs, based on surveys of ABC executives and follow-up
interviews, described the international success of ABC firms and the
managerial principles behind that success.
Other than calling for a reconsideration of export control
International Environment: Views of ABC Members
ABC members assess the
overall trade and invest-
ment environment over
7%
the next decade.
21%
-- 72% Improving/more
liberalized trade investment
environment
-- 21% Worsening environ-
72%
ment/greater protectionism
-- 7% No change
The three highest growth
markets for ABC firms
over the next five years.
JAPAN/
GERMANY/EEC
CANADA
PACIFIC RIM
ABC members over-
whelmingly support
U.S.-Mexico Free Trade
8%
Agreement.
-- 92% Support
-- 0% Oppose
-- 8% No opinion
92%
14
regulations, neither publication made specific policy proposals.
Indeed, ABC executives evinced little enthusiasm for new trade
legislation and no enthusiasm at all for protectionism.
ABC members did not deny that barriers to trade and investment
existed in Japan and elsewhere. They denied instead the capacity of
"Our continued success
government to remove those barriers through unilateral action.
depends upon our ability to
Moreover, ABC dared to suggest that some barriers were not so much
compete effectively with
walls as hurdles and that managerial commitment and skill could
international competition in
surmount them.
both the domestic and over-
These views were provocative. In advancing them, ABC mem-
seas market. We must
bers were at some pains to point out that they did not regard their
continue to offer consumers
international success as automatic or necessarily permanent. They
the finest products at the best
value in whatever market
were, in the words of Ray Stata, CEO of Analog Devices, "running
scared." They did not want anyone concluding, on the basis of their
place we compete. To be
performance, that government had no role to play in cultivating
successful we must have a
competitiveness.
competitive cost of capital,
able employees, and an open,
For government did have a role. Rather than squander political
rules-based trading system."
resources trying to force the Japanese to behave, policymakers could
better spend their time helping to create a healthy economic environ-
W.L. Lyons Brown, Jr.
ment at home. Reduction of the federal budget deficit and construc-
Chairman & CEO
tion of a neutral tax code to facilitate the amassing of low cost,
Brown-Forman
patient investment capital were high on the list of necessary tasks.
Corporation
Fiscal policy was linked indissolubly to international competitiveness.
That linkage was, during the heat of the battle over omnibus
trade legislation in the mid-1980's, an inconvenient truth. ABC's
agnosticism on the matter of devising tough new trade laws placed
the organization in the not unfamiliar position of bucking current
wisdom.
Equally controversial was the nature of ABC firms' international
success. As described in Winning in the World Market, ABC compa-
nies typically had combined exporting with an investment-based
strategy. The latter entailed establishing sales, production, and
research and development facilities in key international markets such
as Japan and the European Community. These facilities were staffed
almost exclusively by foreign nationals.
That ABC members viewed exporting as only one tool among
many for succeeding in international markets disappointed many
tribunes of competitiveness. For them, it was not enough to succeed
internationally; a firm must export.
Central to this view was the assumption that investment abroad
eliminated jobs at home. For companies struggling to preserve
capacity, such a zero sum game might be the rule. Going offshore is
a quick way of reducing costs.
Growth companies are different. Their market share at home is
expanding. They do not invest in international markets to pare
domestic labor costs. They develop a presence abroad to grow
abroad, by keeping close to their customers, capturing product and
technological innovations developed outside of the United States, and
tying down foreign competitors on the latter's turf rather than in the
American market.
15
The ABC experience suggests that, rather than reducing domestic
employment, an international presence helps to create new jobs at
home. In making this point, ABC members hope to elevate the
debate on competitiveness beyond a one-dimensional fixation on the
merchandise trade deficit, a measure that disguises as much as it
reveals about American business's relationship to the rest of the
world.
To that end, ABC members strongly supported efforts to facilitate
the movement of goods, services, and investment through bilateral
pacts, such as the U.S. - Canada Free Trade Agreement and multilat-
eral negotiations such as the Uruguay Round of the GATT. Addition-
ally, ABC members are today actively involved in establishing
linkages with entrepreneurial firms in Japan and the European
Community. Ultimately, ABC hopes to establish an international
business-to-business dialogue on the importance of open markets for
world prosperity and economic efficiency. Forestalling a new era of
protectionism is absolutely critical for the ability of ABC companies as
well as other American firms to thrive in the next decade.
Education
While international expansion does not necessarily reduce
domestic employment, it does require an able and productive
domestic workforce. Along with augmenting the quality and amount
of investment capital, ABC members are similarly concerned with
improving the skills of employees.
This concern predated current business anxiety regarding
education. The rapidity of ABC companies' job creation brought
"We can no longer over-
them close to the problem early on. A 1982 study of ABC companies
look the needs of the majority
found that in order to sustain their job growth rate, 87 percent of the
of our high school students
companies surveyed sponsored job training programs, 65 percent job
who directly enter the
retraining programs, 62 percent handicapped hiring programs, and 53
workforce. They will be our
percent disadvantaged hiring programs.
employees, and we must
invest in their future."
A 1989 survey of the ABC membership further underscored
members' view of the importance of educational improvement. The
Josh S. Weston
vast majority - 83 percent - of ABC members described the decline
Chairman & CEO
in the quality of American education as "very serious." Asked to rank
Automatic Data
the severity of that decline at various scholastic levels, ABC members
Processing, Inc.
cited grades 9-12 as of greatest concern, followed by grades K-8,
college, preschool, and, finally, graduate education.
ABC members were asked to explain the decline in education
quality. First on their list was the relative lack of prestige enjoyed by
the teaching profession in American society. ABC members also
believed that parents were insufficiently involved in their children's
education, that there were no incentives in place to encourage
students to reach for academic excellence, that curricula needed to be
reformed, and that the nation lacked a reliable, standardized measure-
ment to gauge academic achievement.
The diagnosis is not surprising. Respect, involvement, incentives,
ability to change in the light of new conditions, accountability: these
are principles ABC companies put into play every day. To an extent
remarkable for companies of modest size and limited staff resources,
ABC firms are intensely involved in applying those principles for the
16
improvement of education in their communities. This is not the old
story of corporations demanding that schools be run more like
businesses, whatever that may mean. Rather, it is a statement of
belief that across organizations of all kinds, the conceptual keys to
higher achievement are the same.
As ABC members talked with one another about their efforts to
promote education reform, they sought a way to involve ABC as an
organization in the same pursuit. It was not a simple task. The
"Students and educators
essential paradox presented by education is that, while a matter of
national concern, it remains preeminently a local matter. It remains
must know the needs of
business and be convinced we
as well an enormously complicated issue: the American education
will help schools better meet
"problem" is in fact a number of discrete dilemmas ranging from
those needs. Business must
preschool funding to securing an adequate supply of doctoral
candidates in critical fields.
understand the education
system and be ready and
ABC decided to focus its efforts on improving academic achieve-
willing to make the long-term
ment among secondary school students intending to enter the job
commitment to be an active
market after high school. These work-bound students were most in
partner. THE VITAL LINK is
need of incentives to perform well in school.
aimed at developing specific
Virtually from kindergarten, young people learn of the impor-
conduits that facilitate this
tance for college admission of high grades, extracurricular activities,
process."
and good scores on standardized tests. By contrast, students
planning to get a job after high school rarely hear of a relationship
Roger W. Johnson
between scholastic achievement and eventual employment. Too
Chairman, President
many employers cannot be bothered to look beyond a high school
& CEO
diploma to discover what, if anything, a prospective employee did to
Western Digital
earn it. If employers are indifferent to academic achievement, why
Corporation
should work-bound students care?
To break this cycle of shared apathy, ABC in 1989 launched its
VITAL LINK project. The VITAL LINK encourages businesses to
understand better the skills they seek in new employees, to commu-
nicate those criteria to the schools, and to reward with differential
pay and superior opportunities for advancement those students
meeting the standards. Such incentives enable students to work
toward their fullest potential by helping them to understand the
opportunities available after graduation.
Conceptually simple, the VITAL LINK promises a revolution in
the way business hires high school graduates. Over time, as students
learn what skills prospective employers value and see graduates with
those skills receive better pay and faster promotions than less able
graduates, they will learn that scholastic achievement and meaningful
extracurricular experience matter.
The VITAL LINK does not include proposals for changing the
structure of schools or school curricula. It may well be that as work-
bound students begin to draw a close association between what they
learn in school with what they earn on the job, they will ask for
more varied courses. Similarly, educators may be spurred to effect
innovations to better develop the skills work-bound students seek.
In addition, the VITAL LINK could spawn novel forms of skill
assessment as well as new methods for helping students to compile
and transmit to prospective employees records of their academic
performance, test scores, and relevant work experience. All such
innovations would be desirable. From the perspective of ABC and
17
the VITAL LINK, they are by-products of the core tasks of making
businesses more intelligent employers of work-bound students and
providing students greater motivation to achieve.
To implement the VITAL LINK, ABC organized a National
Steering Committee comprising representatives of leading national
"We've beard a lot today
business and educational associations. The steering committee
about the work ethic in our
oversees a number of demonstration projects in communities around
country not being up to par
the country.
with other nations. As Ameri-
At these demonstration sites, committees of local business
can businesses compete for
people, community leaders, and school administrators, teachers, and
leadership in a global
students are working together to establish the feasibility of the VITAL
economy, it is imperative that
LINK concept. Assuming success, the National Steering Committee
our productivity and the
will assist in the dissemination of the VITAL LINK model throughout
quality of our work be at
the nation.
least competitive and at best
exceptional."
The evaluation of each demonstration project will take time.
ABC members believe that the potential rewards justify the effort.
Gloria Boban
Helping work-bound students, some of whom are the most disadvan-
President
taged young people in the nation, is essential if they are to realize a
Omega World Travel, Inc.
fair share in a growing economy.
It is said that a rising tide lifts all boats. That assumes that
significant segments of the populace are not stranded on islands of
apathy and neglect. Education can be a lifeline to these people, if
that line is connected to meaningful economic opportunity. The
VITAL LINK seeks to supply that connection.
The VITAL LINK
American Association of Community and Junior Colleges
National Partners
American Association of School Administrators
American Electronics Association
American Federation of Teachers
American Society for Training & Development
Business-Higher Education Forum
The Business Roundtable
Cities in Schools, Inc.
National Alliance of Business
National Association of Manufacturers
National Association of Secondary School Principals
National Association of Wholesaler-Distributors
National Education Association
National School Boards Association
The VITAL LINK
Fort Worth, Texas
Demonstration Sites
Orange County, California
Montclair/Morristown and Somerset County, New Jersey
18
Final Thoughts
Two important points implicit throughout this report should,
perhaps, be made explicit at the end.
First, ABC members believe that the future of the nation is in our
"The United States faces
own hands. If we bequeath to our children a lower standard of
the real risk of economic
living and worsened social conditions, we shall rightly be held
stagnation. But if we restore
responsible. The source of our problems is not overseas. It is here at
our faith and determination
home, with us, and what we have chosen to do with the extraordi-
to save and invest for the
nary advantages given to us by past generations of Americans.
future - which served our
Second, to secure the future we would wish for our children, we
country so well in the past -
must cultivate economic growth. This is not to say that growth
our society's advantages in
should be an end in itself. A good society is not measured solely in
natural and buman resources
terms of GNP. Without growth, however, the desire to achieve
will enable America to grow
greater equity in American society devolves into a struggle over life
and remain the most prosper-
preservers on a sinking ship.
ous society in the world."
Too often in recent years growth has been treated as a code
word for avarice. In fact, it is a synonym for opportunity. ABC
George N. Hatsopoulos
Chairman & President
executives have made the most of the opportunity created by the
Thermo Electron
nation's past commitment to growth. They want future generations
of Americans to have an even better chance to do the same. It is that
Corporation
motive, in essence, that led to the founding of the American Business
Conference. It is that motive, too, that will propel the organization
into the next decade and beyond.
19
Selected Readings
The American Business Conference, The Challenge of Global
Competitiveness: Views of America's High Growth Companies.
Washington: American Business Conference, 1987.
The American Business Conference, Reflections on Competitive-
ness: Views of Two Chief Executive Officers. Washington: American
Business Conference, 1987.
The American Business Conference, The Vital Link: Motivating
Student Achievement. Washington: American Business Conference,
1990.
The American Business Conference and McKinsey & Company,
Inc., Winning in the World Market. Washington: American Business
Conference, 1987.
Clifford, Donald K., Jr. and Richard E. Cavanagh, The Winning
Performance. New York: Bantam Books, 1985.
Hatsopoulos, George N., High Cost of Capital: Handicap of
American Industry. Washington: American Business Conference and
Thermo Electron Corporation, 1983.
Hatsopoulos, George N., Paul R. Krugman, and James M.
Poterba, Overconsumption: The Challenge to U.S. Economic Policy.
Washington: American Business Conference and Thermo Electron
Corporation, 1989.
McKinsey & Company, Inc., The Winning Performance of the
Midsized Growth Companies. New York: McKinsey & Company,
1983.
About ABC
Since its inception in
1981, the American Business
Conference has served as
the voice of the midsize,
high-growth sector of the
economy. Comprising 100
chief executive officers of
high-growth companies
with revenues over $25
million, ABC works to create
policies which promote
fundamental economic
growth, job creation and a
better standard of living for
all Americans.
American
Business
Conference
1730 K Street. NW, Suite 1200
Washington. DC 20006