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Richard C. (Rick) Allen's Files
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This is not a textual record. This is used as an
administrative marker by the William J. Clinton
Presidential Library Staff.
Collection/Record Group:
Clinton Presidential Records
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National Service
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Rick Allen
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2148
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Miscellaneous Service Groups
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66
2
2
1
where should
These Things
be filed?
passionist
lay
missioners
Eli Segal
Special Assistant to the
President
The White House
1600 Pennsylvania Ave., N.W.
Washington, D.C. 20500
February 12, 1993
Dear Mr. Segal,
I thank you for the Clinton administration's challenge to voluntary
service. As Executive Director of a volunteer program that allows
men and women to experience direct service to those most in need
through working in grass-roots social service agencies, we are
indeed carrying out your mandate to service. I work with a not-
for-profit program called the Passionist Lay Missioners. Our
mission is to enable volunteers to work with and provide presence
and hope to those who are suffering or poor. We do this by
engaging in work which alleviates suffering and addresses the
structures that oppress people, by reflecting on how the contemp-
orary human struggle embodies the Passion of Jesus, and by living
simple, communal life which enables us to carry out our mission.
Because we already provide the opportunity for such service, I
believe this administration needs to do all it can to provide
incentives to encourage men and women to consider service
opportunities in programs such as the Passionist Lay Missioners.
Any incentives offered by this administration should include loan
deferment/cancellation, vouchers, stipends, etc. for volunteers who
work through tax-exempt organizations affiliated with religious
institutions as long as their service honors the Church-State
limitations found in the Higher Education Act and the National
Community Service Act. We are already carrying out your mandate of
voluntary service. Do not exclude us!
Though the Higher Education Act of 1980 and the National Community
Service Act included provisions for deferment for volunteers in
not-for-profit organizations such as ours, this must be kept in
effect! I am asking for an extension of this well established
concept. The same should apply to any grants to an organization
like ours that sponsors volunteers.
The Passionist Lay Missioners is an active member in the
International Liaison of Lay Volunteers in Mission (ILLVIM), an
organization that provides support and networking for volunteer
programs. ILLVIM has been in contact with you on these matters as
well.
Sincerely,
arne J. Ovellone
Anne T. Avellone
Executive Director
5700 North Harlem Ave.
Chicago, IL 60631
312-831-8336
14 Timothy Lane
East Brunswick New Jersey 08816
February 11, 1993
Eli Segal
Assistant to the President
White House
Washington D.C. 20500
Dear Eli,
Congratulations on your appointment as Assistant to the
President. By chance, I had seen your acceptance speech on C-Span.
As I too have hit the big five-0, my thoughts sometimes filter back
beyond Brandeis to a four story school on East 8th Street and I am
astounded at the changes since that time. A few weekends ago, my
wife and I had dinner in SoHo with Danny Gold and Allen Bender and
their wives. Your name popped up and we reminised about the past.
While I have not read any specifics regarding a National
Service Corps, the concept of public service as a means for
students to repay educational debt is a terrific one. In addition
to teaching children, training adults so they can obtain jobs,
graduates can assist with the special needs of the elderly, which
are generally overlooked.
I am somewhat sensitive to college costs since my kids are two
years apart and both will be in college next year (awful planning).
My daughter is currently a sophmore at the University of Michigan
and my son is a high school senior. Although he has been accepted
to Michigan, we don't know as of yet which school he will attend.
I find myself wondering where the money is going to come from to
pay for two children, as I am not optimistic on obtaining financial
assistance. I am a charter member of the not rich enough not poor
enough group.
The financial aid form in use is known as FAFSA. Many schools
such as Michigan just use this form. (Other schools such as the
Ivys also use the FAF plus their own forms) The FAFSA only asks if
anyone else in the family attends college, but does not inquire as
to which college and the costs associated with it. The Michigan
financial office has indicated to me that a set formula is used and
on my son's application, it makes no difference whether I am
spending $2000 or $22000 to send my daughter to Michigan. The FAFSA
used alone is senseless.
Washington is a great area in which to live. I had graduated
from George Washington Law School and worked there for a while. My
wife Gloria was raised in Washington and Silver Spring Md. and her
family is still there.
I want to wish you great success.
Best regards,
Wichael
Michael Meyer
Michael S. Meyer
Vice President
CHEMICALBANK
Chemical Bank New Jersey NA
Two Tower Center
P.O. Box 1090
East Brunswick, NJ 08816-1090
908 220-3176
February 12, 1993
Mr. Eli Segal
Special Assistant to the President
The White House
Washington, D.C. 20500
Dear Mr. Segal,
I was deeply moved by the words of President Clinton in his
inauguration address and the challenge he gave to the citizens of
our country to service for the betterment of our society.
I am writing to encourage and support his initiative for a national
service plan. I would ask that you extend any incentives that may
be offered (vouchers, stipends, loan cancellations) to members of
volunteer corps affliliated with non-profit, tax-exempt
organizations. The Higher Education Act and the National Community
Service Act already include provisions on deferment for our group,
Catholic Charities Volunteer Corps.
The members of our Volunteer Corps give one or more years of their
lives in service to those most in need in the Twin Cities through a
great variety of social service programs. These volunteers are a
fine example of what you are talking about.
I, myself, spent two years as a volunteer working in the inner city
of Chicago, Illinois. I was a member of Claretian Lay Volunteers,
an non-profit organization that offered me a learning experience
and a way to gain practical and insightful experience into life. I
have direcrted also Claretian Volunteers and helped Catholic
Charities begin their program. This is a viable service and a way
for all citizens to give of themselves for their sisters and
brothers.
Please keep Catholic Charities and all non-profit organizations in
mind as the details of a national service program are worked
through. We would be more than happy to share what a good
experience the Volunteer Corps has been for Catholic Charities and
I'd be more than willing to share my own personal experience as a
full-time volunteer right out of college and how it helped define
my way of life. Keep up the good work and know of my support for
the work you are doing. !
Sincerely,
Kevin Kenney
Kevin T. Kenney
2260 Summit Avenue
St. Paul, Minnesota 55105
(612) 962-8983
Leesburg, Virginia
February 9, 1993
Mr. Eli Segal
National Service Director
Executive Office Building
1400 Pennsylvania Avenue N.W.
Washington, D.C.
Dear Eli,
Roger and I were sorry to miss talking to you at the Duffey
reunion party for we have followed your career with great
interest and think that you have the most interesting job in the
new administration.
I am moved to write because of the article in yesterday's
Washington Post which refers to your possible use of ACTION as a
vehicle for National Service volunteers. I would like to suggest
that you also investigate the possibility of using the 4H
program.
It has been some time since I have been actively involved in
4H but in its best days, it and its parent the Extension Service,
were in my opinion, the most effective and efficiently run of all
government programs. The program began to weaken in the
seventies and has deteriorated more precipitously in the last
twelve years. Nonetheless there are a number of reasons that you
may want to consider it.
The structure is in place.
There is an Extension office in almost every county in the
country. Many have a 4H agent who could serve as trainer and
supervisor.
The primary programs are directed toward children aged ten to
sixteen.
Although there is justified concern for the pre-school child
from impoverished homes, it is in the middle school/junior
high years that we are losing our most promising youth
across the whole social and economic spectrum. 4H offers
projects, competition, training, travel, and service
opportunities which keep this age group interested and
involved.
1
Broad support is already built in.
4H succeeded because it was a collaboration of federal,
state and local governments; corporate philanthropy and
individual volunteers. Since the program remained strong in
many states through the seventies, there is a reservoir of
4H'ers as young as 30 through the most senior citizens.
Many of the great agents are retired but still willing to be
active.
Volunteers would make an immediate impact with a minimum of
training
4H worked because the agents worked directly with members
and clubs. The program began to go down hill when there were
not enough agents available. Those in place were encouraged
to get advanced degrees in order to become administrators
who relied on volunteers, just at the time when traditional
volunteers became scarce. National Service volunteers
should be effective replacements for the original concept of
agent.
4H really teaches service.
It sounds syrupy but the concept of service permeated the 4H
program and survives to this day. The teaching of values
was subtle but effective.
Sounds perfect doesn't it? Actually there are all kinds of
barriers which have been erected in the last few years: "urban"
efforts are add ons rather than integrated parts of the program;
attempts to become more "relevant" were often misdirected; there
is a lot of entrenched bureaucracy to overcome. Nonetheless I am
convinced that it is worth your consideration.
Roger joins me in sending you best wishes for great success.
If you ever want a country break, we have wide porches and
comfortable rockers.
Very truly yours,
Ceci
Cecile D. Banner
Mrs. Roger H. Banner
Post Office Box 1936
Leesburg, Virginia
(703) 777-4927
2
The
MEMO
Herîtage Foundation
To:
Mr. Eli Segal, National Service
From:
David M. Mason, Director of Executive Branch Liaison Du
Date:
February 10, 1993
Subject:
Urgent Domestic Policy Concerns
Taxing and spending more are not the answers to America's economic problems. As
you put the finishing touches on the administration's spending and budget plans, please take
a moment to review two Heritage Foundation publications:
The Impact Of Higher Taxes: More Spending, Economic Stagnation, Fewer Jobs, And
Higher Deficits cites the record of tax increase failures. Office of Management and Budget
figures show that, "in the last three years, spending has increased by $1.91 for every dollar
of additional tax revenue." Rather than continuing of the path of more taxing and spending,
Heritage's John M. Olin Fellow Dan Mitchell recommends that the government practice
more fiscal responsibility and institute spending controls in order to increase incentive to
work, save, and invest: "if the government had permitted spending to rise no faster than 2.0
percent annually, beginning in 1987, the budget would be in surplus to the tune of $17
billion this year."
In Increased Government Spending: A Recipe For Economic Stagnation Not
Stimulus, Mitchell contends that the $15 billion proposed by the Clinton administration to
jump-start the economy will have just the opposite effect. No matter how much government
money is invested in public programs, it will cause the economy to falter.
I am certain you will find these memos useful as you and President Clinton face the
enormous tasks before you. If you are interested in more information on these or other
topics from The Heritage Foundation, please feel free to contact me at 546-4400.
214 Massachusetts Avenue, N.E.
Washington, D.C. 20002
(202) 546-4400
Memorandum
RUSH!
The
Herîtage Foundation
214 Massachusetts Avenue, N.E. Washington, D.C. 20002-4999 (202) 546-4400
2/9/93
351
Number
INCREASED GOVERNMENT SPENDING:
A RECIPE FOR ECONOMIC STAGNATION,
NOT STIMULUS
President Bill Clinton is considering proposals to increase government spending in an effort to stimulate the
economy. The "stimulus" plan is said to include at least $15 billion of new spending, most of which would be
designated for public works spending. But the most likely result of these higher federal outlays, regardless of
how the money is spent, would be a drop in the economy's performance. Record increases in federal spending
and budget deficits did not help the economy during the Bush Admininistration. There is no reason to think that
expanding the size of government will work any better for President Clinton.
If higher federal spending and larger budget deficits could stimulate economic growth, the economy would
be booming today. In the last four years, federal spending has increased by more than $340 billion. In this year
alone, federal spending is expected to grow by more than $93 billion-not counting any spending which might
be added by Clinton. The budget deficit, meanwhile, has jumped from $152.5 billion in fiscal year 1989 to a
projected $327.3 billion for this fiscal year. Rather than grow, however, the economy in the last four years has
experienced its weakest growth rate in more than fifty years. Nor has the increase in federal spending helped
create jobs for American workers, the main goal of Clinton's planned stimulus package; unemployment
climbed from 5.3 percent in 1989 to more than 7 percent today.
Outmoded Theory. The notion that higher federal spending generates economic growth is based on the
Keynesian theory of economics, which was popular in the academic world prior to the 1980s. Under this theory,
it is total private and government spending that determines the economy's performance, especially in the short
term. If the economy slows, Keynesians believe that policy makers can restore growth by increasing the budget
deficit and thereby boost total spending in the economy.
The Keynesian theory fell into disrepute in the 1970s when it became clear that high government spending
and deficits were associated with slow economic growth and inflation-often called "stagflation"-and not
with robust growth. Critics of the theory pointed out that, among other reasons, this was because Keynesians as-
sumed that the money used for expanded deficit spending appears out of thin air. In the real world, however,
every dollar of deficit spending requires the government to borrow one dollar from private credit markets.
Rather than stimulate growth or increase total spending in the economy, deficits simply transfer resources from
workers, consumers, and investors in the productive sector of the economy and put them under the control of
politicians and bureaucrats. These officials tend to use the money less efficiently than the private sector would.
The result: slower, not faster, economic growth and slower job creation.
If President Clinton approves $15 billion of additional deficit spending, this will simply crowd out $15 billion
of private sector investment. The economy can benefit from this new federal spending only if government
spends the money more wisely and efficiently than the private sector. World history suggests that is not very
likely. Increased pork-barrel spending will please the interest groups on Capitol Hill, but it will not increase in-
centives to work, save, and invest.
Note: Nothing written here is to be construed as necessarily reflecting the views of The Heritage Foundation or as an
attempt to aid or hinder the passage of any bill before Congress.
Rather than increasing deficit spending, lawmakers should be slashing federal spending, so more of the
nation's pool of savings will be available for investment in the productive sector of the economy. Private sector
borrowing-which is used for such things as research and development, business investment, auto loans, and
home mortgages-increases the economy's capacity to produce goods and services. And private investment
makes possible the productivity increases that lead to rising wages and higher living standards for all Americans.
The Infrastructure Hoax. Clinton claims that spending increases will have a particularly beneficial impact if
the money is spent on infrastructure. According to this theory, the economy's performance depends to a sig-
nificant extent on how much taxpayer money is spent on roads, bridges, mass transit, government-financed re-
search and development, education, and other programs that special interests have re-classified as public "invest-
ment."
The evidence is very clear, however, that higher spending in these categories will not stimulate job creation
and economic growth. The General Accounting Office, for instance, discovered that each job created by the
"Emergency Jobs Act of 1983" cost the economy $175,000 in today's dollars. A 1979 study by the Office of
Management and Budget found that infrastructure jobs cost between $136,000 and $384,000. Since an average
of $40,000 is needed to create each private sector job, any government program that uses more than $40,000 to
create a job will actually reduce the total number of jobs in the economy. Besides being a net job-destroyer,
scholarly research has found, additional infrastructure spending does not increase private sector productivity.
A Real Growth Policy. In order to stimulate economic growth, the Clinton Administration should copy the
successful policies of John F. Kennedy and Ronald Reagan. Both Kennedy and Reagan triggered record
economic expansions by slashing tax rates and reducing the burden of government spending. Both Kennedy and
Reagan also favored free trade policies, resisting the siren song of protectionism. The pro-growth Kennedy and
Reagan policies worked. The unemployment rate during the Kennedy expansion fell from 6.7 percent in 1961 to
3.5 percent in 1969, while Reagan's policies caused the unemployment rate to fall from 7.6 percent in 1981 to
5.3 percent in 1989.
Businesses are not charities; they create jobs when they expect that the revenues generated by an additional
worker will exceed the total cost of employing that new worker, including government-imposed costs such as
taxes and mandated benefits. If Clinton increases taxes, spending, regulation, and federal mandates, some exist-
ing jobs will be destroyed and fewer new jobs will be created.
Four More Years? Like Presidents Herbert Hoover and Jimmy Carter, George Bush undermined economic
growth by increasing the burden of government. Bush reversed President Reagan's successful policies, ending
the longest peacetime economic expansion in American history. Ironically, Clinton's economic platform-more
taxes, higher spending, and increased regulation-signifies four more years of the same failed policies.
With federal spending already expected to increase by nearly $100 billion this year, the $15 billion of addi-
tional spending likely to be proposed by President Clinton will compound the damage already caused by a grow-
ing government share of the nation's economic output. Higher spending may produce economic growth on the
university blackboards of Clinton's economic advisors, but it does not do so in the real world.
Daniel J. Mitchell
John M. Olin Fellow
For further information:
Edward L. Hudgins, "Why Infrastructure Spending Won't Jump Start the Economy," Heritage Foundation Memo to President-Elect
Clinton No. 9, January 15, 1993.
"Anti-Recessionary Job Creation: Lessons From the Emergency Jobs Act of 1983," Testimony of Lawrence H. Thompson, General
Accounting Office, GAO/T-HRD-92-13, February 6, 1992.
"Highlights From Public Works As Countercyclical Assistance," Special Studies Division, Office of Management and Budget,
November, 1979.
Douglas Holtz-Eakin, "Public-Sector Capital and the Productivity Puzzle" (Working Paper No. 4122, National Bureau of Economic
Research, Inc., July 1992).
The Backgrounder
Herîtage Foundation
925
No.
The Heritage Foundation 214 Massachusetts Avenue N.E. Washington, D.C. 20002 (202) 546-4400
The Thomas A. Roe Institute for Economic Policy Studies
February 10, 1993
THE IMPACT OF HIGHER TAXES:
MORE SPENDING, ECONOMIC STAGNATION,
FEWER JOBS, AND HIGHER DEFICITS
By Daniel J. Mitchell
John M. Olin Fellow
Many Washington lawmakers and interest groups are urging President Bill Clinton to
impose higher taxes on the American economy. They say such taxes will reduce the defi-
cit and provide funds for new programs. Unfortunately, the former Arkansas Governor
seems to need little convincing. Although he already has broken several promises made
during the presidential campaign, there is no indication that Clinton will backtrack on his
promise to raise taxes by $150 billion over the next four years. Indeed, evidence is
mounting that Clinton will propose even more taxes. 1 Moreover, after telling Americans
to examine the fine print in his campaign statements, it appears the new President also
will violate his promise to raise taxes only on those families with annual incomes of
more than $200,000.1 2
Proponents of raising taxes argue that the federal budget cannot be balanced without a
tax hike. They argue, too, that tax increases will make the tax code "fairer." Some even
claim that tax increases will encourage economic growth by reducing the need for federal
borrowing.
Raising taxes, however, would be a political and economic mistake, regardless of who
pays and what taxes are increased. If history is any guide:
Higher taxes will fuel additional federal spending. For every dollar of higher
taxes since 1947, spending has increased by $1.59.
1
White House Bulletin, Alexandria, Virginia, January 25, 1993, p. 5.
2
"Clinton to Consider Consumption Tax," The Washington Post, January 25, 1993, p. A1.
Note: Nothing written here is to be construed as necessarily reflecting the views of The Heritage Foundation or as an attempt
to aid or hinder the passage of any bill before Congress.
Higher taxes will hinder economic growth. Large tax increases under Herbert
Hoover, Jimmy Carter, and George Bush slowed the economy, while tax cuts
under John F. Kennedy and Ronald Reagan led to record economic expan-
sions.
Higher taxes will shrink the tax base and reduce tax revenues. The record tax
increase in 1990, for instance, was meant to bring in billions of dollars to the
Treasury and spur growth. Instead, the increase in the tax burden helped
throw the economy into a recession and lost $3.25 of tax revenue for every
dollar it was supposed to raise.
Higher taxes will result in larger federal budget deficits. Taxes were raised in
1982, 1984, 1987, and 1990. In each case, proponents of the hike claimed
that the deficit would decline. But in each case, the deficit rose the following
year.
Advocates of higher taxes have resorted to promoting general myths in an effort to de-
rail opposition. Among the dishonest statements now being used:
Myth #1: The 1981 tax cuts caused the deficit.
Reality:
Tax revenues this year are $630 billion higher than they were in 1980,
an increase of 26 percent after adjusting for inflation.
Myth #2: The federal government is suffering a revenue shortfall.
Reality:
Federal tax revenues are expected to increase by an average of $67.8
billion each year between 1993 and 1998.
Myth #3: The rich are not paying their "fair share."
Reality: The wealthiest 10 percent of taxpayers are paying a larger share of the
income tax burden today than they were in 1980.
Myth #4: The rich got richer and the poor got poorer during the 1980s.
Reality:
All income groups enjoyed higher real earnings during the Reagan years.
The only beneficiaries of tax increases are those who gain from the new programs that
taxes finance. By contrast, typical American families suffer when higher taxes consume
a larger percentage of their income. American workers suffer when tax increases reduce
employment opportunities and upward mobility. American businesses suffer when tax
hikes make new investment unprofitable and hinder their international competitiveness.
If policy makers are concerned about economic growth, they should cut taxes instead
of raising them. Presidents from Calvin Coolidge to John Kennedy to Ronald Reagan
triggered strong economic expansions by cutting tax rates; that policy increased incen-
tives to work, save, and invest. Presidents Herbert Hoover, Jimmy Carter, and George
Bush, on the other hand, imposed substantial tax increases and the economy suffered in
each case. This does not mean, of course, that tax policy is the sole determinant of eco-
nomic growth. Herbert Hoover's protectionist trade policy, for instance, clearly contrib-
uted to the economy's poor performance in the 1930s while John Kennedy's free trade
2
policies helped boost economic growth in the 1960s. But tax policy is a major factor in
U.S. economic performance.
Lawmakers thus should be wary of proposals to reduce the deficit by increasing tax
rates or raising taxes on savings and investment. The record is unambiguous. Raising
taxes fuels spending and widens the deficit. And raising taxes slows the economy by di-
rectly reducing incentives to engage in productive economic activity. No lawmaker famil-
iar with this record can support a tax increase while genuinely wishing to protect the eco-
nomic interests of the average American.
HOW MORE TAXES MEAN MORE SPENDING
Politicians routinely claim that higher taxes mean deficit reduction. But in reality, addi-
tional tax revenues are consumed by more spending. In the 1970s, for instance, tax reve-
nues grew by $324.3 billion, but spending rose by $395.3 billion. In other words, for
every dollar of higher taxes, spending rose by $1.22. In the 1980s, tax revenues rose by
$514.2 billion. Rather than use the new money for deficit reduction, however, lawmakers
increased spending between 1980 and 1990 by $661.7 billion, a spending increase of
$1.29 for each dollar of new tax revenue. The pattern has become even more pronounced
since 1990. In the
last three years,
federal spending
Increase in Federal Spending Associated
has increased by
With a $1.00 Increase in Taxes
$1.91 for every
dollar of addition-
al tax revenue.
3
$2.00
Increased Spending (in Dollars)
The relation-
+$1.59
ship between
1.50
taxes and spend-
ing is confirmed
1.00
+72 $
by scholarly re-
search. A 1991
+20¢
study by Con-
.50
gress's Joint Eco-
-3¢
nomic Commit-
0
tee, for instance,
measured the
budgetary impact
-.50
1791-1825
1826-1860
1867-1913
1947-1990
of tax increases.
The study found
that every dollar
Source: Vedder, Galloway and Frenze, Taxes and Deficits: New Evidence,
of higher taxes be-
Joint Economic Committee, 1991.
Heritage DataChart
tween 1947 and
3
Budget Baselines, Historical Data, and Alternatives for the Future, Office of Management and Budget, Washington,
D.C., January 1993.
3
1990 was associated with $1.59 of new spending. 4 To make matters worse, the propen-
sity of Congress to spend new revenues has increased. As the chart on the previous page
indicates, the bulk of new tax revenues went to deficit reduction in the early years of the
Republic. But over time lawmakers steadily have increased the amount of new spending
associated with higher taxes.
Given the persuasive historical evidence that tax increases result in higher spending, it
is incumbent upon proponents of higher taxes to explain why the pattern would be differ-
ent in 1993-why tax increases today will produce any different result than tax increases
in the past. In theory, the budget deficit could be solved with higher taxes. In reality,
however, lawmakers seem more concerned with reaping political benefits by increasing
spending. Until this political relationship is changed, higher taxes will undermine rather
than promote the goal of deficit reduction.
WHY HIGHER TAXES ARE A RECIPE FOR RECESSION
Higher taxes lead not only to higher spending, but also to a deterioration in the
economy's performance. Taxing labor income (payroll and income taxes), for instance,
drives a tax wedge between the employer's cost of hiring a worker and the after-tax in-
come a worker receives. This wedge reduces the incentive for Americans to work. And it
discourages businesses from hiring new workers by raising the cost of attracting labor.
The increased tax burden between 1965 and 1980, for instance, drove an estimated 1.9
million people out of the labor force. 5 For businesses, statistical research has found that
each one percent increase in payroll taxes reduces hiring by approximately 1.4 percent.
6
Taxing capital is equally pernicious. Capital formation is the key to economic growth
and rising living standards. Yet the tax code is heavily biased against savings and invest-
ment. 7 Examples of this bias include the double taxation of dividend income, the taxa-
tion of capital gains, punitive depreciation schedules, the taxation of interest income, es-
4
Richard Vedder, Lowell Gallaway and Christopher Frenze, "Taxes and Deficits: New Evidence," Joint Economic
Committee, Washington, D.C., October 30, 1991. For additional evidence, see Neela Manage and Michael L.
Marlow, "The Causal Relation between Federal Expenditures and Receipts,' 'Southern Economic Journal, Volume 52,
No. 3 (January 1986); Paul R. Blackley, "Causality Between Revenues and Expenditures and the Size of the Federal
Budget," Public Finance Quarterly, Volume 14, No. 2 (April 1986); and Rati Ram, "Additional Evidence on
Causality between Government Revenue and Government Expenditure," Southern Economic Journal, Volume 54,
No. 3 (January 1986).
5
Otto Eckstein, "Tax Policy and Core Inflation, A Study Prepared for the Use of the Joint Economic Committee,"
(Washington, D.C.: Government Printing Office, 1980). Also see L. Godfrey, "Theoretical and Empirical Aspects of
the Effects of Taxation on the Supply of Labou:" (Paris: Organization for Economic Cooperation and Development,
1975).
6 Michael Beenstock, "Taxation and Incentives in the U.K.," Lloyds Bank Review, Number 134, October 1979, pp.
1-15.
7
For a detailed discussion of the role of capital in the economy, including quotes from liberal economist Paul
Samuelson and the Democrat-controlled Joint Committee on Taxation, see Daniel J. Mitchell, "An Action Plan to
Create Jobs," Heritage Foundation Memo to President-Elect Clinton No. 1, December 14, 1992. Also see Gary
Robbins and Aldona Robbins, "Capital, Taxes and Growth" National Center for Policy Analysis, Report No. 169,
January, 1992); and Arthur P. Hall, II, "Big Government or Economic Prosperity? A Primer on Taxation, Regulation,
and Economic Growth" (Washington, D.C.: Citizens for a Sound Economy Foundation, June 1992).
4
tate taxes, and the corporate income tax. These taxes combine to discourage savings and
investment, biasing economic choices in favor of consumption rather than investment,
and creating a preference for short-term rather than long-term investment.
8
Other levies, such as excise taxes and property taxes, may not impose quite as much
economic damage as taxes on capital and labor, but their impact still is negative. Energy
taxes, for instance, increase the cost of producing and transporting almost every good
produced in the economy. 9 So-called luxury taxes can devastate particular industries. The
luxury taxes imposed as part of the disastrous 1990 budget deal, for example, are widely
credited 10 with destroying jobs and businesses in the light aircraft and boat-building indus-
tries.
Major tax increases almost always have a significant impact on the economy's perfor-
mance. Herbert Hoover's decision in 1930 to increase the top tax rate from 25 percent to
63 percent doubtless contributed to the Depression. Lyndon Johnson's surtax on income
tax liabilities enacted in 1968, together with an increase in the capital gains tax, helped
choke the expansion triggered by the Kennedy tax cut. The economy's dismal perfor-
mance during the Presidency of Jimmy Carter was associated with large tax increases, in-
cluding inflation-induced bracket creep. And George Bush's record tax increase in 1990
was a principal cause of the recent recession and subsequent anemic recovery.
The inverse relationship between taxes and economic growth is confirmed by aca-
demic research. A 1983 World Bank study of twenty countries found that low-tax na-
tions experience faster growth, generate more investment, enjoy faster productivity
growth, and experience more rapid increases in living standards than high-tax nations.
11
A more recent study of taxes in the United States found that each 1.0 percent increase in
the federal tax burden reduces 12 economic growth by 1.8 percent and lowers national em-
ployment by 1.14 percent.
8
For empirical evidence on the relationship between taxes, capital formation, and economic growth, see Eckstein, op.
cit.; Roger H. Gordon and Dale Jorgenson, "The Investment Tax Credit and Countercyclical Policy" (Cambridge:
Harvard Institute of Economic Research, Discussion Paper No. 373, June 1974); James M. Poturba and Lawrence
Summers, "Dividend Taxes, Corporate Investment and 'Q'" (National Bureau of Economic Research, Working Paper
No. 829, December 1981); Martin Feldstein, "Inflation, Tax Rules and the Accumulation of Residential and
Non-residential Capital" (Seminar Paper No. 186, Institute for International Economic Studies, University of
Stockholm, November 1981); Dale W. Jorgenson, "Taxation and Technical Change" in Ralph Landau and N. Bruce
Hannay, eds., Taxation, Technology and the U.S. Economy (New York: Pergamon Press, 1981); Robert E. Hall and
Dale W. Jorgenson, "Tax Policy and Investment Behavior," American Economic Review, 58:3, pp. 391-414; and
Charles W. Bischoff, "The Effect of Alternative Lag Distributions," in Gary Fromm, ed., Tax Incentives and Capital
Spending (Washington, D.C.: The Brookings Institution, 1971).
9
"Jobs-At-Risk: Short-Term And Transitional Employment Impacts of Global Climate Policy Options, Final Report"
CONSAD Research Corporation, Pittsburgh, PA, May 12, 1992.
10 "The 1992 Joint Economic Report" Joint Economic Committee, Washington, D.C., Government Printing Office,
1992, pp. 159-164.
11 Keith Marsden, "Links Between Taxes and Economic Growth: Some Empirical Evidence" (World Bank Staff
Working Paper Number 605, Washington, 1983).
12 William C. Dunkelberg and John Skorburg "How Rising Tax Burdens Can Produce Recession" Cato Institute Policy
Analysis, No. 148, February 21, 1991.
5
The direct economic cost of taxation is compounded by a tax code that is unnecessarily
complex and burdensome. In fact, tax experts have discovered that the tax system as a
whole imposes 13 $1.65 of cost on the private sector for every $1 that the government re-
ceives.
This cost to the economy includes the time, money, and resources that are used
to comply with the tax law, and the economic output lost because of the tax code's im-
pact on incentives to work, save, and invest. Thus elected officials deciding whether to
create or expand government programs should ask themselves the following question:
What will benefit people more, one dollar of additional federal spending or $1.65 of
spending in the productive sector of the economy? Many government programs today
would fail this test.
HOW TAX INCREASES LEAD TO HIGHER DEFICITS
When the economy slows, the impact on the tax base is often dramatic. Workers with-
out jobs do not pay income and payroll taxes. Businesses losing money do not pay corpo-
rate income taxes. A reduction in disposable income means fewer purchases of gasoline,
imported goods, alcohol, cigarettes, and other items subject to excise taxes. It is because
tax increases cause the tax base to shrink in this way, compared with what would have
happened if economic policy had remained constant, that new taxes never raise as much
money as originally forecast.
A major reason why projected revenues from tax increases routinely exceed the
amount of money actually generated is that lawmakers rely on static economic models.
Incredibly, these models assume that higher taxes will have no impact on the economy.
As a result, even though taxes have a well-documented harmful effect on economic activ-
ity, Congress uses revenue estimates that simply pretend the real world does not exist.
The absurdity of this system was exposed in 1989 by Senator Robert Packwood of Ore-
gon, the ranking Republican on the Finance Committee. Senator Packwood asked
Congress's revenue estimating body, the Joint Committee on Taxation (JCT), to estimate
what would happen to tax revenues if the government confiscated all income over
$200,000 per year. The JCT replied that such a tax would generate $104 billion the first
year, $204 billion the second year, $232 billion in the third year, $263 billion in the
fourth year, and $299 billion in the fifth year.
The notion that such a tax would raise higher amounts of revenue each year is of
course preposterous. As Senator Packwood pointed out, "[The JCT estimate] assumes
people will work if they have to pay all their money to the Government. They will work
forever and pay all the money to the Government when clearly anyone in their right
mind will not. Of course, there will be a behavioral response. ,,14
Despite the theoretical models used by the JCT, in the real world higher taxes do affect
the economy. Individuals and businesses change their behavior in an effort to reduce
their tax liability. 15 As a result, tax increases never increase revenues as much as congres-
13 James L. Payne, "Unhappy Return: The $600-Billion Tax Ripoff," Policy Review, Winter 1992.
14 Congressional Record, November 14, 1989, p. S 15534.
15 Many citizens already are taking action to protect their earnings from excessive taxation. Executives at major
6
sional forecasts predict. This revenue shortfall, combined with lawmakers' propensity to
spend projected new tax revenues (which do not materialize), explains why tax increases
almost always increase the budget deficit.
America's recent fiscal history illustrates the counterproductive effect of tax increases.
Major tax hikes were imposed on the American economy four times in the last twelve
years, but not once did the deficit fall:
The 1982 Tax Equity and Fiscal Responsibility Act was supposed to reduce the
budget deficit, but the deficit climbed the following year.
The 1984 Deficit Reduction Act was supposed to reduce the budget deficit, yet
the deficit rose in 1985.
The 1987 Omnibus Budget Reconciliation Act was supposed to reduce the bud-
get deficit. Once again, the deficit was higher the following year.
The budget deal of 1990 saddled the economy with the largest single-year tax
increase in American history, as Congress allegedly sought to reduce the defi-
cit. Since then the budget deficit has risen to record highs.
The 1990 budget deal exemplifies why tax increases are such an ill-conceived policy.
Not only did the agreement unleash a record increase in domestic spending, but the mas-
sive tax hike also helped cause a large decline in tax revenue. The table below compares
five-year baseline revenue projections made in the Summer of 1990-before the budget
deal was enacted-with the revenue numbers and estimates released in January 1993.
Rather
than rising
by an addi-
The 1990 Budget Agreement: More Taxes Equals Less Revenue
tional
$175 bil-
Billions of Dollars
1991
1992
1993
1994
1995
lion over
the five-
1990 Mid-Session
$1121.7
$1194.5
$1278.7
$1363.1
$1441.1
1993 Baseline
1054.3
1091.6
1147.6
1230.3
1305.6
year pe-
Difference
riod, tax
-67.4
-102.9
-131.1
-132.8
-135.5
revenues
Source: Mid-Session Review of the Budget and Budget Baselines, Historical Data and Alternatives
actually
for the Future, Office of Management and Budget, 1990 and 1993.
fell by
$569.7 billion compared with the Summer 1990 estimates. This means the tax increase
16
produced a revenue loss of $3.25 for every dollar it was supposed to generate.
corporations, including General Dynamics and Disney to name just a few, arranged to take bonuses and exercise
stock options in 1992 because of fears that tax rates would be raised this year. Similarly, many major league baseball
players, such as Detroit Tigers outfielder Cecil Fielder and Kansas City Royals pitcher David Cone, have signed
contracts taking a substantial portion of their remuneration in lump-sum amounts in 1992 because of expected
increases in tax rates.
16 The tax increase is not responsible for the entire drop in tax revenues. Other misguided policies, such as the
7
Tax increases have failed to reduce the deficit in the past and they are not likely to
work now for President Clinton. Indeed, if tax increases were to reduce projected eco-
nomic growth by just one percentage point over the next five years, the deficit almost cer-
tainly would grow rather than fall. A one percentage point reduction in growth causes a
small increase in spending and a large drop in projected tax revenues. And the projected
spending increase, it should be noted, only includes higher outlays caused by heavier de-
mands on existing
entitlement pro-
grams, such as
Deficit Impact of Economic Growth 1% Less Than Predicted
food stamps and
unemployment in-
Billions
1993
1994
surance. It does not
1995
1996
of Dollars
1997
1998
include any spend-
Receipts
-$5.8
-$19.1
-$35.5
-$52.4
-70.8
-$90.9
ing increases ac-
Outlays
+1.3
+4.8
+9.7
+16.4
+24.8
+33.2
companying a tax
Deficit Increase
+7.1
+24.0
increase.
+45.0
+68.8
+95.6
+124.1
If tax increases
Source: Budget Baselines, Historical Data and Alternatives for the Future, Office of
Management and Budget, 1993.
could eliminate the
deficit, the budget
would have been balanced long ago. Between 1962 and 1991, Congress approved at least
47 pieces of legislation increasing the burden of taxes. 17 Yet the budget has never been
balanced since 1969. In the 24 years since then, an unbroken string of budget deficits has
added more than $3 trillion to the national debt, and annual budgets have climbed from
$183.6 billion to $1.475 trillion, an increase of more than 700 percent.
FEDERAL SPENDING IS REAL PROBLEM
Even if tax increases could reduce the budget deficit, higher taxes still would be the
wrong choice. The reason for this is that budget deficits are only a symptom of a greater
problem-excessive federal spending. 18 It is the total level of spending, regardless of
whether it is financed by taxing or borrowing, that is the fiscal burden imposed on the
economy by government. Both taxes and borrowing hinder economic growth by reduc-
ing the amount of resources available to the productive sector of the economy. Simply re-
placing government borrowing with taxes-even assuming the taxes do not of them-
selves harm the economy or induce additional spending-leaves the overall fiscal burden
of government unchanged.
minimum wage increase, the Americans with Disabilities Act, the Clean Air Amendments, and the record increase in
domestic spending have contributed to the economy's problems and helped shrink the tax base.
17 "Listing of Tax Laws Which Increased Revenues from 1962 to the Present" Memorandum, Congressional Research
Service, Washington, D.C., May 11, 1992.
18 For an excellent discussion of this issue, see Lawrence Kudlow, "The Deficit Obsession," The Wall Street Journal,
January 25, 1993, p. A16.
8
As in the case of taxes, scholars have discovered a strong inverse relationship between
government spending and economic growth. A 1983 study in the Southern Economic
Journal, for instance, discovered that a one percentage point increase in government con-
sumption spending as a percent of gross domestic product causes real economic growth
to fall by .33 percentage points. 19 A 1989 study in the Journal of Monetary Economics
came up with similar results. The authors found that every percentage point increase in
government consumption spending as a share of national output reduces the economy's
inflation-adjusted growth by .35 percentage points. 20 Numerous other studies also con-
firm the inverse relationship between economic growth and government spending.
21
One reason for this inverse relationship is that politicians and bureaucrats do not have
the incentive to spend money in ways that promote economic growth. Instead, govern-
ment decision makers spend money in response to political pressures. Workers, consum-
ers, investors, and businesses in the private sector, on the other hand, have strong finan-
cial incentives to use resources as efficiently and productively as possible. Thus a dollar
taken from the private sector and spent in the public sector almost always means a net
economic loss.
THE PHONY FAIRNESS ISSUE
Even though higher taxes encourage more spending, undermine economic growth, and
increase the budget deficit, some policy makers still argue that the tax burden on upper-
income citizens should be increased in order to restore "equity" to the tax code. Propo-
nents of this "fairness" argument maintain that tax changes during the 1980s allowed
upper-income Americans to avoid paying their fair share.
This ideologically driven assertion is factually flawed and economically bankrupt.
Indeed, wealthier Americans in fact are paying a larger share of the income tax burden
than they were in 1980. The top ten percent of income earners, for instance, paid 53.9 per-
cent of federal income taxes in 1990-compared with 48.6 percent in 1980. The bottom
50 percent of income earners, on the other hand, saw their portion of the income tax bur-
den drop from 7.4 percent to 6.2 percent.
19 Daniel Landau, "Government Expenditures and Economic Growth: A Cross-Country Study," Southern Economic
Journal 49 (1983), pp. 783-792.
20 Kevin B. Grier and Gordon Tullock, "An Empirical Analysis of Cross-National Economic Growth, 1951-1980,"
Journal of Monetary Economics 24 (1989), pp. 259-276.
21 For example, see R.C. Kormendi and P.G. Mequire, "Macroeconomic Determinants of Growth: Cross-Country
Evidence," Journal of Monetary Economics 16 (1985), pp. 141-163; Michael Marlow, "Private Sector Shrinkage and
the Growth of Industrialized Economies," Public Choice 49 (1986), pp. 143-154; John McCallum and Andre Blais,
"Government Special Interest Groups and Economic Growth," Public Choice 54 (1987), pp. 3-18; James R. Barth
and Michael D. Bradley, "The Impact of Government Spending on Economic Activity," The National Chamber
Foundation, 1988; Robert J. Barro, "A Cross-Country Study of Growth, Saving, and Government," National Bureau
of Economic Research, Working Paper No. 2855, February 1989; and Robert J. Barro, "Economic Growth in a
Cross-Section of Countries," Quarterly Journal of Economics 56 (1991), pp. 407-443.
9
Presented with these data,
proponents of "tax fairness"
In 1990, Upper Income Americans
respond that the only reason
Paid a Larger Share of Income
that upper-income taxpayers
Taxes Than a Decade Earlier
are paying a larger share of
the income tax burden is be-
% of Total Income Tax Paid
42.9%
cause the rich got richer and
Highest 5%
36.4%
the poor got poorer during the
Highest 10%
53.9%
last decade. In other words,
48.8%
the rich paid compar atively
Highest 25%
78.3%
72.9%
more in taxes because their in-
Highest 50%
93.8%
comes skyrocketed, leaving
92.6%
the poor farther behind.
Lowest 50%
6.2%
7.4%
Once again, the assertion is
Lowest 25%
0.9%
0.8%
incorrect. The rich did report
0
20
40
60
80
100%
significant income gains
during the 1980s, just as tax-
1990
1980
cutters predicted would hap-
Source: The Tax Foundation, Washington, D.C. August 1992.
Heritage DataChart
pen once lower tax rates
reduced incentives to shelter and under-report income. But every other income class in
America also experienced substantial gains in income during the Reagan expansion. In-
come fell for every income class during the high-tax Carter years, rose for every income
class once the
Reagan tax
Household Income Growth By Quintile: 1977-1991
cuts took ef-
fect, and fell
Income Growth
Bottom
Second
Middle
Fourth
Top
Top
again when
in Constant Dollars
Fifth
Fifth
Fifth
Fifth
Fifth
5%
President
1977-1981
-3.2
-2.0
-1.9
-0.2
-0.0
-2.9
Bush returned
1981-1989
10.4
10.3
10.7
12.3
22.9
33.6
1982-1989
12.6
10.7
to high-tax
11.1
13.0
20.5
28.8
1989-1991
-5.5
-5.0
-5.1
-4.4
-6.2
-9.4
policies.
Even these
Note: 1982-1989 represents the period between Reagan's tax cuts and Bush's tax increase.
Source: Budget Baselines, Historical Data and Alternatives for the Future Office of
figures under-
Management and Budget, 1993.
state the error
of the rich-got-richer, poor-got-poorer argument. Research has demonstrated that there is
substantial mobility between income classes from one year to the next, so the poor and
rich in 1980 are not the same people as the poor and rich in 1985. Similarly, the poor and
rich in 1985 represent different people than those who are poor and rich in 1990. 22
22 For further information, see: Christopher Frenze, "Income Mobility and Economic Opportunity" (Joint Economic
Committee, Washington, D.C., June 1992); "Household Income Mobility During the 1980s: A Statistical Assessment
Based on Tax Return Data" (U.S. Department of the Treasury, Washington, D.C., June 1992); Ed Gillespie and
Christopher Frenze, "Income Mobility and the U.S. Economy: Open Society or Caste System" (Joint Economic
Committee, Washington, D.C., January 1992); Isabel Sawhill and Mark Condon, "Is U.S. Inequality Really Growing"
(Policy Bites, Urban Institute, Washington, D.C., June 1992); and, Christopher Frenze, "Family Income Growth and
Income Equality: Progress or Punishment?" (Joint Economic Committee, Washington, D.C., July 1992).
10
As the preceding table indi-
cates, policies encouraging eco-
More Welfare Spending Does
nomic growth are the best way
Not Result in Less Poverty
to increase the living standards
for all income classes, includ-
Billions of 1990 Dollars
$250
Poverty Rate
35%
ing the poor. Income growth
was especially strong during
$200
28%
the years when the Reagan tax
cuts were in effect. During the
$150
21%
high-tax periods of the Carter
and Bush presidencies, by con-
$100
14%
trast, all income classes experi-
enced a decline in living stan-
$50
7%
dards. Nor will raising taxes for
the purpose of income redistri-
1930
1940
1950
1960
1970
1980
1990
bution address the poverty prob-
lem. The adjacent chart
Total State and Federal
illustrates how rising welfare
Welfare Spending
Poverty Rate
(Adjusted for Inflation)
expenditures have had no effect
Note: Accurate poverty data prior to 1947 are unavailable.
on the poverty rate. Indeed, the
Source: Various U.S government reports.
Herltage DataChart
poverty rate was falling at a
steady rate before the War on Poverty began. Once federal anti-poverty programs took ef-
23
fect, the decline in poverty ceased.
TAX RATE REDUCTIONS DID NOT CAUSE THE DEFICIT
Many politicians argue that tax cuts caused the deficit, and so higher taxes are needed
to balance the budget. Nothing could be further from the truth. The 1981 Economic Re-
covery Tax Act did indeed reduce marginal tax rates, as did the 1986 Tax Reform Act,
but lower rates do not mean less tax revenue. Tax revenues today are more than $630 bil-
lion higher than they were in 1980, an increase of 122 percent. Even after adjusting for
inflation, tax revenues jumped by more than 26 percent.
Proponents of higher spending specifically blame President Reagan's 1981 Economic
Recovery Tax Act for the budget deficit. But tax revenue growth was more impressive in
the period when the tax cuts were in effect than in other years since 1980. From 1983,
when the tax rate reductions enacted in 1981 became effective, until 1990, when Bush
agreed to the infamous budget deal, tax revenues grew by an average of more than $61
billion per year. But in the three years since taxes were raised by a record amount, as part
of the 1990 budget deal, revenue growth has averaged less than $39 billion annually.
23 For further details on the harmful effects of government welfare programs, see Robert Rector, "The Paradox of
Poverty: How We Spent $3.5 Trillion Without Changing the Poverty Rate," Heritage Lecture No. 410, September 3,
1992.
11
The deficit exists not because of tax rate reductions but because federal spending has
increased even faster than tax revenues. Federal outlays have climbed from $590.9 bil-
lion in 1980 to an estimated $1,474.9 billion in 1993, an increase of nearly 150 percent.
Even adjusting for inflation, outlays have risen by almost 42 percent since 1980. 24 This
relentless rise in spending is the reason that the deficit has jumped from $73.8 billion in
1980 to more than $327 billion in 1993.
THE SOLUTION: SPENDING CONTROLS, NOT TAXES
The only way to solve the budget crisis is to tackle its root cause-the growth of
federal spending. The budget would be balanced today had lawmakers chosen to exercise
fiscal responsibility in the past. For example, if lawmakers had decided in 1989 to freeze
total federal spending at that year's level of $1,143.2 billion, there would have been a
budget surplus this year of more than $4 billion. If they had permitted spending to rise no
faster than 2.0 percent annually, beginning in 1987, the budget would be in surplus to the
tune of $17 billion this year. And if federal spending growth since 1983 had been limited
to the rate of inflation, the
budget deficit this year
Will More Taxes Reduce the Deficit?
would be less than $4 bil-
Since 1980, Tax Revenues
lion. Unfortunately, policy
Have Increased Over $630 Billion
makers did not choose
these prudent and
Billions of Dollars
$1500
reasonable options. In-
stead, they continued to
Spending
1300
vote for rapid increases in
Tax Receipts
spending, pushing the
deficit to record levels.
1100
On the few occasions
900
when policy makers have
adopted policies to slow
700
the growth of federal
spending, the results have
been dramatic. In 1987, for
1981
1983
1985
1987
1989
1991
1993
example, the overall
Note: Data are for Fiscal Years.
growth of federal spending
Source: Budget of the U.S. Government, Historical Tables.
Heritage DataChart
was held to 1.37 percent. As a result of this fiscal restraint, the budget deficit fell by a
record $71.4 billion. And significantly, taxes did not increase that year.
The Gramm-Rudman-Hollings Deficit Reduction Act is another example of just how
successful spending control can be in reducing the deficit. Enacted in 1985 and amended
in 1987, the law created fixed deficit targets designed to balance the budget by 1993.
24 Another prevalent myth is that higher defense spending caused the deficit. While it is true that defense spending did
climb, non-defense spending grew at a faster rate. Inflation-adjusted defense spending rose by 27.7 percent between
1980 and 1993, compared with a 45.8 percent increase in non-defense spending. Moreover, defense spending has
fallen from 22.7 percent of total spending in 1980 to 19.6 percent of outlays in 1993.
12
Gramm-Rudman was far from perfect, and lawmakers regularly engaged in budget gim-
micks to avoid some of the fiscal discipline the law demanded, but the Act significantly
slowed the growth of federal spending. The budget deficit, which consumed 5.4 percent
of gross domestic product
(GDP) when the law was en-
acted, fell to 2.9 percent of
Annual Average Domestic Spending
GDP by the time Reagan left
Growth: The 1990 Budget Agreement
office just four years later.
Unleased a Massive Spending Binge
Unfortunately, the Bush Ad-
ministration and Congress
Billions of
conspired to evade the
1985-1990
1987 Dollars
1990-1993
Gramm-Rudman law in 1989,
and effectively repealed the
Discretionary
$1.52
$8.98
law in 1990 as part of the bud-
Entitlements
4.97
38.83
get deal. The result? The re-
Total Domestic
6.49
47.81
peal of Gramm-Rudman un-
leashed a torrent of domestic
Source: Budget Baselines, Historical Data and Alternatives for the
spending.
Future, Office of Management and Budget, 1993.
President Bill Clinton had
the opportunity, on January
21 of this year, to return to Gramm-Rudman by using his executive authority to mandate
fixed deficit targets. 25 Unfortunately, Clinton chose to continue the current practice of al-
lowing the deficit targets to expand, thus permitting more spending and higher deficits.
In the absence of a tax limitation/balanced budget amendment, returning to Gramm-
Rudman would be a significant move toward a more responsible fiscal policy. Indeed,
lawmakers could make a good bill even better by closing some of the loopholes used to
skirt the law between 1985 and 1990. In particular, replacing deficit targets with spend-
ing targets would focus the law on the real problem-uncontrolled federal spending.
WASHINGTON'S WELL-KEPT SECRET:
TAX REVENUES ALREADY ARE RISING
Listening to the rhetoric about "revenue shortfalls" in Washington, one would think
that tax revenues were plummeting and conclude that a tax increase was a necessary re-
sponse. Once again, however, proponents of higher taxes either do not know the num-
bers or they are being dishonest. According to the Congressional Budget Office (CBO),
tax revenues are expected to climb by an average of $67.8 billion annually between 1993
and 1998-without any additional increase in the tax burden. All told, according to
CBO, tax revenues are 26 projected to be $339 billion higher in 1998 than they are esti-
mated to be in 1993.
25 Daniel J. Mitchell, "Clinton's Real Deficit Test," The Wall Street Journal, January 12, 1993.
26 The Economic and Budget Outlook: Fiscal Years 1994-1998, Congressional Budget Office, Washington, D.C.,
January 1993.
13
Office of Management and Budget (OMB) estimates confirm the CBO numbers. Ac-
cording to OMB's projections, tax revenues under current law are supposed to be $376
billion higher in 1998 than they are this year, an average annual increase of more than
$75 billion. Regardless of which estimate is more accurate, reducing the deficit should be
a relatively simple exercise-use the new revenues for deficit reduction, not more spend-
ing.
Unfortunately, when advocates of higher taxes assert that additional tax revenues must
be part of any deficit-reduction package, they are not referring to the revenue windfall
the government already is projected to receive. They mean that American taxpayers must
sacrifice even more of their incomes to feed a rapidly growing government.
WHAT DO VOTERS REALLY WANT?
Many Washington insiders argue that the American people really favor higher taxes.
But there is little support for this claim in polling data. Voters on election day were
asked, for instance, whether they would rather have government provide more services
but cost more in taxes, or government cost less in taxes but provide fewer services. By a
55 to 36 margin, voters chose smaller government and lower taxes. 27
Since the three major candidates had records or platforms supporting tax hikes, voters
did not have much choice when voting for President last November. But several state ini-
tiatives and referenda did give voters a chance to support or reject higher taxes at the bal-
lot box. A ballot initiative in California, for instance, would have raised state taxes on in-
dividuals earning more than $250,000 annually, and on corporations, and would have
used the money to cut taxes paid by lower income residents. California voters defeated
the initiative by a 58 percent to 42 percent margin.
Similarly, voters in South Dakota rejected a proposal to impose state-wide personal
and corporate income taxes by nearly a three-to-one margin. Some 78 percent of Ohio
voters rejected a proposal to levy a tax on toxic chemicals. Voters in New York were
given the opportunity to approve an $800 million bond package to finance additional
state spending on "job-creating" infrastructure. They rejected it by a 56 percent to 44 per-
cent margin. Colorado had an initiative to increase the state sales tax by one cent, to fund
more education spending. Voters said no by a 54 percent to 46 percent margin.
Overall, voters rejected eleven of the twelve tax and/or spending increases on state bal-
lots. By contrast, voters approved three-fourths of the tax and/or spending reduction ini-
tiatives. Connecticut, Colorado, and Rhode Island voters approved limits on state spend-
ing. Arizona voters approved a measure requiring that tax increases receive two-thirds
support from the legislature. Colorado voters passed a measure mandating that all state
and local tax increases must be approved by voters.
27 "Public Opinion and Demographic Report," The American Enterprise, Vol. 4, No. 1 (January/February 1993), p. 94.
14
CONCLUSION
Higher taxes are neither necessary nor desirable. If taxes are increased, the results will
be easy to predict. Federal spending will increase, the economy will weaken, jobs will be
destroyed, and the deficit will rise. Rather than promote income equality, higher taxes
will have an especially negative impact on the poor and others who are most dependent
on economic growth for advancement. Tax increases also will undermine American com-
petitiveness and hinder the capital formation that is so necessary to rising wages and
higher living standards.
Americans who will benefit from new or expanded programs are clamoring for higher
taxes. Feigning concern for the economy as a whole, they say that raising taxes will re-
duce federal red ink and spur economic growth. Yet the record shows exactly the oppo-
site. No honest lawmaker familiar with this record can vote for a tax increase while
claiming to be acting in the interests of ordinary Americans.
All Heritage Foundation papers are now available electronically to subscribers of the "NEXIS" on-line data
retrieval service. The Heritage Foundation's Reports (HFRPTS) can be found in the OMNI, CURRNT, NWLTRS, and
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15
file
AQUARIUM
INTERACTIVE AUDIOVISUAL EVOLUTIONARY STUDIES
2000 14 St. North, Suite 500, Arlington VA. 22201, Tel: (703) 875-2236 Fax: (703) 875-2231
Mr. Eli Segal
February 14, 1993
White House
National Service Director
Old Executive Building Rm 146
Washington DC 20500
Dear Mr. Segal:
With the historical effort underway toward developing a
civilian National Service I would like to ask your consideration
for discussing the following collaboration.
As a no-stock corporation dedicated to building current
historical, interactive and educational collections AQUARIUM Corp
would like to follow the administration's efforts as it evolves the
National Service. Also, I would like you to consider the possible
collaboration with our Demo-Lab at George Washington University,
GWU presently being reviewed and discussed for setting -up.
AQUARIUM has every intention of developing a 24hr live
educational service. It will generate funding through tv/radio
distribution and on-line subscribers enabling it to be free of
access to users in public schools and public libraries. As a
public service to the people such state of the arts educational and
research technology could, perhaps, qualify for volunteer services
in on-line tutorials.
Every Interactive Audiovisual Evolutionary Study will include
budgets for scholarships, fellowships, research assistants and
internships. I would like to initiate in the collaborative
agreement with GWU the possibility of AQUARIUM being a pilot study
for a National Service exchange. We could closely document the
students receiving funding and the volunteer service exchange,
keeping it closely woven with education. Although time is an
important factor the first evolutionary studies initiated are all
long term and visionary (see Preliminary Proposal).
I mentioned to Dr. Bill Lynch in charge for educational
technology at GWU, who presents this Lab/Site request to the dean,
that I was hoping to see if you would be interested. He felt that
the dean would indeed be concerned in not only the AQUARIUM program
but working with the National Service as a pilot study.
The AQUARIUM corporate office will be established at the
Professional Video Services, PVS, where Washington's most talented
production facility for major news agencies around the world up-
link 24 hours a day. It is located on 21st and M st NW not far
from your offices should you be able to come for videoconferancing
or monthly updates in the studio as to the National Services
developments.
I know how busy you must be to take on this gargantuan task.
If you would find favor with the thought of linking a non-profit
educational activity with National Service and especially want to
assist our complete documentation in this historic adventure please
accept to meet with me for further discussion. I would hope it
could be soon since I would not like to give GWU the proposal
without knowing your opinion.
Thank you for your consideration it these requests and I look
forward to your reply.
Respectfully yours,
Clara Famming
Clare Fanning
President
AQUARIUM Corp.
Preliminary Proposal
DEMONSTRATION LAB/SITE REQUEST
AQUARIUM Corp. & GEORGE WASHINGTON UNIVERSITY
OBJECT: To establish a full-time educational multi-media
demonstration lab for the AQUARIUM Program within GWU's Educational
Technology Department. It would coordinate relations with the
AQUARIUM Corp. office in Washington DC at Professional Video
Services, PVS. The corporation hopes also, to establish a
pioneering collaboration with the developing National Service for
educational support against volunteer service.
AQUARIUM is an authorized public 501 (c) (3) tax exempt
educational activity. It is preparing for the new world of
on-line interactive multi-media communication. The purpose of the
AQUARIUM Program is to produce INTERACTIVE AUDIO-VISUAL
EVOLUTIONARY STUDIES (IAES). "Evolutionary studies" will be
devoted to following current historical processes, therefore co-
ordinating outstanding research collections for posterity and
making them instructional.
Each study will offer within the AQUARIUM program: TV/Radio
documentaries accompanied by the on-line computer network; choice
of programming by on-line voting of AQUARIUM users; continuous
documentation and updating; on-line facility for worldwide multi-
lingual communication; precise data bank accesses (audiovisual,
audio & full text); educational activities and games;
expert/teacher/ student networks; tutorial relays; testing and
equivalency charts; accredited courses; study trips to expand
understanding of subjects with hands-on experience for specific
needs.
Four IAES's are initially proposed. 1) "The European Odyssey"
(following the political and economic consolidation of the European
Community) - research and collaborative agreements completed, along
with introductory promotional video; 2) "Gene Therapy" (following
the evolution in genetic research as it revolutionizes and
normalizes a new healing science) ; 3) "The Science of Education"
(following the evolution of the American society towards global
standards and outstanding educational environments); and "The
American Dream" (following the American ideal through reforms in
the Economy, Health Care, Government and National Service).
These 'special collections' will continue well into the 21st
century.
The PVS facility, where AQUARIUM will set-up its corporate and
Expo-Site, up-links around the world news coverage 24 hr/day.
AQUARIUM Corp. needs to establish a multi-media demonstration lab
for: research and development; inter-departmental subjects
coordination; archive summaries and coding; accredited courses;
comparative equivalencies tests and games; videotapes with
incorporated testing by author software. Examinations for future
producers of INTERACTIVE AUDIOVISUAL EVOLUTIONARY STUDIES to
harmoniously enter into the AQUARIUM multi-media library structure
can be set-up within the University for franchising licenses.
The initial phase would set-up the interactive computer
central with staff in the Educational Technology Department at GWU
and regularly download the information for the first accredited
studies. Thanks to aid of research assistants in collaboration
with their Schools and professorial guidance, information will be
regularly updated and tutorials established.
An estimated funding of $150,000 will be required to set-up
the demonstration lab, its staff and research assistants for one
year. The labs equipment and staff will cost $70,000; 4 research
2
assistants at $20,000 each will be needed. They are: The
International School for "The EUROPEAN ODYSSEY", the School of
Medicine for "GENE THERAPY", the School of Education for
"The SCIENCE of EDUCATION -2001", the Public Administration
Department for "The AMERICAN DREAM", the Journalism Department for
news analysis and the Communications Department for TV/radio.
During the initial phase research assistants would, under the
guidance of the most qualified professor, concentrate upon:
regrouping information; gather and write summaries for entry on-
line; collaborate on accredited courses related to these studies
and identify equivalency standards on the subjects for elementary
through adult levels. Upon fulfillment of AQUARIUM program budgets
for full time development of each on-going IAES collection the
Demo-Lab team, professors, departments and schools can then expand
activities.
Although an over half a million dollars of acruel and several
years of dedication have gone into AQUARIUMS research, development
and collaborative agreements, the corporation has only begun the
official fundraising for the first IAESs. One live, full time
study will cost approximately $4,500,000 annually until prices drop
due to a solid multi-media foundation. Once an accord is reach
between the corporation and George Washington University concerning
the demonstration lab for the initial introductory phase,
fundraising will begin for specifically setting-up that activity
as described by this preliminary proposal.
Should an enthusiastic agreement for collaboration be reached,
AQUARIUM Corp. will offer GWU, it Schools, professors and students
a privileged relationship with its program. Each production budget
includes funding for: R&D, experts, fellowships, scholarships and
film production. As a no stock corporation all the benefits from
the commercialization of the AQUARIUM Program may only and always
be reinvested in the production of further studies. However,
funding will also be used to support free access to the AQUARIUM
Program in public schools and public libraries.
3
As the perfection of this new interactive multi-media
programming with its numerous activities and educational designs
develops, many producers will want to create studies on different
historical processes. This is when they will have to go through
a franchise study and examination that can be established within
the Universities multi-media center.
Each INTERACTIVE AUDIOVISUAL EVOLUTIONARY STUDY that the
corporation or franchise producers develop will oblige the outside
coordination of relations with individuals, businesses,
institutions and administrations of all kinds. A sound
collaboration with GEORGE WASHINGTON UNIVERSITY and its schools
can focalize these live, contemporary, educational collections.
An active Demo-Lab will establish an institutional site in the USA.
Since the combined interactive, multi-media, TV/radio educational
and on-line programming are infant technological programs, mastery
of their production and maintenance in this frontier science will
develop new professional careers.
AQUARIUM has the potential by the year 2000 of being an
outstanding international, multi-lingual, multi-media program
worldwide. American 'knowhow' can take the lead in this future
multi-media world and showcase the collaboration necessary for this
future technology in communication and education.
Clare Fanning
President
AQUARIUM Corp.
4
ARTICLES OF INCORPORATION
For
AQUARIUM Corp.
(A Nonprofit Tax Exempt Corporation)
Excerpt:
Third: The purpose or purposes for which the corporation is
organized are exclusively charitable, educational, literary and
scientific as defined by Section 501 (c) (3) of the Internal
Revenue Code of 1954, as amended, (or the corresponding provisions
of any future United States Internal Revenue Law), and which
purpose include:
(a) To create an innovative, specialized public library
facility for historical, evolutionary studies through
interactive/audiovisual programming devoted to the development of
educational, cultural and scientific series and archives;
(b)
To collaborate with centers of library and
audiovisual research and specific banks of knowledge for
coordinated interactive archive access;
(c) To establish visual aid examinations on these
subjects for different scholastic levels;
(d) To solicit and receive funds and facilities in
furtherance of any purpose of the corporation;
(e) To administer such funds and facilities as may be
received.
Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Person to Contact:
Aquarium Corp.
Edwin Brown
c/o National Corporation
Telephone Number:
Company of Delaware
202-566-3376
381 West North Street
Refer Reply to:
Dover, DE 19903
E:EO:R:1-2
Date:
AUG 8
Employer Identification Number: 98-0105076
Key District: Baltimore
Accounting Period Ending: December 31
Foundation Status Classification: 509 (a) (1) & 170(b) (1) (A) (vi)
Advance Ruling Period Begins: July 10, 1990
Advance Ruling Period Ends: December 31, 1994
Form 990 Required: Yes
Dear Applicant:
Based on information supplied, and assuming your operations
will be as stated in your application for recognition of
exemption, we have determined you are exempt from federal income
tax under section 501 (a) of the Internal Revenue Code as an
organization described in section 501 (c) (3).
Because you are a newly created organization, we are not now
making a final determination of your foundation status under
section 509 (a) of the Code. However, we have determined that you
can reasonably be expected to be a publicly supported
organization described in the section (s) shown above.
Accordingly, you will be treated as a publicly supported
organization, and not as a private foundation, during an advance
ruling period. This advance ruling period begins and ends on the
dates shown above.
Within 90 days after the end of your advance ruling period,
you must submit to your key District Director information needed
to determine whether you have met the requirements of the
applicable support test during the advance ruling period. If you
establish that you have been a publicly supported organization,
you will be classified as a section 509 (a) (1) or 509 (a) (2)
organization as long as you continue to meet the requirements of
the applicable support test. If you do not meet the public
support requirements during the advance ruling period, you will
be classified as a private foundation for future periods. Also,
if you are classified as a private foundation, you will be
treated as a private foundation from the date of your inception
for purposes of sections 507 (d) and 4940.
Donors may deduct contributions to you as provided in
- 2 -
Aquarium Corp.
section 170 of the Code. Bequests, legacies, devises, transfers,
or gifts to you or for your use are deductible for federal estate
and gift tax purposes if they meet the applicable provisions of
sections 2055, 2106, and 2522.
Donors (including private foundations) may rely on the
advance ruling that you are not a private foundation until 90
days after your advance ruling period ends. If you submit the
required information within the 90 days, donors may continue to
rely on the advance ruling until we make a final determination of
your foundation status. However, if notice that you will no
longer be treated as the type of organization shown above is
published in the Internal Revenue Bulletin, donors may not rely
on this advance ruling after the date of such publication. Also,
donors (other than private foundations) may not rely on the
classification shown above if they were in part responsible for,
or were aware of, the act that resulted in your loss of that
classification, or if they acquired knowledge that the Internal
Revenue Service had given notice that you would be removed from
that classification. Private foundations may rely on the
classification as long as you were not directly or indirectly
controlled by them or by disqualified persons with respect to
them. However, private foundations may not rely on the
classification shown above if they acquired knowledge that the
Internal Revenue Service had given notice that you would be
removed from that classification.
If your sources of support, or your purposes, character, or
method of operation change, please let your key district know so
that office can consider the effect of the change on your exempt
status and foundation status. In the case of an amended document
or bylaws, please send a copy of the amended document or bylaws
to your key district. Also, you should inform your key District
Director of all changes in your name or address.
As of January 1, 1984, you are liable for taxes under the
Federal Insurance Contributions Act (social security taxes) on
remuneration of $100 or more you pay to each of your employees
during a calendar year. You are not liable for the tax imposed
under the Federal Unemployment Tax Act (FUTA).
Organizations that are not private foundations are not
subject to the excise taxes under Chapter 42 of the Code.
However, you are not automatically exempt from other federal
excise taxes. If you have any questions about excise,
employment, or other federal taxes, please contact your key
District Director.
If your organization conducts fund-raising events such as
benefit dinners, auctions, membership drives, etc., where
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Aquarium Corp.
something of value is received in return for contributions, you
can help your donors avoid difficulties with their income tax
returns by assisting them in determining the proper tax treatment
of their contributions. To do this you should, in advance of the
event, determine the fair market value of the benefit received
and state it in your fund-raising materials such as
solicitations, tickets, and receipts in such a way that your
donors can determine how much is deductible and how much is not.
To assist you in this, the Service has issued Publication 1391,
Deductibility of Payments Made to Organizations Conducting Fund-
Raising Events. You may obtain copies of Publication 1391 from
your key district office.
In the heading of this letter we have indicated whether you
must file Form 990, Return of Organization Exempt from Income
Tax. If Yes is indicated, you are required to file Form 990 only
if your gross receipts each year are normally more than $25,000.
If your gross receipts each year are not normally more than
$25,000, we ask that you establish that you are not required to
file Form 990 by completing Part I of that Form for your first
year. Thereafter, you will not be required to file a return
until your gross receipts exceed the $25,000 minimum. For
guidance in determining if your gross receipts are "normally" not
more than the $25,000 limit, see the instructions for the Form
990. If a return is required, it must be filed by the 15th day
of the fifth month after the end of your annual accounting
period. A penalty of $10 a day is charged when a return is filed
late, unless there is reasonable cause for the delay. The
maximum penalty charged cannot exceed $5,000 or 5 percent of your
gross receipts for the year, whichever is less. This penalty may
also be charged if a return is not complete, so please be sure
your return is complete before you file it.
You are required to make your annual return available for
public inspection for three years after the return is due. You
are also required to make available a copy of your exemption
application, and supporting documents, and this exemption letter.
Failure to make these documents available for public inspection
may subject you to a penalty of $10 per day for each day there is
a failure to comply (up to a maximum of $5,000 in the case of an
annual return). See Internal Revenue Service Notice 88-120,
1988-2 C.B. 454, for additional information.
You are not required to file federal income tax returns
unless you are subject to the tax on unrelated business income
under Code section 511. If you are subject to this tax, you must
file an income tax return on Form 990-T, Exempt Organization
Business Income Tax Return. In this letter, we are not
determining whether any of your present or proposed activities
are unrelated trade or business as defined in section 513.
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Aquarium Corp.
You need an employer identification number even if you have
no employees. Please that number on all returns you file and in
all correspondence with the Internal Revenue Service.
We are informing your key District Director of this ruling.
Because this letter could help resolve any questions about your
exempt status and foundation status, you should keep it in your
permanent records.
If you have any questions about this ruling, please contact
the person whose name and telephone number are shown in the
heading of this letter. For other matters, including questions
concerning reporting requirements, please contact your key
District Director.
Sincerely yours,
Enclosure
Cound Rowley
Form 872-C
Conrad Rosenberg
Chief, Exempt Organizations
Rulings Branch 1
Multimedia Takes Center Stage
by joy frascinella
W
hen the city of Atlanta competed
sentation tool, Miller has seen
Helping the Bottom Line
media project to provide initial and refresher
for the right to host the 1996
this specialty picking up steam
Wheeler says one of the best things
training for 50,000 of its employees; at
Summer, Olympic Games, the International
in the education arena.
about multimedia is that it "makes the com-
Northern Telecom of Nashville, manage-
Olympic Committee (IOC) was so impressed
Museums, too, are giving mul-
puter seem invisible" by allowing compa-
ment is using multimedia to train their
with the city's presentation, that they were
timedial their stamp of
nies to utilize their technology in better and
20,000 employees at roughly one-tenth the
awarded the games, beating some very
approval as are exposition and
more efficient ways.
time of traditional training methods, accord-
tough international competition in the
exhibit handlers. "Corporate
With a multimedia approach, vast
-ing to a recent article in MacWeek.
process.
presentations are seen as being
amounts of information currently stored on
Roanoke College in Western Virginia is
It wasn't content alone, however, that
a major chunk of the market
different media can be integrated for faster
currently using multimedia to increase the
impressed the IOC. What made Atlanta's
because multimedia is some-
access. Since the technology can be
efficiency of its admissions process. Students
presentation so outstanding was that it was
thing that can be done in-
accessed via a desktop, many companies
can fill out admissions applications with a
created using multimedia, a technological
house," Miller explains. "But,
have already found that multimedia presen-
disk brochure that provides applicants with
enhancement that combines text, animation,
because everyone has different
tations are actually less expensive than tradi-
information on every area of the college—
audio, video, and graphics in a way that
levels of creativity, we'll still
tional marketing tools, i.e. videotapes,
information that would normally appear in a
draws the audience's attention into what is
need editorial and layout peo-
audiotapes, brochures, etc. And, since pro-
printed college brochure. Prospective stu-
being explained.
ple who are experienced at
grams can be run through either DOS or
dents can also see pictures of the campus,
helping a company present in
Macintosh platforms, additional hardware
its environs, and access maps giving direc-
The Best of All Possible Worlds
the best possible light."
investments are kept to a minimum. An
tions to the college from anywhere in the
Multimedia fits today's visual-oriented
additional benefit is the flexibility of the pro-
U.S.
society like a glove by combining consumer
electronics, such as compact disc players
COURTESY: IBM
Putting Your Skills
and video cassette recorders, with the power
to Work
and versatility of a computer. It means com-
Industry watchers like
panies making a pitch to clients no longer
Rockley Miller believe that
have to fumble around with papers and tra-
as multimedia gains
ditional brochures. Instead, the potential
ground, programmers, soft-
client is treated to a visual and audio extrav-
Above: Tom Wheeler, CEO, Multimedia Design
ware engineers, graphic
aganza combining graphs, charts, and other
Corporation. Right: By combining text, animation,
designers, and video engi-
data, along with animated images, narration,
audio, video, and graphics, multimedia presenta-
neers will be needed to
and compact disc-quality music that allows
tions for schools will bring history and current
events to life for students.
develop new multimedia
the company to tell its story in a new and
tools. There will also be
exciting way.
in terms of momentum,". says Rockley
opportunities with hard-
The pioneers of PC-based multimedia,
Miller, editor and publisher of The
ware vendors for those
Apple Computer and IBM, see multimedia
Multimedia and Videodisc Monitor, a
able to design computer
as the next logical progression of the tech-
newsletter that tracks trends in the multime-
enhancements which facil-
nology revolution. "We think the multime-
dia market. "One reason for this momentum
itate multimedia produc-
dia market will 'pop' pretty soon," says
is that we're seeing a significant number of
grams. By using a personal computer, text
tion.
Steve Franzese, director of worldwide mar-
Breaking into the Multimedia Market
company players out in the marketplace
and other information can be easily manipu-
"In order to successfully implement mul-
keting for multimedia at Apple Computer
With industry watchers predicting the
lated with the click of a mouse and can be
who are addressing the public's interest in
timedia, we will need to go beyond the tra-
Corp. "There will be a lot of activity this fall
multimedia market, now at about $500 mil-
multimedia. The other reason is that this
changed or updated with few additional
ditional computer team," adds Miller. "That
on both the hardware and software side but
lion, will approach $16 billion by the year
it will take another 12 months before multi-
increased awareness on the part of vendors
costs.
means traditional computer programmers
1995, organizations specializing in multime-
Multimedia is also ideal for on-the-road
is forcing down the price of creating multi-
must change their orientation and learn to
media really migrates throughout the corpo-
dia solutions are scrambling to capture this
media tools."
presentations which can be loaded onto a
become more visually focused. They will
rate world."
important new market. "It's not tomorrow's
Miller also feels the advent of Microsoft
disk, carried to the desired site, then loaded
also have to work with graphic and design
Last January, Apple unveiled "Quick
technology - it's already here," declares
Windows and IBM's OS/2, both of which
onto a local computer.
specialists who understand multimedia's
Time", a Macintosh-based systems software
Tom Wheeler, president and CEO of the
can be used as building blocks for multime-
As a training tool, multimedia can save
psychological appeal. Getting all of these
package that provides the architecture on
Alexandria-based Multimedia Design
dia capabilities, has helped spur interest in
valuable time and resources. Instead of
talented professionals to work together as a
which to build a wide variety of multimedia
Corporation (MDC), a company specializing
this market. Another innovation has been
herding employees into a classroom, each
team is one of the biggest challenges we will
applications. Numerous academic institu-
in providing state-of-the art communications
the Videoblaster, developed by Creative
employee can access information from indi-
face in the future."
tions and corporations are using "Quick
tools for business, education, and the federal
Labs, a company based in Santa Clara,
vidual workstations, listening and watching
The skills sought for those who will sell
Time" which currently supports over 275
government.
California. The Videoblaster is a tool that
as they learn at their own pace. Salespeople,
this technology is also a bit different.
applications, from lower-end word process-
MDC is currently working on IMPACT,
allows several video sources (tape, disc or
for example, can be given a set of variables
"We don't look for the typical computer
ing and database applications to full-blown,
an integrated multimedia presentation and
higher-end multimedia tools.
cable) to be tied into a personal computer.
and hypothetical situations they might
sales rep," says Wheeler. "We look for ener-
control unit that is fully transportable.
The images, which are displayed in a win-
encounter. For companies with a bilingual
getic people with successful sales experi-
In addition to Apple, other companies
Designed for George Washington
dow format, can be captured and manipu-
staff, training programs incorporating differ-
ence in the advertising, video or computer
are also providing components for multime-
University, IMPACT is expected to revolu-
lated to suit the user's individual needs.
ent language tracks can also be used.
industries who have a sparkle about
dia applications. "We've turned the corner
tionize lecture halls at colleges and universi-
In addition to using multimedia as a pre-
American Airlines is developing a multi-
them."
ties across the U.S.
WEEK OF SEPTEMBER 21-27, 1992
WASHINGTON BUSINESS JOURNAL
PAGE 9
Video producers turn to PVS to cut costs
This Is No
Business booms as more
and Fox News Service. The Christian Sci-
ence Monitor Channel left I'VS when il
use firm's D.C. facilities
folded last year, hul was quickly replaced
Time For
by (``I`V of Canada, several Norwegian
By ALICE Л. LOVE
broadcast companies, and others. Adding
Professional Video Services Corp., a
10 the traffic arc major American networks
downtown firm which leases office and
- like NBC and ABC --- which increas-
Soft Sell.
studio space. technical equipment, and
ingly Imn 10 I'VS facilities and its staff of
camera crews to broadcasters, govern-
50 for special projects here.
ment and business, wrapped up a contract
"Television news isn't going 10 be the
last week to house and feed the Washing-
T
ough times like these
same in live years. You sec a lot more
ore made for oggressive
ton bureau of Medical News Network.
pooling already," explained Grevemberg.
MNN is the newest project of Knoxville,
I'VS has also found a mushrooming
advertising ond public
Tenn.-based Whittle Communications,
market in the corporate and government
relations thol gel results.
best known for its planned for-profit pri-
sectors, offering teleconferencing and
vale school system. dubbed The Edison
video production equipment and facilities
That's why I'd like to
Project.
to clients like Mobil Corp., IBM Corp.,
introduce RMR & Associotes
Robyn Sachs
The contract with Whittle
worth
The American Bankers Association, and
- 0 leoner, meaner, new
RMRE-Associates
close 10 $1 million over a 15-month peri-
the Federal Drug Administration. The
breed of agency. While others ore in 0 recession,
od. and including a 56-month extension
Bob Grevemberg
Bush campaign has turned to I'VS because
option is one in a string PVS has picked
il can't legally lape commercials and elec-
One of the
we're growing like gong
up this year. As cash-strapped communi-
to have a presence III Washington.
tion-related news releases using publicly-
Largest Public
buslers. And bringing our
cation's companies look to consolidate
For Medical News Network - which
funded White House facilities.
Relations Firms
their operations in the nation's capital,
will move in by November and begin
I'VS doesn't own the M Street office
& largest
clients along with US.
PVS's facilities at 2030 M St. NW, arc
Women-Owned
broadcasting an ad-supported news and
space it subleases to clients, ("We don't
In fact, that gets right
Businesses in
quickly replacing The National Press
information program to 5.000 doctors'
want to be in the real estate business,"
offices in February 1,500 square feet of
Grevemberg explained.) so risk and debt
Washington.
lo the biggest difference
Building as the Washington headquarters
of choice for foreign and domestic news
space is being made over into a newsroom
- Hashington
between RMR and other
are kept to a minimum. Since the start of
BusinessJournal
broadcasters.
and outer office. PVS will also provide
its new fiscal year in July, the company's
agencies: We want you to
"Sharing facilities can cut costs tremen-
MNN with a camera and editing crew of
bottom line has been about $500,000 het-
hold US accountable for results. We agree up front
dously. and it's cheaper to go out of house
six. and all its technical equipment. Whit-
ter than last year, Grevemberg said. and
on 0 project's measurable objectives - lead
because you don't have to maintain and
the Communications need only send along
plans are underway to expand Washington
operate equipment," said Bob Grevem-
management and production talent 10
operations and open I'VS of London. The
generolion, article placement,
herg, president and founder of PVS. "The
make MNN in Washington operational.
United Kingdom is an especially fertile
cuslomer attitude, sales.
Call RMR
TV industry is hurting, so we're growing."
"I'VS is a cheaper alternative for us, and
market, Grevemberg said, because the
Then pullou all the stops
The three and a half Hoors PVS cur-
they have the experience WC need in
British government requires regulated
How To Improve
to achieve them.
rently occupies are a maze of studios, and
Washington," said Ken Creed, president
broadcasters to take a percentage of their
Your PR & Advertising
news and editing rooms, in a continual
and chief operating officer of MNN.
work out of house.
With on oward-
FREE INFO
state of redesign to accommodate long-
PVS's no-strings appeal has also
"We're negotiating with the Financial
winning creative leom, market-
and short-term clients who don't want to
attracted clients like the British Broad-
Times, to take over their television opera-
invest in and maintain their own broadcast
savvy account executives, and 0 full support slaff
casting Corp., the European Broadcast
tions, and also with some major British
equipment, facilities, and crews, but need
Union, French and Japanese networks,
banks," he said.
you olways gel the ollention you deserve.
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gel our ollention. We're happy lo work with you on
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CITIZENS DEMOCRACY CORPS
CDC
mobilizing America's voluntary spirit on behalf of the countries of
Central and Eastern Europe and the Commonwealth of Independent States
2021 K Street. NW, Suite 215
Washington, DC 20006
202-872-0933 FAX: 202-872-0923
Citizens Volunteer
Ambassador Strauss Returns to CDC
Program Expanded
New Executive Committee Members Named
CDC is expanding its Citizens
Volunteer Program to the Czech
Republic, Poland, Slovakia and
Ukraine. This expansion doubles the
number of countries aided by the
Citizens Volunteer Program, which
heretofore operated only in Bulgaria,
Hungary, Romania, and Russia.
Volunteer Advisors will soon be
stationed in the Czech Republic,
Hungary, and Poland, and will be
providing assistance to local govern-
ments, nonprofit organizations, and
universities. Program expansion is
also planned for Slovakia later in the
Ambassador Robert Strauss (left) and U.S. Rep. Steny Hoyer
year.
Speaking at a recent meeting of
Three New Members Join
CDC has identified volunteers for
CDC's Executive Committee,
Executive Committee
three projects in the Czech
Ambassador Robert Strauss said it
Republic. Former University of
is important that CDC continue
U.S. Representative Steny H. Hoyer
Chicago Vice President Charles
to provide assistance to Central and
(D-MD) is the second Member of
'Connell will advise Palackeho
Eastern Europe and the former
Congress to be elected to the
University in Olomouc on university
Soviet Union. Ambassador Strauss,
Executive Committee, joining
governance. Management consultant
who recently returned from
Senator Nancy Kassebaum (R-KS).
Anna Elman will help the Czech
Moscow, made his comments as
Rep. Hoyer is the Chairman of the
Philharmonic with its fundraising
the featured speaker of the
House Democratic Caucus, and
and exhibit efforts. Finally. Jim
December meeting. He focused on
serves on the Committees on
Friedlander, a retired state and local
recent developments in the region,
Appropriations and House
government planner, will work with
and how they could affect CDC.
Administration. He is also Chairman
the Tabor city government.
of the Commission on Security and
CDC is pleased to announce that
Cooperation in Europe (the
Chuck Sikora will be in Poland
Ambassador Strauss will rejoin the
"Helsinki Commission").
serving as a Volunteer Advisor to
CDC Executive Committee in
the Foundation for Economic
February. Ambassador Strauss was
William Davidson joins CDC as
Development, giving management
a member of CDC's original
Chairman of the Board and
advice for small business de-
Executive Committee, leaving to
President of Guardian Industries
velopment in local and regional
serve as U.S. Ambassador to the
Corp., a glass products man-
offices. In Hungary, city planner
Soviet Union, and later, to Russia.
ufacturer located in Northville,
See "CVP," page 6
See "New Members," page 6
Tel: 800-394-1945
CITIZENS DEMOCRACY CORPS Bulletin
page 1
Winter 1993