Public Papers - 1989
Remarks to Members of the Small Business Legislative Council
Thank you all for that welcome, and thank you all for being here. And to Secretary [of Commerce] Mosbacher and other dignitaries here and all of you, I am grateful for this opportunity.
Before beginning to talk a little bit about the area that brings us together -- business climate, business community, emphasis small business, entrepreneurship -- I want to comment on an issue of particular currency in Washington. Three guesses. [Laughter]
No, the debate over John Tower's nomination as Defense Secretary should clearly be based on principle and on policy, and it ought not to be based on rumor and innuendo. And no one denies that Senator Tower is well-qualified, hardnosed, tough, experienced. No one denies that he knows the Pentagon well, and he knows the Congress. Those are the facts.
And Americans, whatever their policies -- and I'll bet all of you agree with this -- and whatever their politics, are committed to the concept of fairplay and are committed to decency. And all I am asking in the name of fairplay is that the man be judged on the facts, not on misperceptions. And this is a tough town -- a lot of rumors out there. Public service is not made easier by claims that cannot be substantiated. It's made tougher.
Proceedings are starting in the Senate, as they should, and I've made my call. I've looked at the record. I've known this man since 1959, and my support is unequivocal. And John Tower is, in my view, the best man for this job. And so, my pitch, my appeal to the Senators, has been: Look, do what you've got to do, but remember fairplay; remember decency and honor; and then remember also historically the concept of advise and consent where reasonable doubt is given historically to the President of the United States who, after all, is responsible for the executive branch of this government.
So, that matter -- I wanted to just speak to you on it. I know it's a matter that obviously concerns everyone because it's dominating the news.
But now, back here, you've heard from Gregg Petersmeyer [Deputy Assistant to the President and the Director of the Office of National Service], I know, Richard Breeden [Assistant to the President for Issues Analysis] and Secretary Mosbacher; and these are three key members of my team here in Washington -- able members. And now that you have a feeling for their ideas and their priorities, let me ask and encourage you to work with them. Tell them what you're thinking. They know how to work with the private sector, and they're looking for ways to make this a responsive government, a government by and for the people. And all three of these men have been highly successful in the private sector.
While I was in Asia, this recent trip, I had a chance to think seriously about what sets our trading partners apart from us, and I realized that we may have erected a barrier to our own success and deprived ourselves of vital long-term investment that our competitors have always enjoyed.
In a few minutes, I'm going to have a suggestion for those who argue in favor of protectionist intervention. You know, there are some who say that Asia could become the economic center of the world. Some even suggest that America's power is on the wane. And, well, for them I have news: The 21st century can well be the next American century if we understand the challenges before us and move together to meet them.
More than ever, the world is connected, interdependent, changing rapidly. Barbara and I lived in China 14 years ago for a year and a half, and I've been back there -- this is the fifth time since leaving China. And some of you have been there. But every time you go, you feel it, you feel the movement, and you feel the change. And that's just one part of this highly complex, highly interconnected world. More than any point in our human history, societies and economies rely upon one another. So, competitiveness, which is on everybody's minds these days, takes on a challenging new angle; and it means more than just market share and earned income. And it's more than a zero-sum, winner-take-all game.
Since 1980 the world trade volume is up nearly 40 percent, and almost a fifth of our industrial production is now in exports. Goods and services circle the globe overnight. [Secretary of the Treasury] Nick Brady told me just a while ago over in the Oval Office that clearing in the world markets every night is a trillion dollars' worth of securities -- a trillion dollars one single evening. Instant transfers of funds around the world -- capital, as I say, changes hands in seconds. In a world like that, all nations stand to benefit from the growth of their trading partners, and as long as markets are free and open.
So, I have two key priorities: to promote economic growth through low tax rates and to encourage the kind of free trade that makes all nations better off. General Brent Scowcroft [Assistant to President for National Security Affairs] is here with me, and he was on this trip with me. And at every stop, we made the point to some weary interlocutors, I might add, of the need for keeping these markets open. The goal of competitiveness is not simply to disadvantage the competition, it's to better deploy the advantages that we have and to create new ones.
And that's why the work that you all do is so important. American small business has always been our most creative source of innovation and economic growth. And you, we, have created 19 million new jobs in this country since the recovery began. Relative to population, that's more than twice the number of jobs created in Japan. And in the U.S. private sector, small businesses are responsible for two out of three jobs created -- two out of three. Businesses like yours make America work. By creating jobs, you create opportunity, and while I'm President, government won't interfere with that.
We've got to do more in the field where Richard Breeden spent several years of his life trying to simplify the regulatory process. I'm going to try hard. We will assure you that you have the freedom you need to do what you do best. And I am still determined -- I have not changed my mind on this next one -- to hold the line on taxes, because if the experience of the last 8 years has proven anything, that lower taxes do mean a stronger economy.
Competitiveness demands two things: flexibility in the marketplace, and the right kind of investment at home. So, we want to give the employers and employees the flexibility to work out their own solutions on issues like parental leave and health insurance. And we intend to promote the kind of investment that will allow every American to share in prosperity and help to create more of it. And that's the idea behind a new proposal of mine. I believe that with the proper incentives, small businesses can help lead America's urban renewal. And so, to the entrepreneur, I say this: Start your business in an inner city where the need for jobs is greatest, and we will cut your Federal tax rates. We will create these enterprise zones, which I think would be the best antidote to poverty in the inner city. After all, you'll be saving the Government money by reducing the need for items like welfare and subsidized housing. And you'll help us bring urban enterprise zones to life in cities all across this country.
You know, decisions made and actions taken at the local level very often better serve the interests of those involved. What I'm talking about here is a fundamental American freedom: the freedom to choose, make up your own mind. And that's the driving principle behind the proposal I've made on child care. We want to establish a new, refundable children's tax credit for low-income parents and make the existing child care tax credit refundable as well. We mean to avoid burdensome Federal standards and regulation that would limit family, limit church, and limit community-based care. We will examine the liability insurance barriers for businesses interested in providing child care options. We've got to do something about this liability menace, you might say, which has gotten out of hand. And we need some advice from you on how to accomplish this. We've got some good ideas on proposals that can well be made. We'd like to put solutions and dollars in the hands of parents. We intend to promote choice. And this one is very important with me. As I look at urban America and I look at the complexity of society today, it's right back to the basics: strengthen the family, strengthen the community, strengthen the churches and other groups that are out there trying to help.
You know, flexibility can also promote risk-taking. It's always been the basis for real achievements in business. And so, we need to find new ways to encourage men and women to take risks. We need entrepreneurs who will invest their time, talents, and resources to build the businesses, unlock new markets, unleash new technologies, create new jobs. People who bring to the marketplace competitive products and quality services that are second to none in the world -- they need to be encouraged. You know what the challenges are.
Last year a large survey of CEO's suggested that while American business leaders are inherently optimistic, they're aware that we have new and important work to do. Ninety percent of them said that American business is still too short-term oriented.
And, along with many here -- I better not start telling you my war stories about business or you'll tell me yours, and we'll be here all night. [Laughter] But I have helped build a business from scratch. I happen to think that's a good criterion for being President of the United States, as a matter of fact. And I know that it can be extraordinarily tough. And I understand the pressures, I think, from having been there in a tiny little business many years ago -- the pressures that you face. So, you don't need a lecture on the importance of savings and long-term investment. You need government that enables you to do what's good for business and good for America. And often, that means kind of getting out of the way.
Competitiveness demands the right kind of investment, yes. For a long time now, I've been saying that we must have a competitive capital gains tax rate. If we're to retain the American edge, we must give entrepreneurs and small businesspeople the incentive to keep dreaming and keep taking risks and keep creating good jobs for America. I see a capital gains rate cut as an important way to free up American businesses without distorting world markets. The economies of the Pacific rim -- the ``Four Dragons'' of Hong Kong, Singapore, Taiwan, and South Korea -- all exempt long-term capital gains from tax -- total exemption. Japan also had no tax on capital gains during its meteoric rise to economic power.
And so, I call on anyone who talks about protectionism to consider this: By taxing capital gains, we impede our own progress, and we turn the playing field into an uphill climb. Restoring the capital gains differential would be a powerful incentive for businesses to invest, to innovate, to grow, and to create jobs. The Treasury estimates that the cut that I have proposed will add .8 billion a year to the revenue side of the ledger. So, let those out there charge me of taxes that are favoring the rich. I know that in proposing a capital gains differential, I am favoring innovation and risk-taking, and in the process, I am favoring jobs. And that's what it's all about. I'm committed to government policies that will allow business to invest with an eye toward the long term to assure our competitive future.
In my budget, I've proposed a 13-percent increase for science and technology programs in 1990. And we intend to stay on track in our effort to double the National Science Foundation budget by 1993; to develop engineering and scientific computing research centers; and to build the right links between university, government, and these industry labs. We're recommending a permanent extension of that R E -- research and experimentation tax credit, to keep us at the forefront of technological innovation, especially when it comes to basic research. And we want to encourage more domestic research by multinationals by stabilizing the R E expense allocation rules. The uncertainty brought on by expiring temporary rules has gone on for two decades -- hard to plan when you don't know what the rules of the ballgame are. Businesses should be able to make long-term research plans in a stable climate. And because of the tremendous taxing power of the Government, creating that climate is something government can, should and will do.
We're determined to bring down this budget deficit with my pledge on no new taxes. And we've proposed a major budget reform to put our fiscal policy on a sound footing once and for all. We need to do away with this wonderland concept of current services budgeting -- a land of expanding baselines, where programs are assumed immortal, and cuts are actually increases. Federal policy should not start out with the presumption that the Government spending should go up and up and up.
Senator Rudman -- I was riding with him the other day, and he described the Washington wonderland very well. He said, ``Washington is the only city where I've ever seen -- for a fellow who's making ,000, goes to his boss, asks for a ,000 raise. The boss says, `No, you can have a ,000 raise.' And the story says, Man Gets ,000 Cut.'' [Laughter] And that's the way you look at it now in terms of these programs. But the most important investment that we can make to assure this competitive future is in training and education. Jobs are becoming more demanding. You all know that. The competition is getting tougher. Labor markets are getting tighter. So, we'll need to do more to develop a highly skilled, highly motivated, highly educated work force.
You know, when I was in the oil business, we invested heavily -- my little company -- in what was then a new technology -- offshore drilling. That was back in the mid-fifties -- brand new technologies coming out. And early on -- I'll never forget it -- we had three drilling rigs. And a hurricane came up in the Gulf of Mexico, and it just wiped out a brand-new -- in those days million, today I think the same thing would cost about million -- piece of drilling equipment. It was gone. I've never looked for something so hard that my eyeballs actually ached. [Laughter] And they really did. And we went out, and this piece of equipment was totally vanished, not a trace of it, one-third of our assets. And I knew that whenever you consider an investment you rightly tend to focus on the risks that are involved. But technology moved forward, and now the risks are much less. Where training and education are concerned, the biggest risk is not to get involved.
American public education needs more of our support. All of us -- teachers, parents, administrators, local officials and, yes, private industry -- all of us have a responsibility to ensure that our educational system is second to none. We should look to the vitality of our system and work to build strength through diversity. Successful schools happen everywhere, from rural communities to inner city neighborhoods. And they're shaped by people with high expectations, from both the public and private sector, who work within the schools to bring about the needed improvements. And this way of looking at it means that we are all accountable for the quality of our schools.
We need to strengthen incentives to do better, and we have a mandate to do just exactly that. I want to expand Head Start, reward schools that improve, recognize outstanding teachers right here in the White House. We're going to establish a National Science Scholars Program. We're going to work to free our schools -- we've got to, all of us -- from the pestilence of drugs. And we're going to be looking to you for help and guidance because good schools are good for business. Many of you are already involved with your own local schools, doing important work for the future of your communities and your country. But my pitch: More can be done. More must be done. And I know you'll be there when your community, your State, your country really needs you.
To compete successfully abroad, many of you will find yourselves competing for workers at home. I know managers who are seriously starting to worry about shortages of talented people. And there is a larger, untapped source of talent in this country. Such people are to be found and fostered among the young and the underskilled, who need training; the older and more experienced, who need retraining; the disadvantaged, whose lives can be turned to advantage; disabled workers, who ask only for a chance to prove their ability; dual career families, who need options. Opportunity doesn't necessarily knock on the door. It may be leaning against the wall or standing on the street corner, needing only to be seen for what it is. And in this, we need your leadership. The very heart of our ability to compete may depend on how well we enlist those who have, until now, been on the outskirts of economic growth. They will be needed.
Together, we can build businesses that outwit, outmaneuver, outproduce, and outperform the competition. We can achieve the kind of competitive advantage that comes from collective will. And we can make sure that the words ``Made in the United States of America'' simply mean the best that there is.
So, thank you very much for coming here today. I hope this will be the first of several visits that we have right here in the White House with this group, a group that I deem very, very important to the future of the United States of America. Thank you all, and God bless you, and thanks for coming.
Note: The President spoke at 2:41 p.m. in the East Room at the White House.