Remarks Prepared for Delivery
Senator Tom Harkin
ECONOMIC POLICY INSTITUTE
The New Growth Agenda: Prosperity through Resource-Based
Economics
October 21, 1991
I want to get right to the point. I'm from Iowa, where we
don't waste time with a lot of words, we just say what we mean
and get on with it.
The popular belief among the press and the polls is that
George Bush and the Republican Party are pro-business and
pro-growth. That Democrats are just the party of fairness. And
that Tom Harkin, to paraphrase Time magazine, is a preacher of
the old-time religion of "soak the rich" to help the poor.
That so-called popular belief is a phony line pushed by the
RNC's propaganda machine and repeated so often in the press that
even they are starting to believe it. The truth is . . . George
Bush with his supply-side trickle-down economics is anti-growth
and anti-business.
And I'm the pro-growth, pro-business candidate of the 1992
election.
Now that I've shocked you with this, let me tell you why.
As we've learned over the past three years, don't read
George Bush's lips. Look at the facts.
Under Bush's presidency, the American economy has grown by
less than one percent. Under Jimmy Carter, the GOP's favorite
whipping boy, the growth rate was 3.8 percent.
Under George Bush, eight million Americans are out of work.
Under George Bush, real wages of the average American worker
have dropped nine percent below what they were in 1979.
Under George Bush, business purchases of industrial
equipment are down ten percent.
Under George Bush, the number of Americans filing for
bankruptcy this year alone will reach one million, and next
year's deficit is expected to rise to $350 billion, the largest
in our history.
The fact is George Bush's economic performance, by any
standard you want to measure, has been the worst of any president
since World War II."
Those aren't my words. That's the Washington Times I'm
quoting.
George Bush and the Republican Party are anti-growth because
their supply-side trickle-down economics is anti-business.
Candidate Bush had it right when he called it "voodoo
economics."
Yet President Bush now believes that we get growth by giving
tax breaks to the rich, and letting the wealth trickle-down to
the rest of us.
George Bush and the Republican Party can't get it right.
They don t understand that you can't fertilize a tree from the
top down.
In the 1980s, under Bush and his predecessor, our economy
became Casino America, rather than productive America. It was a
heyday, according to Kevin Phillips, of unearned wealth in the
form of dividends, real estate, and capital gains, not to mention
lottery tickets and even baseball cards.
It was a decade of Milken, Boesky and Donald Trump. It was
a decade where a businessperson was seen as someone who bought
stock at 2:30 in the afternoon, sold it at 2:45, and made a
killing without making a product.
Let's face it, this is what supply-side trickle-down has
done: It made us the world's largest debtor nation. It left us
a huge trade deficit. And more than tripled our national debt.
And now that the bubble's burst, the rich are getting richer, the
poor are getting poorer, and the middle class is left paying the
bills both ways.
In many ways, history is repeating itself. If Ronald Reagan
was the Warren Harding and Calvin Coolidge of the 1980s, then
George Bush is the Herbert Hoover of the 90s.
You know, Herbert Hoover, by all accounts, was a nice guy, a
good family man. And he had a good heart. But he had the same
mindset as George Bush.
Hoover didn't understand that the government can be a
powerful engine for economic growth. So when the economy turned
down in 1929, he insisted the free market would correct itself.
His policy was to keep saying "prosperity was just around the
corner." And the next thing we knew, we were in the Great
Depression.
It's a lesson that George Bush still hasn't learned.
Bush's recovery program can be summed up in three words:
Cut capital gains. That's his answer to everything. Eight
million unemployed? Cut capital gains. Stagnant economy? Cut
capital gains. Trade deficit? Cut capital gains. Got a
toothache? Cut capital gains.
In the early eighties, there was a thirty percent savings on
the profits from capital gains because of the exclusion. That
tax benefit did not create the hoped-for growth. Now, Bush and
the Republicans think that cutting the tax rate by a third of
that is the solution for our economic problems. It will just dig
the hole deeper.
The truth is that George Bush just doesn't understand that
his supply-side trickle-down economics have hurt America and
taken the American Dream away from millions of ordinary,
hardworking Americans.
After nearly destroying the banking system, he's now blaming
the regulators for he credit crunch.- After running up the
largest peacetime deficit in our history, he's failed to come up
with a fiscal policy to stimulate the economy. After watching
the unemployment rate rise for a year, he turned his back on
American workers and vetoed unemployment benefits for those out
of work for more than six months.
Bush is working on a recovery plan for Turkey, for
Bangladesh, and the Soviet Union, but he doesn't have a vision
about how to get our country moving again.
Well, today I plan to outline a new economic strategy that
will lead to real growth. I call it my New Growth Agenda, and
the centerpiece of that New Growth Agenda is Resource-Based
Economics. I've been emphasizing this the last six months and
will continue to emphasize it throughout the campaign.
Resource-based economics is about redirecting our priorities
to invest in America, in our physical and human infrastructure,
to promote real growth. Our New Growth Agenda calls for
investing the peace dividend here at home, getting tough on trade
and stopping the export of U.S. jobs, and promoting policies that
reflect the realities of the modern workplace.
I'm not talking about fine-tuning trickle-down. I'm talking
about a change in direction and policy, that's both pro-growth
and pro-business.
And now is the time to make that change, to bring us
strongly into the next century.
For nearly half a century, the American people have been
their money, their blood, and their lives to defend the world
from communism.
But now the Cold War is over. And we won! Just look at
what we've done for Europe, and South Korea, and Taiwan, and
Japan. Well, now it's our turn. The American people have earned
the right to reap the dividends of that investment. A peace
dividend that must be invested here in America, to invest in us,
which spells 'U . . . S."
Today, we have an investment gap, but we also have a window
of opportunity to close that gap and start growing and prospering
in the new world economy.
But to do that, we need an economy with real growth based on
a solid foundation, that provides a higher standard of living for
all our citizens, not just a privileged few. We need an economy
with growth based on long-term private investment, that enables
small businesses, minority businesses and entrepreneurs to get
the resources they need to develop new products and seek out new
markets.
We need an economy that improves the standard of living for
all our people with well-paying, secure jobs where they can raise
their families, educate their kids, buy a home, buy a car, take a
nice vacation, and retire in dignity with good health care.
And we need an economy that invests in its physical
infrastructure to make business more efficient and a human
infrastructure to make our people the healthiest, smartest, most
productive workforce in the world. As Princeton professor Alan
Blinder explains, that's what resource-based economics is all
about.
The American people stand at a crossroads and have a clear
choice. As the recent report of a distinguished group of
business, leader and academic leaders -- the Commission on the
Skills of the American Workforce -- points out, there are two
paths we can take.
One is the path of George Bush and the Republican Party, the
low-wage, low-skills, low-growth, lower-our-standard-of-living
path to the future.
Today, the Bush path has led our economy into a vicious
downward spiral. Lower incomes lead to lower tax revenues, and
this to the crises in state and local governments that we see all
around the country. The result is cutbacks in education and
training and infrastructure, which lowers our productivity
further and forces us to lower our wages and profit margins even
more.
Fortunately, there's another path. It's the path of
developing our own country's resources so that we can compete in
the world by selling high quality products at high enough margins
in order to pay high wages.
This is the strategy that the smart countries in Europe and
Asia have been pursuing . . . the Japanese, the Taiwanese, and
the Germans have been investing in high-wage, high-skill work
forces, modern transportation and communication systems, and new
ways for organizing the workplace.
That's what America used to do. From the 40s and into the
60s, government worked with the private sector to support
industrial breakthroughs like transistors, Jet aircraft,
computers, agricultural technology. Investments were made in
transportation, the GI Bill and the National Defense Education
Act, training and civilian research. These investments provided
stimulus and opportunity for private sector growth. And made our
workforce the best educated, best paid, and most productive in
the world.
That was then. How do we stack up against our competitors
today?
Education: 14th out of 16 industrial countries in our
federal investments in K through 12. Investments in training:
last. Wages: less than most of the developed countries of
Europe. And 44 percent less than the Germans.
George Bush has it dead wrong. You don't make the economy
grow by giving bigger pieces of a shrinking pie to the people at
the top. You make it grow by investing in the skills of the
people, giving the private sector the right incentives to provide
a skilled workforce with the tools they need, and investing in
infrastructure and new technologies. Then, production and
investment that depend on skilled labor will go -- and stay --
where the skilled labor is.
That's the high-skills, high-wage path to international
competitiveness. And this is the path America must take to
promote real economic growth and lead the world into the 2lst
century.
That's the path of the New Growth-Agenda. And there are
five steps we must take to make it happen.
First we must take that failed experiment of supply-side
trickle-down economics and throw it on the scrap heap of history
along with that other failed experiment called communism.
You may think, Harkin, what are you talking about, linking
supply-side and communism.
Well, they're different names, but the outcomes the same.
Communism was supposed to help everyone. Who did it help?
A narrow, privileged few at the top.
Supply-side was supposed to help everyone. Who did it help?
A narrow, privileged few at the top.
There are some in government today -- some in my own party
-- who say we can put a humane face on supply-side trickle-down
economics, tinker with it, and care for people. Well, you can't
do it.
You cant put a humane face on supply-side trickle-down
economics, just like you cant put a humane face on communism.
Because they're both fundamentally wrong. Yeltsin understood
that, and threw communism out the window. We must do the same
with trickle-down.
Second we need to invest in America and build that New
growth Aqenda by putting in place a program of resource-based
economics.
If were going to compete in the world economy, we need to
invest in our physical and human infrastructure.
We need to provide business with the elements it needs to
make quality products to be competitive both here and abroad.
That means: an efficient infrastructure, efficient energy
systems, and a healthy and productive workforce.
For job creation in the short-term that will lead to private
sector growth, we need to start rebuilding our roads and bridges
and highways and mass transit systems.
As Robert Heilbroner points out in his book The Debt and the
Deficit, without an adequate infrastructure, private industry
cannot live up to its potential.
If a truck is late for a delivery because of congested
roads, if a businessperson misses a meeting because the airplane
is sitting on the runway for two hours, if vehicles need to be
repaired more often because of pothole damage, private industry
cannot live up to its potential.
Yet, as a nation, we've let our infrastructure deteriorate.
From the 1960s to the present, measured against the value of
the gross national product, our investment in infrastructure
declined 50 percent 7- from 3.2 percent of GNP to 1.6 percent.
Some economists, like David Auschauer, have linked the drop
in the growth rate in public investment to the slowdown in our
nation's productivity growth. He estimates that a given
investment in public infrastructure stimulates from 4 to 7 times
as much private investment. You can disagree with his specific
conclusions, but you can't deny the link between public
investment and private sector growth.
Earlier this year, the Bank for International Settlements
found that "regions investing more in infrastructure tend to have
higher output, productivity, and employment growth. And guess
what two countries they cited as examples: Germany, which spends
15 times more than we do as a percentage of output, and Japan,
which spends 23 times as a percentage of output.
Now, this doesn't mean that we want to invest in the same
kinds of things today as we did 20 years ago. The demands of a
global economy require that our infrastructure reflect new
technologies.
For example, the transportation systems of the 2lst century
will have high-speed trains, faster and higher flying aircraft,
electric or hybrid cars, automated highways, and high-tech mass
transit systems in our urban areas. Investing in the
infrastructure of the future does two things: it solves
America s pressing problems and creates internationally
competitive industries.
We also need to develop new energy and environmental
technologies that will reduce business costs, improve energy
efficiency, and promote self sufficient forms of renewable
energy. This will reduce our dependence on Middle East oil,
lower energy costs, and preserve our national security. This is
plain common sense -- energy and national security policy.
To develop these new technologies, we need to focus more of
our private research and development on commercializing American
developments and bringing them to market. I'm tired of seeing
America get the Nobel Prize while the rest of the world gets the
profits.
We should make better use of the technological assets that
we've bought and paid for. Our goal should be to shift our
scientists and engineers who are no longer needed for defense
work to build the new transportation, telecommunications, energy
and environmental systems that we need now.
And at a time when many small and medium-sized American
businesses can't afford basic research and development, we should
develop new ways to help make available the process technologies
of the 0s.
While developing our physical infrastructure, we also need
to develop our human infrastructure, to develop a high skills
workforce that will make our businesses more productive and more
competitive.
That means investing in education and health care.
We can start by investing more wisely in education, to bring
more computers into our grade schools and making our high schools
the world's best in science and math.
And we need to make a better effort to train the two-thirds
of our workforce who will not go to college so they can get good
jobs. Do you realize that in the last 11 years, the real wages
of those high school graduates who have been working for less
than 5 years have declined 20 percent? What's this saying to the
high school students who didn't drop out? They played by the
rules, they got a high school education, and they're not making
it.
It's a disincentive for them to graduate. That's why we've
got to make sure that technical training is available so they can
work with computer-driven equipment, take responsibility for
decisions in the workplace, and solve customers' problems.
While making these changes, we need to re-think our general
approach to education, and make early intervention and prevention
the centerpiece of our policy.
- That means investing in programs like Head Start, WIC, and
childhood immunization programs that provide high returns on our
investment.
Thats not just me talking. That's the conclusion reached
by a national business organization, led by Honeywell President
James Renier, called the Committee for Economic Development.
They urged a comprehensive and coordinated strategy for human
investment that redefines education as a process that begins at
birth, and recognizes that preparation for education begins even
before birth.
They understood that when you have a low birthweight baby
and that child doesnt have health care and immunizations and
doesn't have nutritious food and intellectual stimulation until
its six or seven years old -- I dont care how many remedil
programs you have, that kid's life is stunted. Early
intervention saves lives and saves money.
We know, for example, that every dollar spent on Head Start
returns nearly $5 in later worker productivity and in budgetary
savings from lower welfare and special education costs. And
every dollar spent on the prenatal component of WIC saves $3 in
short-term hospital costs and more in later years. Now, that's
smarter spending.
The same goes for health care. Everybody's running around
talking about how we can patch and fix and mend things, and
that's important. But I say we need to start talking about how
to prevent disease and disability and keep people healthy in the
first place. Not only to save lives, but to save money. It's
just plain common sense. Let me give you an example.
Take low birthweight babies. We spend nearly $1,000 a day
nurse these babies back to health in neonatal care units. I've
seen figures that go as high as $100,000 to $200,000. And
there's not a person here who wouldn't pay it. But it costs only
S1,000 for nine months of maternal and child health care, to make
sure that baby is born healthy in the first place, yet Bush cut
that program.
Maternal and child health care is smarter spending -- much
smarter than what were doing.
In the last budget he sent down, Bush wanted a bigger
increase in administrative expenses than in preventive health
care. I said no. We moved S150 million out of his bureaucracy
and red tape and moved it into preventive health care because
it's smarter spending.
Preventive health care also means investing in medical
research and development. Do you realize that we have spent more
on defense research and development in the last 30 months than we
have in the entire 105 year history of the National Institutes of
Health? Investments in medical research lead to cures and cost-
saving methods of preventing disease and disability. There's
also an economic benefit to these investments.
Our medical research enterprise has spawned the
biotechnology revolution, which the Commerce Department estimates
will be a S40 billion industry by the year 2000. Medical R&D is
good for people and good for the economy.
Finally, we need to make sure that American business is
supported by a healthy financial infrastructure.
We need to go back to the basics, making money the
old-fashioned way: by earning it. Regulators should take a dim
view of get rich quick schemes and should stop financial
institutions from gambling their way out of trouble.
We also need to lower interest rates now. Bush keeps
complaining about the high interest rate, yet he's the one who
just reappointed Alan Greenspan, knowing he was for tight money
policies.
Fact is, lower interest rates make housing more affordable.
I believe that government needs to promote home ownership and
adequate housing for all Americans.
We can make this new growth agenda a reality if we start
investing in America, to give businesses the tools they need to
compete here and around the world. That will lead to real growth
and prosperity. How are we going to pay for it?
The third thing we're going to do is to stop subsidizing our
friends and allies defense and start investing in America.
For the last ten years, we've invested in the military to
make America strong from the outside-in. With the end of the
Cold War, it's clearer than ever before that we need to shift
spending priorities from military to domestic to make America
strong from the inside-out.
Now, I understand the need for a strong defense. I spent 8
years, 8 months, and 8 days as a jet pilot in the U.S. Navy.
Nobody knows the value of a.strong defense better than I.
But according to the Pentagon's own estimates, we're still
spending $160 billion a year to defend Europe from a non-existent
Soviet Union and $22 billion on Cold War weapons like Star Wars
and the B-2. The B-2, built for two reasons: one, to be
invisible from radar, and two, to defend us against the Soviet
Union.
Today, it's showing up on radar screens while flying toward
a country that isn't there anymore. And Bush wants to build four
more of them this year. That's wasteful spending.
The biggest deterrent to shifting our spending priorities is
last year's budget agreement. With the Cold War over, that
agreement's firewalls are just as outmoded as the Berlin Wall.
And just as the Berlin Wall fell, so too must the budget accord.
We can maintain the most powerful, modern, high-tech
military in the world, provide support for our allies, and still
cut our military budget by 50 percent over the next ten years.
William Kaufman, the defense analyst for the Brookings
Institute says 'defense spending could be cut by 50 percent
during the next ten years without jeopardizing U.S. security
needs.'
We've proven we can win on the battlefield. Now we must
prove we can win in the marketplace. Because that's where the
new battles -- the economic battles -- are being fought.
Fourth we need to act tough on trade and stop exporting
U.S. jobs.
For too long, our trade policy has been subservient to our
foreign policy, rather than part of our long-term economic
strategy. The trade deficit has soared and jobs have been lost
as a result. Carla Hills estimates that $l billion of trade
equals 23,500 jobs. Thus, last year's 100 billion trade deficit
cost us more than 2 million jobs -- good jobs in autos,
electronics, and bio-tech.
Today, this Cold War mentality still blocks exports of our
machine tools, telecommunications, and other high tech items and
cedes those markets to our competitors in Europe and Asia.
I also reject Bush s extreme ideological devotion to one-way
free trade which insists on opening our markets on the hope hat
others will reciprocate. Our competitors pursue integrated trade
and domestic policies that further their national interests. The
result is predictable to all but Bush's advisers: our country is
getting taken to the cleaners by our trading partners.
As President, I will use the laws and agreements now on the
books to get tough on our trade competitors and get them to open
up foreign markets.
I'm not talking about bashing Japan. I want to make it
clear that the problem is not in Tokyo. They're doing whatever
they can to support their own economy.
When I was in the Navy, I was under contract for a year and
a half working with a Japanese company. And the one thing I
learned working with them is that the Japanese will never cheat
you, but theyll never give you a break." They deal honestly
with you, but they're tough, and our trade negotiators must be as
tough as they are, and stop giving away the store.
We must negotiate agreements that promote high wages here,
and improved wages abroad. That raise living standards at home
and abroad, and ensure environmental protections. And that
improve working conditions for workers here, while protecting
working rights for their counterparts across our borders.
We must compete on the quality of our products, not on the
misery and suffering of those who make them.
Finally, the revolving door for our trade negotiators must
shut. Since 1974, 47 of the professionals who worked at USTR
now represent foreign firms. And of the 16 top Commerce trade
agents in the Reagan and Bush administrations, nine are now
foreign agents, and seven are working for Japan.
That's just like General Schwarzkopf selling his services to
the Iraqis after the Gulf war. And we wouldn't tolerate that.
Well, trade is just as vital to our national security.
Fifth we need policies that reflect the new realities of
American families and the workplace.
Our society and workplace have changed. Today, in the
workforce, there are more single parents, mothers, and two-income
families with children. Issues that used to be just social
issues are now workplace issues.
If we want our workers to be more productive, we need to
adopt policies that help make our workers more secure in knowing
that their families are safe, so they can focus on their jobs and
not carry all the burdens of their daily lives into the
workplace.
That means we need to invest in child care, and family
leave, and improved safety standards. Conservatives say it costs
too much; that it's not competitive. Yet, Germans are
competitive and guarantee a month paid vacation, paid parental
leave, and a 38-hour work week.
We also need to recognize the tremendous burden placed on
society and business by our current health care system. It costs
more to make automobiles, steel, and telecommunications products
in America because firms have to pay for higher health cost. We
need to bring health costs down.
We also need to adopt a health care system where affordable
care is not just a privilege of wealth, but a basic right of
every American citizen.
We can also make structural improvements, like promoting the
use of autonomous work groups, which greatly improve performance.
And, we can expand arrangements like Labor-management Councils
that have been very successful in limited use.
Our new growth agenda can't be accomplished by government
alone. It must be initiated in the workplace and the boardroom.
We need a new sense of cooperation and teamwork in our
workplaces. We cant play class against class. We must work
together toward the common goal of building a growth economy.
And by working together to achieve that new agenda, I
believe we can position the United States for world economic
leadership today and in the future.
When I think of the possibilities before us, I'm reminded of
what Arthur Schlesinger once wrote when John Kennedy was elected
president. He wrote that there was a sense that "the world was
plastic, and the future unlimited."
I share that optimism. I believe the future is unlimited.
Thirty years ago, John Kennedy challenged us to land a man
on the moon by the end of the decade. And by investing in
America, by dedicating ourselves to that vision, we did just
that.
I say it's time to bring that New Vision down to earth. I
say it's time to challenge the American people once again.
And dont tell me we cant do it. Dont tell me that if we
work together, it can't be done. Were Americans. We can do
anything we set our minds to. We the People have never backed
down from a challenge before.
We the People created the bravest, freest country on the
face of the earth.
We the People built the strongest economy in the world.
We the People turned back Nazism and Fascism and Communism.
We the People put a man on the moon.
And I say it's time for We the People to take back
government from the privileged few and special interests and
create an economic system that will work for all of us.
Today, the American people have a clear choice: we can
continue down the low-wage, low-skill, low-growth path of George
Bush and the Republican Party, or we can turn toward the high-
wage, high-skill, high-growth Harkin path of resource-based
economics.
But we need your help. All of you here represent some of
the best economic minds in our country. I'm counting on all of
you to begin laying the groundwork today to create that
high-skills, high wage, high growth economy by making our New
Growth Agenda a reality.
I believe if we work together -- we can achieve that vision
-- if we work together -- we can make that New America -- nd if
we work together -- we can lead the world again.
