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�DOMESTIC ASSESSMENT VI:
SMALL BUSINESS
EVENT:
Assessment of current state of small business and entrepreneurial sector.
Pn:senter:
Alan Patricof
Chairman. Patricof & Co. Ventures, Inc.
Chairman, Entrepreneurs for Clinton·Gore
GOALS:
•
Describe the central role that small businesses play in job creation and economic growth,
•
Outline the cballenges, such as the "credit crunch", that small businesses face,
Al-l'ACHED:
•
Summary of the presentation
•
Additional points to explore with the presenters
•
Background
•
Chans hat might be used
t
•
Biographies of roundtable participants
•
�SUMMARY OF ASSESSMENT:
Alan Palricofs company provides specialized investment advice to groups interested in
participating in the formation of new businesses. Patricof will make the following points:
en~repreneurial
•
Small businesses, particularly the
growth and job creation.
•
During the 19805, the Fortune 500 companies cut 3.5 million jobs, while small
businesses created more than 20 million jobs. [W~lLStreet Journal, 8/10/92]
•
The~
•
The needs of sole-proprietorships (e.g., mom-andnpops stores) and the needs of high
growth companies are quite distinct. For example, access to capital is a very important
issue for entrepeneurial firms, but not as important for sole-proprietorships.
•
The biotechnology sector is an excellent illustration of the importance of the
entrepeneurial sector. In 1970, the industry didn't exist. Today, the biotech industry
has $8.l billion in sales ,and is composed of 1,200 companies.
sector, are the engine of economic
ability of small businesses to create jobs has been hampered by a credit crunch and
increased regulation,
ADDITIONAL POINTS TO EXPLORE:
•
Advocates of the entrepeneurial sector believe that high net-worth individuals ("angels")
are a major. largely untapped source of risk capital for long-term investments in new
businesses. You may wish to explore what policies, such as your 50 percent targeted
capital gains reduction, would be most effective in getting individuals to make long term
investments in growth companies.
BACKGROUND:
A, ROLES OF SMALL BUSINESS:
l.
Primary job creator: Small business has become the primary engine for creating jobs
in the U.S. However, the Bureau of Labor StatiSlics estimates that new businesses added
only aboul 144,000 jobs in 1991, compared with L5 million in 1990, [Wall Slree!
Journal, Augu,l 10, 1992]
2.
.\1aJor problems: Small business owners rank the following as their major problems:
COit of he.'1Jtb insurance, federal taxes on business income, cash flow, workers'
compensation costs, and the cost and availability of liability insurance to he their most
important business problems. Sixty-one percent termed the problem of health care costs
to be "critical", Small employers pay as much as 20 percent more than large employers
for the same health insurance coverage. [Small Business Problems and PriQrities,
Nationai,Federal of [ndependent Business, 1992,]
�:L
4,
Evidence of a credit crunch: Approximate1y one~half of small business owners tried to
get bank loans in the last 12 months. Nearly 25% were turned down. About 1/3 of
small business owners who have outstanding loans said their banks indicated a decreased
willingness to lend. Fifteen percent who have outstanding loans experienced unfavorable
changes in tcrms on outstanding loans, lSu-rvey of Small and Mid-Sized Businesses,
sponsored by National Small Business United and Arthur Andersen, December, 1992]
Re:lsons for the credit crunch:
•
•
In other regions, banks have shifted to more conservative lending policies because
of new regulations that penalize bank directors who permit· their. institutions to
pursue seemingly risky lending policies.
.
•
5.
In New EngJand, Texas, and California, major bank failures have reduced banks'
abilities to suppon lending to small businesses,
As a result of these two factors, commercial banks now have more government
securities in their portfolios than commercial loans,
Exports: Only 11 percent of small businesses are exporting product& or services. Most
lack information or know~how about exporting, [Survey of Small and Mid-Sized
Businesses, National Small Business United. December, 1992)
B. CLINTON/GORE SMALL BUSINESS POSITIONS:
The paper caUs for a
five~part
strategy to empower sma1l businesses and entrepreneurs:
I. .
(nl;rcase access to capital and credit by creating a new enterprise tax credit, directing
bank regulatory agencies to t.'lkc actions that will increase lending activity to small
businesses, and establishing through the private se.ctor a national network of 100
community development banks and 1000 micro-enterprise programs.
2__
SU'Cnglhen investment incentives by providing a targeted investment tax credit, making
the research and development. tax credit permanent, and creating comprehensi've
emerprise zones,
3.
Cut go\'CrnmCnl regulation by enforcing the Regulatory Flexibility Act, developing
rc~~ulatory shorl forms, :and strongly supporting a White House Conference on Small
Business.
4.
Expand market access and R&D by creating a Rebuild America Fund, doubling the
Small Business Innovation Research program. and creating 170 manufacturing centers
in a national technology extenSion service.
5.
Control health care costs by restoring competition in health care and providing tax
credits to help small businesses cover their employees.
�POSSIBLE POINTS OF CONTENTION:
•
Small business leaders strongly advocate reducing the regulatory burden Oli sma!!
business. However, environmental laws which are expected to be reauthorized next year,
such as the Clean Water Act and the solid waste disposal law > could impose new burdens
on industry which might hit small business especially hard,
•
The organizations which represent small business have vigorously. and often successfully,
opposed parts of the Democralic domestic agenda ~- including famHyand medical leave,
the Civil Rights Act of 1991, the Americans with Disabilities Act, and health care
reform. Often, such opposition has been framed in terms of burdensome regulation or
stifling free enterprise.
�������·
~.
"
�..
~.
Internatjonal Assessment Panel
Cresidenl-elect Dill Clinton
Vice Presidcnt~eled AI Gore, Jr.
Sheryl Handler
Linda Tsao Yang
Howard Cunis Reed
See. of the Treasury Lloyd Bentsen
Roberto Goi:r;ueta
lack Olero
Owen Bieber
Kathleen Cooper
Walter Elisha
lohn Ong
Sec. of Labor Robert Reich
Brian Roberts
Chair of CEA Laura Tyson
leffGanen *
Karen Horn
Fred Smith
Susan Collins
Economic Policy Advisor Robert Rubin
Dan Tellep
Clif Wharton
Glen Fukushima *
P.M. "Sandy" Grieve
Jill Barnd
Robert Browne '"
Marina von Neumann Whitman
Director of OMB Leon Panetta
John Bryan
Lawrence Summers *
Jim Fallows
Sec. of Commerce Ron Brown
* ::; Presenter
Podium
(libel:
.
J)r::~DtetS
l. Rudi Dornbusch
2. Paula Stem *
3.
4.
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International Panel
Name
Company
Ms. Jill Barad
Mr. Owen Bieber
~Mr. Robert Browne
Mr. John E. Bryan
Ms. Susan Collins
Ms. Kathleen Cooper
~ Mr. Rudi Dornbusch ('1r~ ')
Mr. Walter Y. Elisha
Mr. Jim Fallows
*Mr. Glen Fukushima
i Mr. Jeff Garten
Mr. Roberto Goizueta
Mr. P.M. Grieve
Ms. Sheryl L. Handler
Ms. Karen Horn
Mr. John Ong
Mr. Jack otero
Mr .. Howard Curtis Reed
Mr. Brian Roberts
Mr. Frederick W. smith
i: Ms. Paula stern (rlt~."..r·,>,,:.,. ~ J
Mr. Lawrence Summers
Mr. Dan Tellep
Mr. Clifton Wharton
Ms. Marina von Neumann
Mrs. Linda Tsao Yang
"*
¥
Pt'l..l.tC<"' 1 \. ,"\.
Category
MatteI Company
United Auto Workers
Howard University
Sara Lee Corp.
Brookings
Exxon corp.
Massachusetts
Springs Industries
The Atlantic Monthly
AT&T Japan Ltd.
Columbia University
Coca-Cola
Ecolab, Inc.
Thinking Machine
BancOne, Cleveland,
Goodrich
Labor council for
Curt Reed & Co.
COMCAST
Federal Express
The Stern Group
World Bank
Lockheed Corporation
TlAA-CREF
university of
Linda Tsao-Yang &
Consumer
Labor
Academia
Consumer
Academia
Energy
Academia
Textiles
communications
Telecommunicati
Academia
Consumer
Consumer
Small Business
Commercial
Consumer
Labor
Small Business
High Tech
Transportation
Academia
Non Profit
Defense
Finance
Auto
Finance
st
Phone #
CA
310-524-2891
313-926-5201
202-296-0250
312-558-8501/8502
202 797 6000
214-444-1709
617-253-3648
803-547-3780
202-625-1773
011813-5561-3000
212-935-2626
804-626-2263
612-293-2318
617-234-1111
216-781-3333
216-374-2000
202-783-3660
501-375-2403
215-665-1700
901-395-3377
202-775-2379
202-473-3774
818-876-2000
212-490-9000
313-662-8593 (H)
916-758-0300
MI
DC
IL
DC
TX'
MA
SC
DC
NY
GA
MN
MA
OH
OH
DC
AR
FA
TN
DC
DC
CA
NY
MI
CA
,
�·.
ASSESSMENT: INTERNATIONAL ECONOMY
Presenters:
Robert Browne
Rudi Dornbusch
Glen Fukushima
Jeff Garten
Paula Stern
Lawrence Summers
Panelists:
Ilarad. Jill EUl;ann
El Segundo, CA
President and Chief Operating Officer for MatteI, Inc.
Oversees U.S. marketing and sales efforts for all Mattei brands
Board Member: Trustees of Queens College Foundation: Governors of
Town Hall of CA.; Reebok International Ltd.
'
Primary concerns: MFN -- particularly trade ,,1th China.
Beiber. Owen .
Detroit, MI
President, United Auto Workers
Major labor leader in auto industry.
Has focused on protecting UAW members' job and income security;
retirement benefits; expanding education, training, health, safety
programs.
Negotiated first UAW agreement with Japanese (GM-Toyota joint
venture)
Primary concerns: NAFTA, Health care (including FASB).
Bryan. John H.
Chicago, lL
Chairman and C.E.O. of Sara Lee Corporation (since 1976)
Member of the Business Roundtable and Business Council.
Supports economic integration, convergence as the best way tO'increase
US prosperity. Personally supports NAFTA, GATT extension "although
neither is in my company's best interest." Believes we must focu~ on
dislocations in order to be able to compete effectively. Says "benefits of
globaJ.izatlon to US will be primarily in service sector jobs; US economic
policies should focus on taking advantage of, rather than resisting,
globalization. "
�.'
Collins. Susan M.
Washington, D.C.
Senior Fellow, The Brookings Institution
Associate Professor of Economics, Georgetown University
Senior Staff Economist, President's Council of Economic Advisors ('89-'90)
Cooper. Kathleen E,
Irving, TX
Chief Economist, Exxon Corporation (since 1990)
Former Executive Vice President and Chief Economist, Security Pacific
National Bank
Former President, National Association of Business Economists
Primary concerns: short-term economic issues: the likelihood that Ee,
Japanese economies will rebound; oil industry prospects in Russia.
Charlotte, NC
Elisha. Walter y,
Chalrman and CEO, Springs Industries, Inc.
Home furnishings and fabrics manufact\!rer, with HQin S. Carolina; 43
'
plants in US and abroad.
1991 sales'of $1.9 billion; South Carolina's largest employer
Director: AT&T, Cummins Engine; Associates of Harvard Business School
Strongly believes market-focus more important than territorial focus;
"the US has erred by managing our in'temational economic pOlicies based
on territorial concepts." Supports NAFTA"contrary to most in my
industry", and believes in open trade -- but ,""ants to see new emphasis
on national treatment.
Fallows, lames
Washington, DC
Washington Editor of The Atlantic Monthly
Former chief speechwriter for President Carter ( 1977 -7 8)
Books include: The Water Lords (1971); NationaJDefense (1981); The
System (1976); Inside the System (1977); More like Us (1990); Looking
at the Sun (in progress)
Offers four questions for panel consideration: (I) To what extent is
the US realli: in decline!; (2) Should we be thinking of US national
interests in conflict '''ith those of other nations -- or in cooperation?;
"Why should this be a zero-sum game?" (supports Laura Tyson's
views on national economic interests); (3) Has post-war free trade
changed? Should it change?; (4) Is it feasible for the lJS to learn
from and apply the lessons and tools of Japanese or EC economic
policies
�Gllizlleta. Roberto C.
Atlanta, GA
Chairman and C.E.O. of Coca·Cola Company (since 1981)
Primary concerns: "In Eastern Europe, we are seeing that people
believe that private enterprise, not government, is the way to raise
living standards. Anything that encourages the friendly democracies
in Eastern Europe helps us."
Grieye. Pierson M. "Sandy"
51. Paul, MN
Chairman and C.E.D. of Ecolab Inc.
Ecolab manufactures and sells cleaning, sanitizing and maintenance
chemicals around the World. $2 Billion in annual sales. Participates in a
joint venture with Europe. 5,500 of 10,000 total employees in U.S.
Boards include: US West, Norwest Corp., St. Paul Companies.
"The US is going through a paradigm shift .. and it ~ making us
'competitive. The price we are paying is short· term job loss .. but our
industries are becoming more competitive than those of the EC, and our
economy is becoming stronger. I believe we should look at taxing foreign
corporations :. but we must keep the fairness issue in mind. We can't
afford to have US companies unfairly taxed in retaliation overseas."
Handler. Sheryl L.
Cambridge, MA
PreSident, Thinking Machines Corporation
Founded corporation which introduced Connection Machine
supercomputer .. the first massively parallel high performance
computer system and the pioneer in a new generation of advanced
computing; now the second-largest supercomputer manufacturer in
the US.
"Our company is able to compete in Japan, and do it well .- because
we are more advanced than the Japanese. The key is striving for the
same qUality. US government incentives must encourage American
companies to take risks in the global marketplace."
�.'
On2. lohn D.
Akron, OH
Chainnan and C.E.O. ofBFGoodrich Company (since 1979)
Transformed BFGoodrich from primarily a tire and rubber manufacturer
to a major'producer of speciaity chemicais, plastics and aerospace
components,
Chairman of the Business Roundtable.
Primary concerns: "I don't want to get bogged down in discussions about
the D<!utsche Mark; I want to talk about what we must do to promote US
competitiveness. II
Otero. lack
Washington, DC
Vice-President of the AFL-CIO
President of Labor Council for Latin American Advancement (LCLAA)
Vice President of the Transportation and Communications Int'] Union
(TCU)
DNC Vice-Chalnnan for Voter Participation
Cuban immigrant.
"I'm concerned about the impacr of US International economic policies on
lower-\',-age earners - and on the Hispanic work force in particular. I
also want to discuss US re-industrialization -- how we can compete
effectively in the global marketplace, and how this can lead to better jobs
at better wages."
Reed. Dr, Howard C.
little Rock, AR
Former Professor ant U. of Texas Graduate School of Business
Focus: relationship between international financial centers. foreign direct
investment flows, and interest rate behavior.
Books include: The Preeminence of International Financial Center
Primary concerns: Trade's disproportionate influence on U.S. monetary
policy and its negative repercussions on the U.S. economy.
�"
Roberts. Brian I..
Philadelphia, PA
President, Comcast Corporation
Third largest cable 1V operator; cellular communication service;
largest independent Muzak franchisee. Corneas! is also involved in
,vireless, fiber, and coaxial communication technologies.
]\'lember of Board and Executive Committee of the National Cable
Television Association; Board member of Turner Broadcasting
System, QVC Network, and Viewer's Choice
"Government shouldn't be picking the economic·",.'inners and losers.
Instead, government should be encouraging competition. "
Memphis, T!'1
Smith, Frederick W,
Chalrman, President and C,E.O. of Federal Express
Nearly $8 billion per year in revenue
Calabasas, CA
Tellup. Daniel M.
Chalrman and C.E.O. of Lockheed Corporation
Joined Lockheed as pnncipal scientist for the X-17 missile expeliments in
1955.
Primary concerns: European subsidization.
�.'
Wharton. It" Clifton R.
New York City, NY
Chaim,an and CEO, Teachers Insurance Annuity Association and
College Retirement Equities Fund (T1AA-CREF). With assets over $112
billion, T1AA-CREF is the largest private pension fund in the US.
Became first African-American to head a Fortune 100 service
company.
Former PreSident, Michigan State University; former Chancellor, State
University of New York system.
Fonner Chair, Rockefeller Foundation.
Boards: Ford and N.Y.s.E.
Whitman. Marina von Neumann
Ann Arbor, MI
Distinguished Visiting Professor of Business Administration and
Public Policy, University of Michigan
.
Former VP and Chief Economist, General Motors.
Member, President'S Advisory Committee on Trade Policy and
Negotiations (since '87)
Commission on Presidential Debates (since '87)
(Personal note: Dr. Whinnan's mother died Tuesday.)
Primary conCerns:
I} appropriate short-tenn fiscal position
2) adjustment facilitation for industries, firms and workers in transition
3) the challenge of increasing productivity in the service sector where
most new jobs are created,
4) healthcare: cOst control and financing
Yang, Linda Tsao
Davis, CA
linda Tsao Yang & Associates (finanCial consulting finn)
Former California Savings and Loan Commissioner
DNC delegate in '84, '88, '92
Primary concerns: With the constraints imposed by a $4 trillion debt, how
do we address the twin problems of" belly economics" - to create .
immediate job openings at a living wage for all willing and able to work
and "conversion economics" - to build a skilled labor force to compete for
well paying jobs in a post-cold war and rapidly globalizing world
economy?
�·.
..
ASSESSMEl'\T: Il'\TERNA TIONAL ECONOMIES
EVENT:
A series of five seven-minute presentations on different regions of the world, preceded by a
global overview:
Presenter:
Global Overview
Rudi Dornbusch, Professor·of Economics, MIT
Economie Community
Jeffrey Garten, Columbia University Professor
lapan, P.R.c. and Asia Paciflc
Glen Fukushima, Director ofPublk Policy, AT&T
F,S.U. and Eastern Europe
Lawrence Summers, Chief Economist, World Bank
Mexico and Latin America
Paula Stern, Competitiveness Policy CouncH'
Africa
Robert Browne, Economist. Howard University
GOALS:
The purpose of these presentations is to gain an understanding of the economic conditions
throughout the world and particularly the ways in whi~h current developments in these five
regions affect the United Stales, As the WQrld moves towards a more globalized economy.
characteril.ed by increasing interdependence, the: U.S. must increasingly become engaged and
aware of developments overseas,
�GLOnAL OVERVIEW
WHO: Rudlger Dornbusch is the Ford International Profes.Wf of Economics at MIT where he
has taught since 1975. He is a Research Associate of the National Bureau of Economic
Research, a member of the Brookings Panel on Economic Activity, the Advisory Board
of the Institute for International Economics and the Academic Panel of the Federal
Reserve Bank of Boston. He bas advised governments in Latin America, the European
Community, and the government of the Russian Federation. He also served as an
advisor to the Clinton/Gore campaign,
IIACKGROUND:
• Global e::onomic activity remains sluggish after more than two years of disappointing
growth, Although there are some signs of a U.S. economic recovery. structural problems
, in Europe and Japan will continue to constrain global growth. Expect a modest pickup in
1993, with growth in the OEeD nations likely to be in the 1,5 % to 2,0% range following
.
growth of about 1.5% in 1992.
.• Nations which entered recession early or which experienced the sharpest declines in output ~
- including Australia, Canada, and the United States -- are recovering. Growth in Japan is
expected to remain below 2% next year, which is a recession by Japanese standards, The
~utlook for Europe is even more guarded, In the wake of Europe's currency crise..'i l which
has undercut business and consumer confidence, the risk of a more pronounced slowdown
is real,
• The silver lining to this cloudy outlook is that global inflation should remain subdued.
Average inflation in the OEeD nations is expected to be close to 2.5 % in 1993 ~- down
from about 3% in 1992 and a peak of 5% in late 1990,
• The mixed outlook for different regions points to varying economic policies in 1993. With
signs of recovery in the U.S., the phase of monetary easing appears almost over now. In
Japan, private sector weakness suggests further monetary easing allhough the government
has already proposed a large-scale fiscal stimulus initiative for 1993.
• In Europej the Bundesbank seems unlikely to cut interest rates aggressively for seveml
months, due to high money growth and unification-related inflatiQn pressures. But economic
weakness in Europe should pave the way for an eventual decline in German rates next year
of 1.5% to 2% or possibly more, That should permit rates to resume declining in the UK
and cor~tjnental Europe, seuing the slage for some acceleration of European growth late next
year and into 1994. However, European fiscal policies will by and large be a drag on
growth for the next several years with both Haly and Germany headed for multi-year fiscal
consolidation.
�• The most robust growth in the world is likely \0 come from the Asia~Paciflc region. After
a sharp slowdown in 1990, China is booming again and supporting growth in the region.
The China boom is supporting strong growth in Hong Kong and Taiwan as well, although
concerns arc mounting that China will have to put a brake on credit expansion in 1993 in
response to rising intlation. With a recovery in North America likely to provide some
external support for Southeast Asian nations like Singapore and Malaysia, expect growth in
Asia excluding Japan [0 exceed 8% in 1993. following growth of about 7% in 1992 and 6%
in 1991.
• The outlook for Latin America remains generally positive as well. Brazil and Mexico are
expected to be at the low end of growth and Argentina. Chile, and Venezuela toward the
high end. In most cases, with Brazil as the key exception, inflation is expected to continue
to moderate while government finances should remain in near balance. While growth is
slowing from the pace of the last two years, Latin America should remain a healthy market
for U,S. exports and an attractive deslLnation for international capital flows.
(Source:
Merrill Lynch, "Global Economics and Currencies", (2/9/921
I>()SSIBLE QUESTIONS FOR PRESENTER:
• How feasible is a "global growth" strategy by the advanced industrial countries at this time'!
�REGIONAL PRESENTATION 1:
ECONOMIC COMMUNITY
\VUO: Jeffrey Canen is a professor of Finance and economics at the Co!umbia University
Business School and Director of the Intcrnatkmal Fellows Program at the Columbia
School for International and Public Affairs, He is the author of A Cold Peace~
A.!:ru::rica. Japan. Germany and the Struggle for Supremacy.
IIACKGROUNU:
Maastricht Treaty
• The Maastricht Treaty -- if ratified by all of the 12 member states of the European
Community
~~
will provide for tbe transition to a common European currency and a
common, independent Central Bank to complement the free trade benefits of the European
union and move Be nalions toward a deeper political and economic integration.
•
Public antipathy to greater economic and political convergence -- notably in Denmark and
Britain ~. has proved to be a more powerful brake on the Maastricht Treaty than the most
strident opposition of national governments. If the current Maastricht Treaty unravels, the
key elements of the treaty are likely to be negotiated separately.
• The first day of the Community's December J J-12 summit in Edinburgh was dominated by
attempts to overcome Denmark's June rejection of the Maastricht Treaty. Danish leaders
continued to pressure European Community leaders for special exemptions from the treaty,
saying public pressure may force it to leave the Community. The other EC members heJd
fast against setting a precedent for an "a 1a carte" Europe where each nation would choose
among the treaty's offerings.
EC'92
• Roughly 90% of the planed border free single market spanning the 12 members of the EC
will be in place by January I, 1993. The missing 10% covers, among other things,
proposals in intellectual property and corporate law) which would enable companies to take
better advantage of the single market. However, the absence of this legislation will not
drastically undermine cross-border activitics. furthermore, once the European Economic
Area (EEA) ~~ now running behind its schedule for January I, 1993 -- has been eSlablisfled.
the single market and frcc now of goods, services, capital and workers will also extend to
the seven EFTA (European Free Trade Area) countries,
• The Be's: 12 member countries have a combined population of almost 330 minion, with total
GDP of $6.8 trillion in 1992.
�Financial Markets/Monetary Policy
•
-In mid-September. a currency crisis erupted across Europe. setting off a wave of speculative
frenzy. Many currencies were unable to maintain their values within the European
Community's currency system -- which had been dominated by a strong German mark,
Several {;ountries, including Britain and Italy, abandoned the ERM (Excliange Rate
Mechanism), allowing their currencies to be dictated by market forces.
• As
a result of the recent turmoil in the currency markels, two possible scenarios have
emerged. Many ex.pecl the central role of the Deutschemark as the anchor of European
exchange rates -- and the corresponding leadership of German monetary policy -- to
continue. Germany's dominant position in this exchange rate regime can be attributed to
its rdative economic siz.e and its anti~inflationary credentials. However, others predict that
{lie ERM will soon perish and tbat the French Franc could replace the Deutschemark as
Europe's leading currency within a year.
EconQmic Growth
• Growth for Western Europe in 1992 was barely over 1 percent -- due to the lower than
anticipated performances of the British and German economies, Growth is not expected to'
be higher (han 2 % for the next two years.
• The key problem inhibiting growth in Europe is the combination of high interest rates and
high levels of government debt. Germany's decision to finance unification with large~scale
government borrowing has made it difficult for Germany's central bank (Bundesbank) to
lower interest rates -- even given the recession.
• Govermmmt spending in Europe is expected to decline as governments attempt to control
large budget deficits,
Prices and
W~
• The gradual reduction of inflation continues. Inflation is ex.pected to be down to 3,4% by
1996"" from 4.3% in 1992.
• Whether or not the Maastricht Treaty is ratified by all member states, the imperative
towards e<;onomtc convergence generated by the trade pressures of the single market will
continue, Governments are therefore expected to engage in policies that will put downward
pressure 00 inflation.
rise
• Unemployment in Western Europe is high -- averaging over 9.5% ~- and is expected to
even further, This can be Jargely attributed to the recent drive to reduce subsidies and move
toward freer Jabor markets, as well as tighter corporate cost comrols due to increased
competitj'''c pressures.
�U.SJEC RelatioDs
• Trade Balance. From 1985 to 1991) U.S. exports to the EC have increased from $53 billion
to $103 billion, During this same period, the U.S. trade balance with the EC has gone from
a deficit of $i9 billion to a surplus of $11 billion. However, anaJysts afe concerned that
slower growth in the EC will reduce U,S. exports in 1993.
• C,;,unpleting the Uruguay RQund: By far the biggest challenge ahead is wrapping up the
Uruguay Round, The fuiI range of UR talks have resumed in Geneva after the European
Community accepted a 21 percent reduction in its subsidized food exports: to avert the
:.pectcr of a trad0 war with the United States. GAlT's director~general set a goal to
conclude the talks by the end of this year. Some industries and members of Congress (e.g.,
Senator Baucus) believe that the Bush Administration will not achieve key negotiating
objectives in its rush to get a deal
•
US/UK Avialion Dispu«;: British Airways says it will withdraw its $750 million offer for
a 21 % voting stake in USAir jf approval is not granted by December 24, Other U.s,
airlines oppose the BA-USAir deal unless Britain allows prompt greater access to London's
Heathrow Airport, but a BritiSh proposaJ would not liberalize London routes until after a
thrcc~ycar transition period.
• S1eel Trade Policy: The Voluntary Restraint Agreements to buffer U.S, markers from
foreign subsidized and dumped steel expired in March 1992. The United States can either
resurrect the VRA's or allow the subsidy and dumping cases ~- which 12 U,S, steel
companies filed against imports from 21 countries after the VRA's expired ~- to run their
course. On November 30, the Commerce Department tentatively ruled that steel imported
into the l;.S. from Italy, Germany, France and 9 other foreign countries is being unfairly
subsidized,
[SQurces; Morgan Stanley International Investment Research, 12/2/92; Gary Hufbauer,
Institute for International Economics, 12/92~ The Economist Intelligence Unit,
Western Euro~: Regional Overvjew, Third Quancr 1992]
POSSIBLE QUI'STIONS FOR PRI'SENTER:
• What do
YOll
think wit! be the major potential flash points in
U.S.~EC
relations
In
the
1990s'I
•
In what way will the recent turmoJ! in Europc's currency markets affect the value of the
dollar and the U.S. economy in genera!'?
-.
Wh'lt has been the impact of Europe's recent currency problems on the ratification of the
Maastricht Treaty? What affcct, if any, would the failure of the ERM and even the
Maastricht Treaty have on the European Cotnmunity as a whole?
�R],GIONAL PRESENTATION II:
JAl'AN, 1'.R.C Al\1) ASIA PACIFIC
WHO: Glen FuktJsl'ima is the Director of Public Policy and Markel Development at AT&T
Japan Ltd. In 1988. he was appointed Deputy Assistant U,S, Trade Representative for
Japan and China, following three years as the Director for Japanese Affairs at the USTR
office in the While Housc. He has published The Politics. of U.S. Economic Friction.
IIACKGROUNI}:
I. Japan
Economic Telines
• Japan has enjoyed robust economk expansion with low inflation and unemployment for the
past 3 decades. During most of this period. an export-led growth strategy was followed.
In the second half of the 1980's, when the value of the yen rose sharply. rea1llet exports
declined and became a drag on growth. However, domestic demand ~ especially investment
~ picked up the slack and became the driving force for growth. Consumer spending also
increased in the late 1980's,
• Over the longer term, there has been a gradual slowing of Japan's growth rates from Ole
dOUble digit levels of the 1960's. Annual growtb averaged about 5 percent in the J970's
and just over 4 percent In the 1980's. Although a further slowdown was predicted for the
J99O's, GDP grew by 5,3 percent in 1990,
• However, a slowdown began in 1991 and ~~ with at leas.t two successive quarterly
contractions so far in 1992 it is. acknowledged that Japan is in a'recession. Corporate
profits havc' declined for the third consecutive year, bankruptcies have risen, the stock
markct has been dropping since 1988, real estate values have declined, banks and entire
. industries are in troublcj and businesses which have followed a tradition of "life time
employment~ are beginning to reduce their work forces.
MM
• It is widely agreed that the recession is the aftermath of actions taken in the late 1980's
when subsidies and a stimulative monetary policy, intended to maintain a high level of
business activity in the wake of the sharp appreciation of the yen. led to a sharp rise in asset
prices - the "bubble" years. With low interest rates and a strong yen, mooey poured into
the stock market and domestic and overseas rcal estate. When real estate and slock values
plummeted, the bubble burst. This. time the government is plJrsuing a restrictive monetary
policy, although a modest fiscal stimulus package was adopted in August.
�Consequences of the Recession
• There are two major alternative assessments of the likely consequences of the recession,
In one view, Japan is foilowing the classic pattern of a maturing cconomy. Generally
speaking, rapid growth is possible from a Jow base, but, as the economy expands and
modernizes, incremental improvements become more difficult to achieve. Thus, the long
term growth potential of the industrial countries is in the 3~4 percent range. In this view,
Japan will have to trim its expectations. It will recover from the present downturn hut then
settle for slower growth with less of an advamage in capital costs, rising labor costs, and
an easing of demand and private consumption,
• The second view comes from a much different perspective. 11 holds that Japan has been
engaging ill a major restructuring effurt which will result in a leaner, meaner business
sector, prepared to re-engage the U.S. and others for global markets and influence.
According to this view, Japanese firms are using the recession as justification to reduce
labor costs and to target ~ew areas of business i,nvestment.
• Japan's investment in manufacturing has been booming in recent years, itl Contrasl to the
decline of manufacturing investment in the U.S. These disparities arc creating an
"investment gap" which will take several years to work its way through the factory to the
market place. In 1991, Japan invested $230 billion more tban the U.S., despite the fact that
Japan's economy is only three-fifths the size of the US, with half the population. By the
mid 1990's, it is argued, Japan will be strategically repositioned to capture greater market
shares in key industrial sectors.
• In addition, Japanls decision to emphasize research and development enhances the effect>;
of the investment gap with regard to competitiveness. U.S. spending on civilian R&D has
been essentiaHy flat at 1.9 percent of GDP since 1983, Over the same period, Japan has.
increased its allocation of resources to commercial R&D ~~ which rose to 3% of GDP in
1989.
v,s. - Japan Trade
• Despite the economic slowdown in the West. Japan's global exports have been surging
recently while its imports, constrained by reduced consumer spending at home, have
declined. The result is a current account surplus much larger than what it was in 1984
(when the, Pla7.a Accord was entered into for the purpose of eliminating Japan's current
account surplus), But most of the recent increase appears to be a result of higher prices due
to the strengthening of the yen against the dollar, rather than an increase in the volume of
ex.ports.
�• Whatever the reason, the U.S. bilateral trade deficit with Japan has been increasing for the
past 3 years, having peaked in 1987 and then declined for a period afterwards. Most
notably, although U.S. exports of manufactured goods have been steadily increasing, the
deficit in this key sector exceeded $50 billion in 1991.
[Sources: Richard Kaufman, Joint Economic Committee, 12/92; "Japan's New Reality: A
Two Part Series", Wall Street Journal, 1217192, 12/8/92]
POssmLE QUESTIONS FOR PRESENTER:
• Do you think that Japan's economy will grow at a much slower rate in the 1990s than it has
in previous decades?
• Is the U.S. in danger of losing its economic position in the Asia-Pacific countries?
• What steps is Japan taking to upgrade its telecommunications infrastructure?
• As a fonner U.S. trade negotiator, what lessons have you learned about negotiating
successful trade agreements with Japan?
II. Peoples' Republic of China
The Chinese Economy - Growth
• China has achieved rapid economic growth for more than a decade. Although there is some
uncertainty about the accuracy of official Chinese statistics, most experts agree that annual
GNP growth has been in the 8-10 percent range during this period. The economy grew by
7 percent in 1991 and is expected to grow at a somewhat higher rate this year. Of course,
China's growth has been from a low economic base. Its GNP per capita is predicted by the
World Bank to be only $380 in 1992, with a total GNP between $455 and $600 billion.
China Trade Policies
• While economic reforms doubtlessly account for much of. China's success, China is also
using foreign trade to sustain rapid economic growth. Until now, Beijing has pursued an
export-led growth strategy combined with severe restrictions on imports. By and large,
foreign firms do not have full access to China' s domestic market.
• China's ability to increase exports is enhanced by: large inflows of foreign investment; an
abundance of lo~ cost labor (inel. prison labor); direct government support of export
industries; and indirect subsidies (Le., low-interest loans).
• To control imports China uses: import quotas and total bars against certain goods; excess
tariff rates (up to 100 percent); control over foreign exchange expenditures; and import
licensing.
�. The.U.S. -China Trade Balance
• In 1991, China's total exports grew by 16 percent. China', global trade surplus was $8.1
billion, down slightly from the 1990 figure ($8.7 billion). The 1991 bilateral surplus with
the U.S. reached $12.7 billion, up from $10.4 billion in 1990. Thus, China's trade surplus
with the U.S. exceeded its total global trade surplu,.
• The U.S. trade deficit with China has exploded in recent years. The U.S. had a modest
trade surplus with China in 1981 and 1982. By 1983, the U.S. bilateral trade surplus had
disappeared and the trade balance began moving in China's favor, rising to.a modest $300
million in 1984. In 199!, the trade deficit with China was $12.7 billion, up 22 percent from
the Y"'" before, and is expected to exceed $15 billion this Y""'.
• China's foreign exchange reserves. buUl up from repeated trade surpluses, now amount to
$43 billion, about the same level as the U.S. reserves ($44 billion), and the world's sixth
largest.
China's Share of U.S. Market
• The U.S, is presently China's largest export market, accounting fOf 26 percent of China's
total exports in 1991. Most experts believe that Chin.'s exports to the U.S. are likely to
continue growing rapidly for the rest of the decade. The largest categories of U.S. imports
from China are clothing items, toys and sporting goods, miscellaneous manufactured items,
household appliances, and radios and broadcast receivers, covering both the low tech, labor
intensive goods as well as the high-tech end of the U.S. market. The top U.S. exports to
China are fertilizer, agricultural products, and aircraft.
Relations With Other Trade
Partners
• The U.S. is not the only critic of China:s trade policies. Several European countries, Japan,
and other Asian countries have complained recently about lack of access to China's markets.
Some have taken retaliatory actions:
This year, Japan initiated its first-ever anti-dumping investigation of China.
South Korea has imposed prohibitive tariffs on agricultural and industrial products In
response to soaring bilatera1 trade deficits.
• China has taken some steps, in response to foreign criticism, to liberalize its import policies.
In genernJ. the responses bave been too limited and narrowly focused to reduce the major
barriers or make much difference in the trends. Beijing relaxed some import controls in
1991 and is committed to taking other liberalizing measures.
•
It promised to eliminate or reduce import licensing requirements for a number of
products and recently announced steps in that direction. Beijing also said it
would abolish the import regulatory tax that applied to 18 categories of high value
�goods (although on at least 2 of the items the Chinese immediately raised tariffs
to offset the elimination of the tax.)
• China has dispatched well publicized buying missions to the U.S. and Europe. But in many
cases the purchases announced in various countries merely finalized contracts that had
already been agreed to.
Chin. Plays The Japan Card
• In 1991 China played its Japan card. Japan was the one major Western trade pactner whose
bilateral trade deficit with it declined modestly. Beijing appears to have allowed Japan to
increase its share of the Chinese import market as 'a reward to Tokyo for being the first to
abandon the economic sanctions imposed by the West after the brutal crackdown at
Tiananmen Square.
[SQllrtes: Richard Kaufman, Joint Economic Committee, 12192; The Economist, ·When the
Dragon Wakes: A Survey of China, 1l/28/921
�REGIONAL I'RESE!'.TATION Ill:
I<'ORMER sovnrr UNION Ar-.1l EASTERN EUROPE
WIJO: Lawrence Summers is Vice President of Development Economics and Chief Economist
of the World Bank. He is on leave from his position as Nathaniel Ropes Professor of
Political Economy at Harvard University. He is the author of more than one hundred
articles and two books,
Unemployment.
Tax
Pulicy and
the EcQnom); and
Understanding
BACKGROUND:
I. Republics of the Fonner Soviet Union
•
In the 1980s, prior to the breakup oftne Soviet Union, the economy went through a lengthy
period of stagnation. Although official statistics arc notoriously unreliable, all experts agree
that the economy declined in 1990, and that this decline accelerated in 1991 and 1992.
Most experts beiieve the GDP situation has worsened this year. The decline is expected
to be in the 15-20 percent range for 1992.
• Among the more disturbing developments is the decline in the energy sector. The oil
industry has become one of the worst industrial performers. contributing to the drop in
overall exports. Without the hard currency that oil exports bring Ill, much needed imports
are constrained, Inflation has greatly worsened and is moving dangerously dose to
hyperinflation,
Although the official figures show only a negligibJe unemployment
rate,
there is much hidden unemployment and tne figure is expected to rise sharply by next year.
• The downsizing of the defense program is a potential bright spot in the sense that eventually
resources that went to the military will be reallocated 10 the civilian economy. By the end
of 1991, defense spending was about 25 percent below the 1988 level. Most experts expect
another substantial decline this year,
•
However, the ddense conversion program has been handled badly and many defense
enterprises are on the edge of financial coUapsc. Industrial interests have pressured the
government 10 continue subsidiz.ing the state owned enterprises. One result of the continued
prodlJction of arms despite the dramatic slowdown in purchases by the military has been a
large accumulation of stocks at the factories, To reduce these stocks and to earn hard
currency, the government is stepping up arms exports.
• With regard to the individua! republics of tbe FSU, the decline has been more or less across
the board; in i991 production declIned in each of the repUblics. The most notable declines
were in the larger republics· Russia, Ukraine, and Georgia,
�•
Because tile contraction has become so severe, and is not expected to significantly improve
until 1994 at the earliest, many see the situation as comparable to the Great Depression.
Some would temper that judgment by pointing out that at the present time official statistics
tend to t:xaggcrate difficulties and do nol yet fully take into aCCOUH! the emerging private
sector, In the CIA's view, there is at least a decade-long process taking place. in which
improvemeots wil1 come by fits and starts and will be marked by recuning crises.
• The setbacks reflected by the economic statistics and the political turmoil should not obscure
the fact that there has Men remarkable progress on economic reforms. Russia and all the
other republics have taken real steps towards transformations of their economic systems.
Many prices have been decontrolled, privatil.ation is going (orward, new financial systems
are being put inio place, foreign investment is being encouraged, and private sectors arc
mking hold. Of COOfSt\ such radical change has led to backlashes such as the one which
Presidcflt Boris Yeltsin apparently survived in the recent showdown with conservative forces
in the Russian parliament
Relations With
llL~
• The key issue in U,S, relations with the fonner Soviet Union is the extent to which the U.S.
will lend its financial support to this region's reform efforts. Many experts have criticized
the Bush administration for its neglect of Russia's needs in the year since the collapse of the
Soviet Union. They argue this delay has undermined President Yeltsin's position and
strengthened the hand of the hardliners that seek to reverse Yeltsin's efforts toward free
market reform.
• All in all, the Western aid ~~ including bilateral and multilateral donors -- has amounted to
$10 billion of unstructured lending: without a program, a timetable, or an attempt to link
the vasl majority of the funds to actual reform measures,
11. Eastern Europe
•
Econonlic (ransformation in the former Soviet Bloc countries of East Europe is turning out
to be a longer and more painful process than first anticipated. The difficulties are reflected
in the deepening recession throughout most of the region, GNP in the 5 former bloc
countries (no! induding the former East Germany) declined by an average of 7 percent in
1990 and by 13 percent in 199 L
• The largest declines. were registered by Bulgana. Czechoslovakia, and Romania. Only in
Poland was the decline less jn 1991 than 1990, (n addition. official German statislics show
that cCI1ditions in toe former E.ast Germany arc, so far, at least as bad as in the other
countries, Basi German GNP declined by 28.4 percent in 1991,
•
~1ost
Other indicators sbow deteriorating conditions. Industrial production has dropped and
unemployment has soared. Much of the region's: difficulties (in addition to the systemic
problems inherem in the centrally planned economic systems that formerly prevailed) arc
related to the disruption of trade with the former Soviet Union, on which each country was
�..
heavily dependent E'..ast Europe's trade with the former Soviet Union was cut in half in
1991. At the same time, {he European Community has been slow to give Ihe East
Europeans 2.CCesS to West European markets. Western private inveSHllent flows have also
been below expectations. wilh the exception of the former East Germany which has received
large infusions of capital from the WesL
• Reform policies have achieved positive results in the area of inflation. Prices went up
sharply in the early period of independence from Moscow, but were reduced in J991. On
the other hand, the government spending cuts, and the austerity programs imposed to
achieve those resulls, have provoked popular discontent and caused some governments (Q
slow the reform process. In Poland, where wages and spending for social programs have
been incfcased, there has been at least a panial retreat from the "shock therapy", fast track
approach to reform.
• The German government is now making a similar mid-colJrse correction. Chancellor
Helmut Kohl recently indicated that the "privatize or close" policy will no longer be
followed in East Germany, where official unemployment is 14,6 percent. Instead, some
mal"lUfacluring firms will be kept in business with state subs.idles and there will be a m~re
gradual approach to industrial restructuring,
• Still, significant progress in reforms has been made in each country. In general, prices arc
being dc-controlled, property rights are stronger, private markets are expanding. and
currencks are more convertible. The greatest advances have been made in Hungary. which
has attracted more foreign investment than any of the other countries. and Cz.echoslovakia,
wbich has accelerated tbe reform process,
• Poland, among other measures, has introduced Western style corporate and personal income
taxes, with personal deductions to encourage home ownership. As in some of the other
countries, foreign investment is still impeded by political instability, questions about
property ownership claims, and government red tape. In Bulgaria, a privatization law was
enacted this year, attempting to reconcile employees' interests in state~owf)ed enterprises and
citizen's concerns that the former Communist managers would benefit.
• Romania, which is already in its third post-Communist government, has taken the slowest
path to change and is moving cautiously, if at all, towards a market system, Officials there
speak of developing a "social market economy'" suggesting the government will continue
to control key sectors, Nonetheless, retail stores are being privatized, there has been
progress lowards currency convertibility, and there has been relatively strong growth of
foreign investment.
[Sources: PlanEcoii. Review and Qutlook. Analysis and Forecasts to 1996 of Economic
Developments in Eastern E!.l[Q~, 6/92; PlanEcon, Review and Outlook. Analxsis
and Forecasts to 1996 of Economic Developments in the Former Soviet
Republics, 11/92: Economist Intelligence Unit, Commonwealth of lndepenuent
States: Country Rel'Ort. Third Quarter 1992]
�I'OSSlIILE QUESTIONS FOR I'RESENTER:
•
ls the reform path that the former Soviet Union and Eastern Europe have embarked upon
politically sustainable?
•
Arc the advanced industrial countries doing a good job of coordinating their development
assistance?
• What role have the multilateral organizations such as the World Bank and the IMF played
in the reforms being undertaken by the former Soviet Bloc countries'!
�REGIONAL I'RESENTATlON IV:
LATIN AiVlERICA
)
WHO: Paula Stern is president of The Stem Group, an economic analysis and trade advIsory
firm in Washington, D,C. She is Senior Adviwr and member of the Trade Policy
Subcouncil of the federally mandated Competitiveness Policy Council. The group is
preparing a report and recommendations on tra.de policy for a more competitive
America thai wili be delivered to the incoming Administration and ne"w Congress. For
the past rouneen months, she has also been serving the Clinton/Gore campaign as a
Senior Advisor on trade and international economic matters,
IIACKGROU]I;D:
•
Latin America is on tr.lck to become a dynamic growth region in the 19905. This
remarkable about turn from the debt-induced depression of the 19805 results from the
region's nearly unanimous embrace of sound, markcl--oriented economic fundamentals, in
addition to the rise of a new breed of government techoocnus who are determined to make
the reforms endure,
• Progress could be abruptly derailed. however, by the failure
to build supportive political
coalitions and by other domestic and external sliocks. Latin American politics are ffitlch less
volatile tlian a decade or two ago, but democracy is still not firmly rooted.
•
In the early 1980s. (WO adverse external shocks jOlted Latin America's balance of payments
.- a spike in interest rates and the flight of commercial lenders. Now I in a dramatic
reversal. the region is the beneficiary of two favorable shocks -- the dip in global interest
rates and renewed acceptance on international capital markets,
• To spur (!Xports while increasing overall economic efficiency and lowering domestic prices,
governments have been unilaterally dismantling their highly protectionist trade regimes.
Many have abollshed quantitative restrictions and are dramatically lowering trade harriers.
For example, Argcmina has cuI ils average tariff from 43 percent to 9 percent.
•
The chief underlying cause of the great Latin' American inflation fiscal deficits has bcc:)
substantially corrected. Central government deficits, which averaged nearly 7 percent (If
GDP from 1981 88, wcre stashed to 2,3 percent during 1989-91.
M
•
While the economics of the region are healmg up, most growth rates are likely to remain
lukewarm over the medium nm, Constrained by inflation fears and capital shortages, Latin
America· with the exception of Chile ~ is unlikely to enjoy the spectacular 8~10 percenl
annual growth racked up by the Asian Tigers during their boom years.
•
Brazil -- tbe hemisphere's big disappointment -- lb lagging badly. the expectation of a lUrn
of events is gone. InvcSllllcnt has faBen off sharply, and real wages have been dL"cJining.
The opportunities for massive privatization to help stabilize the budget and SlOp 1000 percent
ifltlulion per year arc being squandered, There is a possibility of economic populism under
the new President ~ no cure for Brazil's problems.
�.'
•
Dcbt prQbl~Jm arc (lot central to the -prooccupalions of flU)' of the large l.,atin AmenC3Jl
The problem today is how to stabilize inflation, how fast to reform, how much
CCQnQmif:~.
to tap the world capital market. The pattern of secondary market deht prices reflects the
varying debtor quality as rated by creditors in the world market. Chile looks very good,
as does Colombia. while Peru looks terrible"
• In the longer term, expected changes in world and regional trade policies during the 1990's
should have a positive impact on Latin America. Latin America needs high exports in the
1990's to achieve sustained growth. Tbe North American Free Trade Agreement (NAFTA)
wit! benefit Mexico, and a successful conclusion of the Uruguay Round of GA'rr will help
, food exporters and perhaps some textile and clothing exporters, Better market access alone.
however, will not guamnlcc strong improvements in cxpons and growth,
Effects on th(~ United
•
~j;\les
Latin American growth in 1993 will have only moderate effects on the U.S, economy, U.S,
lotal exports in 199J amounted to $422 hillion, Only 15 percent ortha! total wen! to Latin
6rnerica.
.
• Tbe trade opening of Latin Amenca is still having very strong positive: effects on our
exports. Over the past 3 years, our exports to 1he region have grown in dollar terms by 13
percent per year, As a result of only moderate growth in the region, we anticipate growth
of only 10 percent for the coming year.
[Sources: Economic Commission for Latin America; Inter-American Dialogue; The
Economist Intelligence Unlt. Lalin America: Regional Overview, Third Quarter
1992: "Latin America: Back on the Screen". Richard E, Feinberg, Internatjonal
Eoonomic It\sights]
!'OSSIIlLE QUESTIONS FOR I'RESENTER:
•
Now that the debt crisis has been hrought under conlrol, what
chaHenge that the region faces?
•
In what way have r\X:l:nl global movements toward regional lrade arrang\!mcnts ~~ such as
Europe's Economic Community, char'd<..:tcnzt.'d by prefcrenliallfade relations within a group
of nations .• manifested itself in Latin AmcflC<i?
1S
the major economic
�.
REGIONAL PRESEi','TATION V:
AFRICA
WIIO: Robert Browne is an economist at Howard University. From 1986 to 1991, he was
the Staff Director for the Subcommittee on International Development, Fiancee, Trade
and Monetary Policy (of the House Banking Committee). Under Carter, he was a
mcmt>cr of the Panel of Economic Advisors in the Congressional Budget Office. He
founded the Black r~nomic Researcb Center and has lectured extensively on aspects
of economic development and African-American relations,
UACKGROUNO:
•
to tbe
mid~1980s.
a growing number of African countries recognized the need to make
fundamental economic policy reforms. At present, about 30 countries are at various stages
of (he reform process, assisted by the international financial institutions and bilateral donors.
• In those countries where it has been vigorously pursued, the economic reforms begun in the
mid~80s have yielded significant benefits: lower fiscal deficits. improved current accounl
balances, lower inflation rates and, in many cases, external trade reforms and more
compc!itive exchange rates. Most adjusting countries have also attempted to initiatc
programs: [0 divest public enterprises ~- in addition to liberalizing agriculture prices and
commodities, and implementing financial sector reforms.
• Throughout thc region, there are now an unprecedented number of countries engaged in
peaceful political transitions.. However, the economic and financial costs to this political
tmnshiol1 have been severe -* diverting attention from long term economic issues. In some
cases, transitional governments have not felt secure enough to introduce or implement tough
economic reforms. Most seriOUSly, many countries that had been attempting to shift toward
mnrkct economies and a reduced role for their governments have found these efforts
complicated by this political transformation.
•
Moreover, over the last two years, the region has been hindered by three factors: the
sluggish growth of industrial economics~ which dampened world commodity prices and
demand for African exports; a drought that struck 10 countries in Eastern and Southern
Afrie:l; and severe debt serviee obligations.
• As a result, problems in most African countrlcs remain severe
-~
reminiscent of the 1980s
"Africa CriSIS" -- which was characterized by poverty, hunger, environmental degradation,
.1 large debt burden and negligible private investment:
Per capita inc-Omes and consumption have declined in the last two years and arc below
1970 levels,
Invcstment rates are well below historical or desirable levels.
Social ex.penditures are not keeping up with the emerging demands of the population.
�Most government~ are still facing fiscal cns]s and their dependence on external
resources has intensified.
lnfr'lstructure and other capital assets suffer from a lack of adequate maintenance and
rehabilitation,
In 1>91, the region's GDP grew by only 0.8% (excluding South Africa and Nigeria).
Growth in 1992 is estimated to be a weak 2.7%
In 1991 and 1992, agricultural production continued to stagnate. Food production
remains insufficient to feed rapidly growing populations, leading to a growing
dependence on food imports.
Weakness in world primary commodity pnces continues· to cloud the balance of
payments of the reglon.
• During the 1970s and early 19805, Sub-Saharan African countries plunged themselves into
debt, borrowing heavily at negative real interest rates to finance unsustainable government
consumption and unproductive investment
• As a result, lhese African countries remain among the most indebted of developing nations.
At the end of 1990, the region's debt was about $161 billion -- 112% of GNP. Thirty of
the region's 44 countries -~ 24 of which the World Bank considers severely indebted ~~ were
forced to reschedule their debt, mostly through the Paris Cluh bilateral mechanisms.
R.elations Wilh Ihe U. s.
•
The World Bank argues that, with the end of the Cold War, Africa feels neglected _.
especially economically. U.S, aid to Africa today totals $800 million a year -- only 5% of
a foreign aid budget of $15 billion, The World Bank recommends a doubling of this amount
within the existing foreign aid budget, combined with an opening of the U.S. markets to
African expons on a preferential basis and increased U,S, investment in the region.
rSO\lfces: Mr. Edward Jaycox, v.P. Africa, The World Bank, 12192; The Global Coalition
for Africa, 1992 Annual Report, 11/92]
POSSIIILE QUESTIONS FOR PRESENTER:
• Could the U,S, private sector playa greater role in African economic developm'enl?
�.'
• In what way is the African debt crisis similar to the one experienced by the Latin American
nmions in the mid·1980s? What lessons did we learn from the Latin American experience
that might help Africa avert further turmoil?
• Some anribute Africa's current balance of payment'i to concentration on a few primary
products. What measures can these countries take to diversify their production and export
base?
• What countries have been the most successful in implementing economic reforms and what
lypes of reforms have been mOS1 effective? Does a consensus exist on what needs to be
dune? (yes)
�•
>
1-:
�,"
~-!.
Lifetime Learning Pand
President-clcct Bill Clinton
Vice
President~elect
*
Lisbeth "U" Shore
AJ Gore, Jr.
Facundo Bravo
Ed ArlZt
Heather \Veiss ..
Linda Johnson Rice
Larry Farmer. Sr.
~~--------------
See. of the Treasury Lloyd Bentsen
Martha Diepenbroc=k-'-::-c-:-_ _ _ __
Kay Koplovitz
Sec. of Labor Robe,"! Reich
Dick Jenrette
Arnold Hiatt '"
Chair of CEA Laura Tyson
AI Shanker
David Britt
Raul Yzaguirre
William Wilson
Keith Geiger
Mary Kelley
Johnnena B. Cole
*
Buzz Fitzgerald
Economk Policy Advisor' Robert Rubin
Director of OMB Leon ranetta
Diana Meehan
AI Boutte
Paul Allaire "
Candice Carpenter
Mike Bailin
Sec. of Commerce Ron Bro\\"11
Gerald Grinstein
* ;;: Presenter
Podium
presenters
1. Hilary Pennington
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Educat.ion Panel
company
Name
~Mr.
Paul Allaire
Mr. Edwin L* Artzt
Mr. Mike Bailin
Mr. Al Boutte
Mr. Facundo Bravo
Mr. David Britt
Ms. Candice carpenter
Johnnetta B. cole
Martha Oiepenbrock
Mr. Larry Farmer, Sr.
"t Ms ~
Ms~
Mr. Buzz Fitzgerald
Mr. Keith Geiger
Mr • Gerald Grinstein
,. Mr. Arnold Hiatt
Mr. Richard H. Jenrette
Ms. Mary F. Kelley
Ms. Kay Koplovitz
Ms. Diana Meehan
.">1,. Ms. Hilary Pennington("Q,~-,::J)
Ms. Linda Johnson Rice
Lisbeth Schorr
Mr. Al Shanker
~Ms. Heather Weiss
Mr. william Julius Wilson
Mr. Raul Yzaguirre
AI; Ms.
category
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Xerox corporation
Procter and Gamble
Public/Private
Independence Bank
Uniboring, Inc.
High Tech
Consumer
Non Profit
CommerGial
Small Business
Communications
Telecommunicati
Academia
tfon Profit
Non Profit
Defense
Labor
Transportation
Consumer
Insurance
Small Business
communications
Entertainment
Non Profit
Communications
conununications
Labor
CT
Children's
Time-Life Video and
Spelman College
L.A. conservation
Mississippi Action
Bath Ironworks
NEA
Burlington Northern
Stride Rite
The Equitable
strait Kushinsky and
USA Network
UBU Productions
Jobs for the Future
Johnson Publishing
Harvard Project
American Federation
Harvard University
Department of
National Council of
OH
PA
IL
MI
NY
VA
GA
CA
MS
ME
DC
Phone #
----------------------------------203 968 3000
513-983-1100
215-592-9099
312-487-4"'00
517 548 0500
212-595-3456
703-838-7003
404 223 1400
213-749-3601
601-335-3523
TX
207-443-3311
202-833-4000
817-878-2272
MA
617-491-8800
NY
CO
NY
303-623-5900
212-554-3120
212-408-2700
CA
MA
310-471-4243
II,
DC
DC
312-322-9200
202-462-3071
.202-879-4400
staff
Academia
Education
IL
DC
312-702-089'
202-289-1380
~ i?i{~N i'J l...
,
�WORKING SESSION I: LIFETIME LEARNING
Presenters:
Paul Allaire
Johnnetta B. Cole
Arnold Hiatt
Hillary Pennington
Usbeth Schorr
Heather Weiss
Panelists:
I~
CinCinnati, OH
Chairman and CEO of Proctor & Gamble since 1990
Director of GTE, Teradyne and Delta.
Member of Bush AdviSOry Conunittee on Trade Policy and Negotiations,
Bush Conunission on Environmental Quality.
Artzt.
Primary concerns:
1) Wha.t changes in the tax law, if any, should be considered to stimulate
the economy and help reduce the deficit? How can we increase revenues
without jeopardizing U.S. global competitiveness?
2) Small business needs access to investment capital.
Bailin. Michael A.
Philadelphia, PA
President of Public/Private Ventures since 1983
P/PV is a non-profit corporation dedicated to designing solutions to high
dropout rate, illiteracy, teen pregnancy and youth unemployment, and
helping public and private sector concerns to emulate successful
programs.
Primary concerns: How can your economic policies be formulated to
maximally improve the prospect s for families who are not on public
assistance but not yet of the middle class? And how can your work
force improvement policies/programs be formulated to address the
needs of those young people not equipped to take advantage of the
"apprentice-like" and "National Trust" opportunities you have
proposed?
�Boutte, A1Yin J.
Chicago, IL
President and Chief Executive Officer of Indecorp Inc.
Chalnnan and Chief Executive Officer of Independence Bank of
Chicago and Drexel National Bank
Board Member of Better Business Bureau of Metropolitan Chicago,
Trust Inc., and several other organizations
Bravo. Farundo
Howell, MI
President of Uniboring Company, Inc. (precision machining specialty
shop)
Born and raised in Argentina. Emigrated to US at age 23.
Joined Uniboring in 1976 and became major stockholder in 1982.
On Fortune 500 of Hispanic-owned companies.
Received "National Businessman of the Year" Award from US Hispanic
Chamber of Commerce this year.
Primary concerns: Is the new administration ,,"!ling to reinstate the
investment tax credit to businesses to help stimulate jobs and investment
in new technologies?
Ilon, DWLid V.B.
New York, NY
President and C.E.O. of Children's Television Workshop (CTW)
Served as Deputy Director of Communication for US Special Action Office
for Drug Abuse Prevention; Senior Planning Officer, Overseas Private
Investment Corporation; Director, Program and Plans, EEOC; Chief,
Legislation Presentation Staff, USAID.
Primary concerns: Structural refonn of the U.S, economy and the role of
education.
Carpenter. Candice M.
Washington, DC
President of Time-Ufe Video and Television since 1989
Former V.P. of American Express. Travel Related Services for Direct
Marketing
Primary concerns:
1) How can we bring a strategic focus, based on a vision for our future, to
the issue of competitiveness globally? Private versus public role in this?
2) How can we make a quantum leap in the development of human
infrastn1cture, and make this our primary competitive edge in the next
century"!
�."
Diej)enbrock. Martha
Executive Director, the Los Angeles Conservation Corps
Founded New York Conservation Corps
Former Associate Director, California Conservation Corps
Former Conservation Corps Cadet
Primary concerns: Youth service corps as part of jobs stimulation/public
works project.
Fanner. Larry N" Sr.
Greenville. MS
President and CEO of Mississippi Action for Community Education
(MACE)
Began as MACE leadership development trainee.
Under his direction, MACE has secured, millions to support development
of low income housing, incorporation of five black-managed towns, and
become one of nation's leading rural community development
organizations. .
Primary concerns: economic development in rural areas. :
Bath, ME
Fitzgerald, Duane D. "Buzz"
President and C.E.O. of Bath Iron Works (since 1991)
Bath is Maine's largest private employer and one of the nation's largest
shipbuilders.
Leading successful conversion to non-military shipbuilding.
Leader wnong U.S. shipyards in developing innovative workplace
Primary concerns: Health care
Geiger. Keith
Washington, DC
President of National Education Association
30 year career in all aspects of education
Spokesperson for Campaign for New Priorities
Member of Education Policy Advisory Committee and several other
education committees
Ft. Worth, TX
Grinstein. Gerald
Chairman, President and C.E.O. of Burlington Northern Inc. (since 1991)
Former C.E.O. of Western Airlines
Member of the Business Roundtable
Primary concerns: Long and short-term job expansion; relationship
between education and work.
�lentett,;. Richard H, "Dick"
New York, NY
Chairman and c.E.0. of The Equitable Companies
Chairman of Donaldson, Lufkin & Jenrette
Member of the Business Roundtable
Primary concerns: Trade deficit
Kelley. Mary Frances
Denver, CO
Director of Audit and Consulting, Strait-Kushinsky and Company
(accounting)
N.F.I.B. Board; Federai Reserve Board, Kansas City, Smail Business and
Agriculturai Committee; Greater Denver Chamber of Commerce; Whlte
House Conference on Smail Business; U.s. Chamber of Commerce Small
Business Council.
Primary concerns: How do we preserve and enhance the job generating
ability of smail business?
New York, NY
KOllloyitz. Kay
Founder, President and C.E.O. of USA Network (since 1980)
Led Industry-wide anti-drug initiative with the Partnership for a Drug
Free America
Boards: liz Claiborne Inc., General Re, the American Bu'siness Conference,
and the New York City Partnership.
Los Angeles, CA
Meehan. Diana M.
Creator of VU Productions - a partnership of women committed to
producing non-fiction media on issues relating to women, children and
family ("Women in War," LIFETIME's "Oanger:Kids at Work," "Shattered
Lullabies," and ABC's "Workforce 2000")
Founder of the Institute for the Study of Men and Women at U.S.C.
Moderator of the 1988 Great American Family Tour
Primary concerns: women-owned businesses.
Rice. Linda lohnson
Chicago, IL
President and Chief Operating Officer of Johnson Publishing Co., Inc.
Executive Producer of EBONYfJET Showcase
Board Member of numerous associations including Continental Bank
Corp., Bausch &Lomb [nc., Magazine Publishers Assn.
Primary concerns: How can we employ all our unskilled workers'!
�,',
Shanker. Albert
Washington, DC
President, American Federation of Teachers (since 1974)
Member, President's Council on Competetiveness
Wilson. Julius William
Lucy Flower University Professor of Sociology and Public Policy at the U.
of Chicago
Director of the Center for the Study of Urban Inequality at the U. of
Chicago
Books include: The Truly Disadvantaged: The Inner City, The Underciass,
and Public Policy
Yzaguirre. Raul Hon.
Washington D.C.
,
President and CEO of National Council of La Raza since 1978
Founded National Organization for Mexican American Services and
Hispanic Association for Corporate Responsibility
Primary concerns: A comprehensive economic growth strategy including
infrastructure, human capital, investment incentives, and technological
innovation.
�."
WORKING SESSION I:
LIFELONG LEARNING
EVENT:
Discuss lifetime learning in 2 one-hour segments: preparation for school and the school-to-work
transition.
Prep for school is divided further into three segments:
• The government's role - Lisbeth Schorr, Harvard professor
Parental responsibility/family support programs -- Heather Weiss, Director of the Harvard
Family Research Project
o The role of the private-sector - Arnold Hiatt, former CEO of Stride-Rite
o
School-te-work is divided into sections on:
o Apprenticeships - HUlary Pennington, head of the non-profit Jobs For the Future
o National Service Trust Fund - Joboota Cole, president of Spelman College
• The needs of the bigb-perfonnance workplace - Paul Allaire, CEO of Xerox
RATIONALE:
Prep for school and the school-to-work transition were chosen as the two segments because in
these two areas, you have proposed clear investment strategies that can he direcUy linked to
programs. In the prep-for-school section, programs like Head Start, WIe and HIPPY stand out,
and in the school-to-work transition, a national apprenticeship program and the National Service
Trust Fund would be major steps.
ATTACHED:
• Goals for Preparation For School session
• Presenters and topics
• Discussion points/questions
• Additional background
•
Potential points of contention
• Goals for Preparation For Work session
• Presenters and topics
• Discussion points/questions
• Additional background
o
Potential pitfalls
�PREPARATION FOR SCHOOL
GOALS:
Show the positive investmetlts that can and should be made early in a person's life.
Emphasize tt,at everyone has an equally important role to play: government, parents and business
working toge:ther in partnerships. That's why a presenter will talk about each sector.
Stress that the ultimate responsibility belongs to the parents.
TOPIC:
Government role in preparing kids for school -- Head Start, WIC.
WHO:
Lisbeth Schorr is a lecturer in social medicine at Harvard University, a member of the
Harvard University Working Group on Early Life, and Director of the Harvard University
Project on Effective Services. She is: a national authority on improving the future of
disadvantaged children and their families, and she wrote the highly influential book, Within Our
Reach: Breaking lbs Cycle of Disarlvanlage.
TOPIC:
Family support programs such as illPPY. Emphasis on affordable programs that work with the
family unit. Also child support enforcement.
WHO:
Heather Weiss, founder and director of the Harvard Family Research Project (HFRP). Lecturer
at the Harvard University Graduate School of Education. The project analyzes emerging family
support and r.ducation programs. The group has focused its research on the state-level initiatives
in recognition of the role of states as leaders in policy making and implementation, Weiss is a
nationally-recognized authority on family support initiatives.
TOPIC:
Private~sector
roJe in preparing children for s·chool. Includes child care, family leave, etc.
WHO:
Arnold Hiatt l former CEO of Stride-Rite. Famous for pioneering progressive company policies
on child care and' family leave. Retired in June 1992. Joined the company in 1968.
Under Hiatt's leadership. Stride-Rite's first on-site day-care center opened 20 years ago, and
they now have an Intergenerational Day Care Center at Iheir Cambridge, MA headquarters,
where employees and members of the local community have a place to get care for both their
aging parents and their children.
Its family leave policy inclUdes paid disability leave for childbirth, plus up 10 eighteen weeks
unpaid family leave; paid time off may be used for shorHerm care of iiI dependents.
Hiatt once Stdd. "We don't live in a vacuum. We live in a community, And that community has
�."
needs. It is poople from the community who buy our products and support our business. It
doesn't seem SO farfetched to have an interest in the well-being of that community. were just
broadening the definition of our self-interest.
1/
DISCUSSION POINTS/QUESTIONS:
(for Lisbeth Schorr) Are there ways of reorganizing the services we provide to achieve greater
outcomes at the same cost? For example, if we reformed the system of providing pre-natal care
to pregnant women, could we save money ruilllower the incidence of sick infants?
(for Heather Weiss) I know that one study called the 3 year-olds in Missouri's Parents As
Teachers (PAn program "significanUy more advanced" than other 3 year-aids. Is that a common
finding with these kinds of progrnms? alle Unfinished Agenda, Committee for Economic"
Development)
(for Heather Weiss) You talked about programs which involved things like parent support groups
and neighborhood resource centers which have been very important to parents and families but
don't need any real money. TeH us about some other aspects of these programs that don't
involve new government spending. I like those.
(for Heather Weiss) I'd like to talk about child support for a moment because I believe this is
an area that needs serious attention. We establish paternity in less than 30 porcent of out-of·
wedlock births in this country -~ clearly we are not aggressive enough in establishing paternity
and enforcing child support payments. Aggressive states 1ike Michigan succeed in about two- '
thirds of such cases. What kind of national effort would it take to track down delinquent parents!
(Irwin Garfinkel, Assuring Child S\!l1llIlrl, p. 68)
Note: Child support discussions do not figure prominently in Weiss' work; however, it probably
deserves a place in this discussion. You may be the one to steer the discussion in this directlon,
(for Arnold Hiatt) I understand businesses have taken Significantly more responsibility in helping
their emplo)'ees with child care in the last decade. I believe the number of large employers that
offer child-care assistance is up to 5400 at last count. But why haven't more businesses created
on~site day (;are centers?
(for Arnold Hiatt) To the CEO, here, what are some of the more innovative things that
companies are doing to help with child care, even if you don't have on-site centers.
For most working families. child care is the fourth most expensive budget item, after food.
housing, and taxes. (An America That Works, Committee for Economic Development, 1990,
p. 115)
�BACKGROUND:
Many studies show that children who start school unprepared suffer for many years afterwards.
Far too many American children currently go to school in inadequate health and unprepared 10
learn.
Two main points stand out from a consideration of these issues, First, money spent by the
Federal government on appropriate preschool interventions has an extremely high social rale of
return.
A rough ealculation of the costs and benefits of each program, taken from summaries by Isabell
SawhiH. indicates that:
Program
WIC
Benefil:CQJi! Ralio Per£<:nl of Targe! Popylation Served
3: I
Prenatal Care
3.4:1
Childhood Immunization 10:1
Head Start
6:1
Compensatory education 4.9:1
50 - 60%
75
80 - 88
30
50
Head Start is a government program that has almost universally been found to be most .ucressful
in preparing children for school. The best evidence on compensatory education programs similar
to Head Start comes from studies that began in the early 19605: the Early Training Proje<:t in
Tennessee; the Perry Preschool Program in Ypsilanti, Michigan; and the IDS Harlem Proje<:t
Of these three, the Perry Preschool Program is the one with the most extensive follow-ups.
Children in the program advanced farther in school, did better in the !aber market, and were less
likely to become involved in criminal activities than were the control children.
Similar results have been found for Head Start, although the evaluations here are somewhat less
complete. A 1985 study examined over 2 I0 research reports on the effedlveness of Head Start
concluded that:
"Children enrolled in Head Start enjoy significant immediate gains in cognitive test scores,
socioemotional test scores. and health status. In the long run, cognitive and socjoemotional test
scores of former Head Start students do not remain superior to those of disadvantaged children
who did not attend Head Start. However, a small sub,et of studies find that former Head Starts
are more likely to be promoted to the next grade and are less likely to be assigned to spe<:ial
education classes, Head Start also has aided families by providing health, social and educational
services and by linking famities with services available in the community. Finally, educational,
economic, health. care, social service and other institutions have been influenced by Head Start
staff and parents to provide benefits to both Head Start and non-Head Start families in their
respe<:tive communities.' (Head Start Synthesis PIQject, p. I)
The up-front cost of enrolling every eligible child in Head Start would be $5 to 6 billion more
than we currently spend, a modest amount considering the 6: 1 rate of return. (An America That
Works, Committee for Economic Development, p, 16)
�A second program with large social returns is the Supplemental Food Program for \Vomen,
Infants and Children (WIC) program. WIC provides nutritional risk assessments, food
supplementation, nutrition education, and health and social service referrals to low-income
pregnant and postpanum women and their infants. up to age 5. The most comprehensive
evaluation of the WIC program was conducted by the United States Department of Agriculture
in 1985. As summarized by Usbeth Schorr in Within Our Reach. "Among the study's findings
(are)"
'. WIC participation reduces premature births among high risk motllers by 15 to 25 perccnt
- WIC participation helps bring more women into prenatal care earlier in their pregnancy
and incrt'ases the likelihood that they will have the desirable number of prenatal visits
• WIC partiCipation raises tlle chances tllat children will have a regular source of medical
care and be better immunized.
- WIC participation has the largest impact among minorities and the least well informed.
Among children, the greatest benefits are reaped by those who are poor, small of stature, black,
and in sing1e-parent families. 10
WIC also appears to have very large returns. The General Accounting Office concluded that
each $1 of WIC spending returned $3.50 over 18 years to governments, of which $2.89 was
savings in tlle year after birth. Indeed, many of tlle benefits of the WIC program occur shortly
after the spending. Mathematic Policy Research, for example, estimates that in tlle first 60 days
after birth, WIC saves about $600 in Medicaid spending alone.
But programs such as Head Start and WIC currently fail to serve a substantial fraction of their
intended larget population.
• Only thirty percent of children eligible to enroll in Head Start actually do, and only fifty
percent of women eligible for WIC actually receive benefits.
•
These programs have a demonstrated capacity to make a difference in the lives of children and
compensate for some of the well~known deficiencies in family functionlng. Carefully expanding
such programs would be a good use of scarce resources, It would represent a wise investment
in the future.
Eamil): S\!l!P'ID Programs:
A source of IX'tentiaHy useful early interventions are programs to strengthen and build family
ties. improve parenting skills, and encourage parental responsibility.
A number of states have recently established community-based family support and education
programs; in which community agencies employ lay or professional workers to provide support
during pregnancy, infancy, and/or early childhood. Support is generally provided informally,
in the home and through peer suppon groups or parent-eOucation classes.
Evaluations (If these programs suggest that they do influence parenting behavior. and that they
�affect parentwchild interactions. Children whose families have participated in these programs are
better adjusted socially. have better parent-child relationships, and perfonn better in schooL
Unfortunately, our knowledge of the long-run efficacy of these programs is limited.
Weiss' research concludes that creative statewlocal or pubHc~private partnerships: in program
development and funding are a key ingredient to successful endeavors. Weiss Slresses the
importance of preserving community~based approaches. with significant local discretion of tIle
program development to avoid ngid l bureaucratic programs poorly matched to local needs.
Her work emphasizes that the most productive programs are family-centered • not eentered
around the parent or child. preventative rather than interventionist, non~bureaucratic in
orienlation and geared to promote self-sufficiency.
Arkansas' HIPPY program is one of the family support programs Weiss has studied and praised
- it trains parents of at-risk children with a structured two--year curriculum of daily lessons to
prepare their kids for school.
Missouri's Parents as Teachers (pAT) program •• also cited by Weiss -- provides parent
'education in the form of home visits by parent educators, monthly group meetings at
neighborhood parent resource centers, and developmental screening for physical, cognitive and
language development of children from birth through age four in every school district in the
Slate, A study of the program concluded that children in the PAT program were ·significantly
more advane<:d" in language and social development than other three-year-olds.
Unfinished
Agenda t Committee for Economic Development, p. 19)
me
Another example is Kentucky's Family Literacy Project, which enhances the basic literacy and
parenting skills of parents of disadvantaged children while their children are in preschool. It
requires thaI parent and child be enrolled in programs simultaneously, based on the notion Ihat
comprehensive and Hnked. learning experiences crea.te a stronger basis for long-term motivation
to leam, for both the parent and the child.
Child $uPm[J:
1
We can do better in child support enforcement. Slates that are tough on child support get good
returns; a coordinated national effort would strengthen families.
• In 1989. only fifty percent of families that were supposed to receive child support payments
received the fuB amount of the payment. Twenty-four percent received partial payment, and
the remainder received no payment.
• Whereas the United States as a whole establishes paternity in Jess than 30 percent of out-of
wedlock births, the state of Michigan establishes paternity in about two~thirds of such cases.
Texas, on the other hand, establishes paternity in only 2 percent of them. (Irwin Garfinkel,
AssunngJ;hild Suppon. Russell Sage Foundation, 1992, p, 68)
• The one study done on the matter indicates that, within three to four years, the benefits of
establishing paternily and "",uring support exceed the costs. (Garfinkel. p. 66)
�• If there were child support awards in all cases and all that was owed were paid, child
support payments would increase in the U.S. by $25.6 billion. (Garfinkel, p. 63)
The Federal Government, and many state governments, are introducing wage withholding
provisions for fathers who do not pay support. The most ambitious of these projects is the one
in Wisconsin, termed the Child Support Assurance System.
Family Leave:
There is increasing evidence that "family-friendly" policies, involving family and medicall..ve,
alternative work scheduling) career sequencing} and child care} directly benefit corporate profits.
One recent study documents dramatic t measurable payoffs in the form of improVed recruitment,
reduced tUITiover, reduced absenteeism, increased productivity, and enhanced corporate image.
Although less easily quantified, improvements.in empJoyee morale. firm loyalty, and reduced
tardiness aTl~ also reported. (Beyond Rhetoric: A New American Agenda for Children and
Families, final report of the National Commission On Children, 1991, p. 259)
A survey by the U. S: Department of Labor of family benefits in medium and large firms shows
that unpaid maternity leave is a common benefit: 37 percent of women in medium and large
firms have unpaid leave benefits. Paid maternity 'leave is much less common, however, as is
support with child care.
A 1990 study of approximately 3,100 employers commissioned by the SBA found that large
employers (those with 500 or more employees) are significantly more likely to offer some form
of paid leave for pregnancy and childbirth. For example, almost 70 percent of large employers
offered job-guaranteed, paid sick leave for pregnancy and childbirth-related disabilities,
compared to only 23 percent of employers with 15 or fewer employees.
Merck is a company that bas seen impressive returns from its family leave policy. At Merck,
the reported cost of replacing the average em'ployee is about $50.000. In contrast, permitting a
new parent to take a six~month leave with partial pay, benefits, and otchr indirect costs is
estimated to be an average of $38,000 -- a $12,000 savings. By making this option available,
the company has succeeded in retaining almost all of its employees who are new mothers. In
addition, the annual attrition rate among employees at Merck is less than half the industry
average (6 percent compared to 14 percent). Merck officials say that their generous famity
oriented benefits make the difference. (Beyond Rhetonc, National Commission on Children, p.
261)
Child eare:
The increase over the last decade in the number of American businesses providing child-care
assistance is an encouraging trend, but we can form more partnerships to bell' children get ready
for school.
• The number of employers with 100+ employees offering child-<:are assistance rose from I!O
in 1978 to 5,400 in 1990. Benefits range from on-site day-care centers to day-care tuition
subsidies to employer contracts with referral services. But the percentage of participating
companies is still small, given that there are are about 6 million businesses in the US,
(Christian Science Monitor, 4115191; Committee on Economic Development)
�If companies docide that they can't afford a day-care center, there are plenty of other ways
employers: carl help with day care, ranging from flexible work schedules to school~vacation
recreation programs to day-care tuition assistance.
POTENTIAL PITFALLS:
Some may objoct to the .xpan,ion of federal programs.
The issue of mandates may come up. Someone may question you about mandating family leave
for companies,
�PREPARATION FOR WORK
GOALS:
Demonstrate the ne£d for a real schooHo-work transition strategy for the country.
Point out that unlike most 'other industrialized countries, we have never had a national stci.tegy
for non college-bound students. Show that such a strategy would pay dividends.
Portray your National Service Trust Fund proposal as a chance to open the doors of college
education to all Americans.
Demonstrate that the skills of those now entering the workforce are inadequate for the high
performance workplace of the 21st century.
TOPIC:
The problem of the current path for kids who don't go to college. The ne£d for a national
apprenticeship program for young people.
WHO:
Hillary Pennington, president of Jobs For the Future, a foundation-supported organization that
promotes th" development of apprenticeships. Pennington says tliat 'our objective in 10 to 20
years is to have apprenticeships as a viable option for 15 to 25 percent of the school population.'
Jobs For the Future (IFF) is conducting one of the most ambitious apprenticeship initiatives
funded by foundations. IFF will be providing technical assistance and guidance to at least 15
local work-related learning projects in 12 states. (MDRe report, 1'.9)
TOPIC;
The need for a new way to finance college education. The possibility of creating a National
Service Trust Fund.
WHO:
Johnnetta Cole, president of Spelman CoUege, Head of transition cluster for education and
labor. In June, you appeared on Good Morning America with her,' Dr. Koop, Dr, Poussaint and
Norm Ornstein.
TOPIC:
The ne£d, of the new, high-performance workplace in the next century. The demand for workers
who can think and solve prohlems.
WHO;
Paul Allaire is the Chairtnan and CEO of Xerox Corporation (since 1991). He began working
with Xerox in 1966. He is a member of the Council on Foreign Relations, the Business
Roundtable. the Business Council, and the Council on Competitiveness .
..
�DISCUSSION POINTS/QUESTIONS:
(for HiHary Pennington) With the 1990 amendments to the Carl Perkins Act, it seems we are
seeing more experiments around the country, like the North Carolina Tech Prep approach, that
coordinate high school and community college programs. What do you think of this approach?
(for Hillary Pennington) When talking about apprenticeships, everyone always says: "Well)
Germany's got a great system. but,that system wouldn't work in America," Now, let's start from
the assumption that the United States is not going to imitate Germany anytime soon and have
70% of its 16 to 18 year-olds enrolled as apprentices, Given th.t, what lessons can we draw
from Germany and other European models?
(for Hillary Pennington) Let's look at the issue from my perspective for a minute. How can we
at the federal level best use federnl grants to :leverage school-business partnerships for youth
apprenticeship?
(for Hillary Pennington) We're not necessarily talking about the lowest-performing students here.
It's my understanding that about 25 percent of all high-school students are in college-preparatory
studies and another 25 percent are enrolled in a vocational program, So that leaves 50 percent
of our students on a genera) track that's not preparing them for anything in particular.
("Challenges for Apprenticeship and Vocational Trnlning'in the 1990.: German and American
Perspectives: p. 19)
(for Hillary Pennington) The program, Jobs For America's Graduates (JAG), seems to be
working. The most recent studies, if 1 remember correctly, showed" that: JAG gradua~es were
60% more likely to be employed than their counterparts. Is this a program that we can replicate
in many more states?
(for Hillary Pennington) Can • program be developed that creates a single educational
environment appropriate for all students. regardJess of whether their future goal lead them to
post-secondary education or directly into the labor market?
The economic benefIts for a National Service Trust Fund would be short-term as well as loog*
term, The GAO estimated that a switch to direct student loans ""uld save the federnl government
about $4,8 billion within the first 5 years of implementation.
The initial outlays for the GI bill were immense .. in 1949, they came to $2.7 billion .. almost
1% of GNP and approximately $55 billion in today'. dollars, But the GI BiI! paid beck the
Treasury three times what it cost, and provided education for millions of veterans. This wouldn't
cost as much, but it would be just as good an investment. (A Call To CiYie Service, Charles
Moskos, p, 102; DLC)
(for lohnnetta Cole) To what extent should a National Service Corps work with or build on state
and local programs like Boston's CityYear, the California Conservation Corps and New York's
City Volunteer Corps?
We talk a 10:' about how grcat it would bo to send more kids to college through this National
Service Trust Fund. But a national service corps would also have real social value. Nearly 3.5
�'"
million positions could be filled by unskilled young people, according to a Ford Foundation
study. Most of these positions are located in education, the health care sector, and child care,
but several thousand youlll could be employed as police officers, working to protect the
environment. or working in Horaries and museums. (Moskos, p. 147; Richard Danzig and Peter
Szanton, NatiQnal Service: What Would II Mean?; Lexington Books, 1986; pp. 17-40)
(for Paul Allaire) Earlier we talked about a real youth apprenticeship program in Illi, country.
Now I've talked to many business leaders wbo Illink that would be a great idea. But tbe
Commission on the Skills in the American Workforce found that the vast majority of U.S.
employers remain firmly committed to and apparently satisfied with traditional production
processes that depend on iow~wage, low~skilled workers. Would companies really be willing to
invest in training if they're not ready to move to a high-performance workplace?
(for Paul Allaire) I remember america', CbQi!;ll citing the example of a plant in Texas that
needed to cut millions of dollars in costs. Railler Illan lowering wages or moving the plant
overseas, they changed their work organization, organized the workers into teams, moved
toward lean production and launched a major education and training initiative for their
workforce. Productivity improved by more Illan 200 percent and quality by five times. What do
we need to do so that more plants can make that choice to upgrade skills and increase
productivity? (America', ChQice, p. 33-36)
BACKGROUND:
The Problem for Non Colle~~Bound Srodents:
Young worker, who leave school with only a high school education face worscnlngjob prospects
today. Between 1973 and 1988, male high school grnduates with ten years of work experience
saw Illeir wages fall by 40 percent relative to the wages of college grnduates. (Mandate ElIr
Change)
US public schools typically bave fairly. close connections with colleges, but weak links with
employers. Pl'l's Mandale For Change describes the problem this way:
"Many test the labor market hy bouncing from one employer to another before settling into a
long-term job.
This creates a vicious cycle:
The frequent movement of young workers
discourages employers from providing training. ,while the absence of training limits the incentive
of young people to remain with and work hard at a given firm."
There are four key consequences of Ille American practice of delaying the hiring and training
of youth. First, compared with their counterparts 1n Germany and Japan. American youth
experience a 5-to-lO-year delay in gaining access to significant occupational skill training.
Second, the best corporations are disengaged from the process of instructing and socializing their
future workers. Third, the delay in hiring high school graduates e1iminates a natural
communication loop for employers to feed clear information back to schools about what skills
are needed in the workplace. Finally, and perhaps most important, for American high school
students, effort and achievement in school are disconnected from rewards in the workplace.
German or Japanese students can see in clear and unmistakable terms that doing well in school
results in access to a better career with a better emplQyer. ("Challenges for Apprenticeship and
Vocational Tmining in the 199Os: German and American Perspectives,' p. 17)
�..
. Apprenticeship programs that combine classroom instruction with on~the~job training at a local
business. starting in the late high school years, have been effective in Germany Switzerland,
and Austria for decades. In Germany, 70 percent of 16 to 18-yeru-olds are enrolled in the
apprenticeship system. ('School-To-Work Transition and Youth Apprenticeship in the United
States," Manpower Demonstration Research Corporation, 1992, p. 7)
I
The apprenticeship programs that do exist primarily serve adults, and only reach less than
300,000 people at any given
(America', Chojce, p. 50)
time~~less
than three tenths of one percent of our workforce.
Ap!!rentiajp in Other Countries:
Students in Denmark, Germany and Sweden begin learning about occupations in the seventh
grade from local employers and labor market representatives who visit the schools. Swedish
children make field trips to workplaces and are required to complete 10 weeks of summer
employment by age 16. (America's Ch<li~~, p. 59)
After they finish compulsory school at age 15 or 16, the majority of young people in Germany,
Sweden and Denmark enter a twt>- to four-yeru professional program to prepare them for
working life. In GermanY, young people enter one 0080 formal apprenticeship programs and
receive training in a company four days a week. In Sweden and Denmark, most of the
instruction is provided in school, but students also participate in workplace training. Most of
the programs are designed, if combined with the appropriate general education courses. to allow
the student to continue on to college or a variety of higher technical and commercia) programs.
(America:S Choice. p. 59-60)
.
Many experts say that the situation in Germany is different from the United States bocause of
the prominent role that German unions play in the labor market and the greater mobility of
American workers. (MDRC, p. 10)
School-!o-Work Transition in the US:
America's apprenticeship program' is not designed or perceived as a school-to-work transition
program -- the average apprentice in the United States is older than age 29. Currently only 1,500
students am enrolled in school-lO·apprenticeship programs based on the European model.
(AmeriClI:'sJ:;hoice, p. 46)
Education models designed to serve non-college~bound students are often referred to as "school
to~work transition" models. These include high school career academies, Tech Prep programs,
cooperative education, high-quality urban vocational schools, and other strategies that offer an
alternative to traditional COllege-preparatory academic programs. (MDRC. p. I)
Pennsylvania has a machine-tool youth apprenticeship program where participants report that
they are learning more in school and have broadened their horizons because of their participation
in the program. Wisconsin and Maine are planning to implement state-wide programs. ("Earning
and Learning," Forl:!es. May II, 1992)
The career academies in Philadelphia and California, alternative schools within public high
schools, are partnerships between the schOOl district and private industry to provide
at~risk
�.
·
students wid. marketable job skills. The Boston Compact is one of the most succesful 5Ohool-to
work programs in Ole country. It closely links the private sector and schools, providing world
of-work experiences within a school context, linking school attendance and academic
improvement with job placement upon graduation, and having employers act as job counselors.
Boslon's Project Pro-tech, an apprenticeship program where high school students spend part of
their days in hospitals learning to be technicians, was recently fealured in a front-page New
York Times article on apprenticeships and is having some initial success.
Youth apprenticeship is such a new concept that proponents have yet 10 agree on an exact
definition. Hillary Pennington's Jobs for the Fulure (JFF), a nonprofil organization that studies
and analyzes workforce preparation and development, states that youth apprenticeship should be
based on the following six principles:
L Collaboration among secondary schools, post
secondary educational institutions, and employers;
2. Provision of work-based training by employers as part
of the program;
3. High-quality, integrated academic and occupational
education;
4. A focus on preparation for bigh-skilled occupation.;
5. Certification of occupational as well as acadeotic
skill levels of participating young people; and
6. An attempt to reach back into the early serondary
or middle-school years and to link youth apprentice
ship to a broad strategy of career exploration
(Karis, 1991). (MDRC, p. 3-4)
Sen. Nunn says apprenticeships should require "certifiable skills, involve employers as dire<;t
participants with a stake in the individual students; acadeotic and skills training acbievement and
be an integral part of the school curriculum, available to all students, not an add~on or adjunct
program, and (should carry) prestige in school and community." (Mandate For Cbangll)
The U. S. Department of Labor has created an Office of Work-Based Learning that has mounted
several pilot projC(ts and statewide demonstrations to promote and test apprenticeship--like
models, and tile U. S. Department of Education i. supporting the development of school-to-work
transition models in vocational education programs. Both departments are also supporting other
research on work-related learning and school-In-work transition. (MDRe, p. 9)
Among current school-tn-work models, Tech Prep programs appear to have come closest to
breaking the barriers in secondary education between traditional vocational and academic
students. Indeed, the basic goal of the Te<;h Prep strategy is to create a stronger institutional
�.'
link between the secondary and post-secondary institutions, thus beginning to blur the distinction
between the college-bound and non-eollege-bound. (MDRC, p. 24)
The central concept of Technical Preparation programs, widely known as 2 +2 or Tech Prep
programs, is the articulation of secondary school with eommunity eollege programs in specific
occupational areas. Although the articulation concept dates from the late 1960s, the 1990
amendments to the Carl Perkins Act allocated funds to encourage the approach. As defined by
the amendments, Tech Prep involves the coordination of curricula during the last two years of
high school and two years of community college "with a common eore of required proficiency
in mathematics, science~ communications~ and technologies designed to lead to an associate
degree or certificate in a specific career field" (Section 344). Coordination and consultation with
local employers and labor unions are also a key component of the model as it is outlined by the
federal legislation. (MDRC, p. 21)
Systematic impacl evaluations of Tech Prep have not been carried OUI, but many reports from
Ihe field suggest positive results. For example, in the six years since the start of the North
Carolina Tech Prep Programs, in the Tech Prep sites, SAT scores bave risen, dropout rates have
fallen, and there has been a 60 percent increase in the number of students taking high school
algebra. Community college enrollment among Teeh Prep participants has risen 28 percent.
(MDRC, p. 23)
Jobs for America's Graduates (JAG), a youth pre-employment program funded under JTPA and
private sector don.tions which teaches job skills and offers job plaremenl assistance, shows
impressive returns. "According to the most recent evaluations, lAG graduates were 60 percent
more likely to be employed full·time than the non-participatiog control group. Black graduates
were two-thirds more likely to hold full-time jobs.' fThe Forgouen Half: Non-Colic" YllJjth
in Arnerk,a, William T. Gnmt Foundation Commission on Work. Family, and Citizenship.
January 1988, p. 46)
The Student L!l!m Problem:
For those wbo wisb to attend college, the problem is ofien access. Soaring costs, which rose
5 I percent in the last decade for private colleges and 31 percent for public colleges (adjusted for
inflation), are putting college beyond the reach of average working families. (M3ndale For
Chan", p. 1)
While college costs SkYrocketed, median family income fell by 1 percent between 1980 and
1990. (The Condition of Education: 1992, US Dept. of Education, p. 36)
Most middle income families do not receive PeU grants or receive minimal assistance. TIle
maximum Pell grant today pays for less than 25 percent of the average cost of. post-secondary
education -- half what it did a decade ago. (Democratic Policy Committee; Mandate For Change.
Ch. ll,p, 15)
Student loan defaults have reached record highs. 22 percent of the student borrowers wbo were
supposed to begin repaying their loans in fiscal 1990 eventually defaulted. (Dept. of Education,
1992)
�The federal government paid more than $3.5 billion gross in student loan default' claims in
FY91, according to the CBO. In addition, $1 billion goes to banks to subsidize loans. (Manda!e
fQ( Change, Ch. II, p. 15)
Nalional SelYice CIllllS:
A useful wa~1 of assessing the possible sodal and economic benefits of a National Service Corps
is by looking at past and current service corps such as the Civilian Conservation Corps from the
1930> and the california Conservation Corps. Sociologist Charles Moskos, who studied the
history of past service corps as well as current programs, found that:
.....the consensus 1s fairly finn that the worth of work completed by conservation corps is at
least equal to, and probably greater than, the totll1 costs of the program. It is much barder to
quantify other types of longer-term social: benefits-redueed unemployment, well-being of
recipients of social services, lower crime rates, shrunken ,welfare roHs~~but in all these cases,
the level of savings would seem to be large indeed.· (Moskos, A Call To Cjvic Service, p. 86)
Public/Private Ventures studied tbe largest slate program, the California Conservation Corps,
and ooncluded that the value of the work done exceeded the program's costs. The Job Corps
returns $7,400 per pardcipant, compared to $5,000 in program co,ts. (An America That Works,
Committee for Economic Development, p. 157)
PPI cites Boston's private CityYear project and the City Volunteer Corps in New York as
leading models. City Year attracts diverse volunteers from across race and class lines, performs
work of genuine value to the community, and operates with a minimum of overhead.
In 1990, Congress passed the National and Community Service Act, which earmarked $22
million to support up to to eight demonstration projects for a large-seale program of voluntary
national service.
Public SUl'J!QI1:
A 1984 Gallup poll reported that two of every three Americans support a year of mandatory
national service for young adulls in return for GI Bill-type benefits. (Moskos, p. 114)
Tll~ Chooging Workpl~:
The organization of America's workplaces today is largely modeled after the system of mass
manufacture pioneered during the early 1900 1 8 -- the "Taylor- method. The premise is simple:
Break complex jobs into a myriad of simple rote tasks, which the worker then repeats with
machine~like efficiency, But in the world's best companies, new high performance work
organizations are replacing this !'"Taylor" method. 'These companies are using a new approach
to unleash major advances in productivity, quality, variety and speed of new product
introductions.
The new high performance forms of work organization operate very differently. Rather than
increasing bureaucracy, they reduce it by asking front-line workers to use judgment and make
decisions. Management layers disappear as front-line· workers assume responsibiIity for many
of tbe tasks--from quality control to production scheduling-that otbers used to do. Work
organizations like these require ~arge investments in training. Workers' pay levels often rise to
�rellect their greater qualillcations and responsibilities. But the productivity and quality gains
more than offset the costs to the company of higher wages and skills development. (America's
ChQice. p. 2-3)
High wage nations like the Uniled States can succeed only by producing higher quality products.
providing customers with greater product variety. introducing new products more frequently and
creating automated systems which are more complex than those that can be operated in low wage
countries. (America's Choice, p. 38)
Our Lack ofJnyestment In Trainine:
The Office of Technology Assessment concluded that American companies spend 1.2% to 1.8%
in employee training.
But leading foreign firms spend up to 6% of payroll on training and devote a significant share
of their effort to their front-line workers. Large,Oerman companies provide their workers with
a wide range of free courses, either at company training centers or at outside institutions. Small
German businesses pool their resources and operate external training centers through industry
associations or local Chambers of Commerce. Japanese Companies focus on shop floor training
through formalized job rotation and instruction programs. (America's ChQice, p. 62)
Each year, American employers spend an estimated $30 billion on formal training. At most,
however t only one third of this amount is spent on our noo.-college educated workforce, affecting
no more than eight percent of our front-line workers. The occasional training which companies .
do provide for their workers is generally limited to orientation training for new hires or 'team
building' and motivational training for long-Ierm employees. The one exception is the ongoing
training provided for skilled craftspeople. [America's Choice, p. 49)
Only a small fl"action of firms make a significant investment in training workers. According to
the American Society for Training and Development, $27 billion of that $30 billion was paid out
by 15,000 employ.rs (one half of one percent of all American employers). And, of this small
universe of firms that actually train, only 100 to 200-the largest companies with significant
professional and managerial staff-spend more than two percent of their payroll on formal
training. (America's ChOice, p. 49)
Only eight percent of our front-line workers receive any formal training once on the job, and
this is usually limited to orientation for new hires or short courses on team buHding or safety.
(America's Choice, p. 4)
Forty-two million people are employed in jobs in America that require a significant amount of
training beyond a ba..<;ic education. but not a four-year college degree. In this group faJl the
traditional skilled workers--apprenticed trades, auto mechanics, secretaries and data workers~
firefighters, e]eetricians, plumbers and technicians. It was in these jobs that the Commission
on the Skills of the American Workforce found occupation-specific skills shortages most often
mentioned. (America's Choice, p. 27)
�1!lll 'l'nliping E<amples in the US:
Evidence from rccent, rigorous evaluation of the Job Training Partnership Act (ITPA) shows
highly disappointing results for young workers. A year or more after the progrnm, young men
assigned to JTPA earned about $200 less per quarter (around 10 percent) than a control group
not assigned to ITPA. (Mandate For Change)
In Boynton Beach, Florida, Motorola can make 200% more pagers than it could four years ago
with just 22 % more manufacturing employees. says generai manager Hector Ruiz: "The factory
doesn't look much different. The improvement came about through training, Our return on
tralning is on the order of 30 to 1.' fFonune, Oct. 19, 1992, p.57)
Since the early 1980's, the United Automobile Workers (UAW) has successfully negotiated
dedicated training funds into its contracts with major auto companies. (America's Cboice, p.
110)
Ford Molor Company, The National Education, Development and Training Center (NEDTC),
located on the campus of Henry Ford Community College, to this point has provided tralning
for about half of Ford's hourly workforce. (p. 110)
While much of the tralning in technical literacy, problem solving and teamwork for UAW
represented Ford employees takes place after working hours, a great deal of it is clearly linked
to the tralning sponsored on company time. As the company has emphasized statistical process
control training for its workers., the NEDTC has provided courses in remedial math and
computer awareness for those who need to acquire basic skills. More than 30,000 workers have
participated in this companion tralning. (p. Ill)
Since the UAW and Ford decided to make tralning a strategic issue, the company's firurncial
profile bas moved from losses to profits. The 1988 annual report noted: "Ford learned a
pivotal lesson during the bleak days of the early 198O's--if the company was to be successful it
bad to focus on the basics of its business and engage the full support of its employee•. ' Ford
recognizes NEDTC as having played an integrai role in this turnaround. (p. 111)
�.•
POssmLE PITFALLS:
Apprenticeship programs could lead to early tracking.
The mobility of the American workforee makes it un!ilrelY that employers wi!! invest very mueh
in potential employees.
Unions have expressed concerns about youth apprentices and the National Service Corps. But
the Ford Foundation study cited above shows that there are 3.5 million service-oriented jobs that
would not be done otherwise.
Businesses that are reluctantly cajoled into participating in apprenticeship programs may not
provide any kind of rul training.
Some will say that the National Service Trust Fund costs too much. But it would cost much less
than the well·regarded GI Bin and be as good an investment. By and large, the program pays
for itself, and it would rely heavily on private community groups to serve as potential sPonsors
and supervisors of Corps volunteers.
Someone might mise the question: do you have to go to college in exchange for 2 years of
service or could you use the voueher for vocational training? Would the National Service Corps
really include a diverse group of people?
Business leaders may say that they cannot afford to invest 1.5% of payroll on the training of
their workers. Small businesses will see it as too mueh of a burden.
Business Jeaders may question spending their money to invest in training considering the
mobility of the American workforce.
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Sbort Term IDvestmentPanel
President-elect Bill Clinton
Vice President-eled AI Gore, J'r.
Crandall Bowles
Zoe Baird
Bruce Llewellyn
Earl Gmves
Barbara Blum
James Johnson
Sec. of the Treasury Lloyd Bentsen
Roger Johnson
Frank Cruz
Mary Houghton
Sec. of Labor Robert Reich
Vincent Lane
Chair of CEA Laura Tyson
Elaine Kamarek
Reuben Mark
Mike Walsh
Roben Johnson
Gerald McEntee
Ken Brody
Adele Simmons
Ellen Gordon
Director of OMB Leon Panetta
Economic Policy Advisor Robert Rubin
Allen Sinai '"
Charles Corry
lames Tobin
leff Faux
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Don Munro
Sec. of Commerce Ron Brown
Martha Briley
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Name
company
Ms. Zoe Baird
Ms. Barbara Blum
Ms. Crandall Bowles
Ms. Martha Briley
Mr. Ken Brody
Mr. Charles A. Corry
Mr. Frank Cruz
Mr. Jeff Faux
Mrs. Ellen R. Gordon
Mr. Earl Graves
Mr. Mary Houghton
Mr. James Johnson
Mr. Robert Johnson
Mr. Roger W. Johnson
Dr. Elaine Kamarck
Mr. Vincent Lane
Mr. Bruce Llewellyn
Mr. Reuben Mark
Mr. Gerald McEntee
*"Mr. Charles MCMillion(~~
Mr. Don Munro
Ms. Adele Simmons
YMr. Allen Sinai
~r. James S. Tobin
Mr. Michael H. Walsh
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Adams National Bank
Springs Industries
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Economic Policy
Tootsie Roll
Black Enterprise
Shorebank Corp.
Fannie-Mae
Black Entertainment
western Digital
Progressive Policy
Chicago Housing
Rubin, Baum, Levin,
Colgate-Palmolive
AFSCME
Insurance
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Finance
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Metals
Insurance
Academia
Consumer
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Commercial
Business
Entertainment
High Tech
Non Profit
Government
Consumer
Consumer
Labor
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CT
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203-273-0123
202-466-4090
803-547-3795
201-802-6262
212-977-3705
412 433 1101
213-749-4888
202-775-8810
312-838-3400
212 886 9510
312-753-5702
202-752-7000
703-875-0430
714-932-7800
202-547-0001
312-791-8401
212-698-7700
212-310-2944
202-429-1000
\MBG
The Munro Companies
MacArthur Foundation
The Boston Company
The Cowles
Tenneco Inc.
NJ
NY
PA
CA
DC
IL
NY
IL
DC
VA
CA
DC
IL
NY
NY
DC
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501-262-6000
312-726-8000
CT
TX
203-432-3720
713-757-1300
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�· '.
WORKIl':Ki..S.ESSION.1I;JNVESTMENT FOR SHORT TERM GROWTH
Presenters:
Charles McMillan
Alan Sinai
James Tobin
Panelists:
Baim, Zoe
Hartford, CT
Senior VP and General Counsel,. Aetna Life and Casualty Company
Former Associate Counsel to the President of the United States
(1980-81)
Board of Directors, Sou thern New England Telephone Company
Board of Advisors, Institute for Governmental Studies, UC-Berkeley;
Board of Advisors, Yale Repertory Theater
Blum, Barbara Qayis
Washington, DC
Chair, President and c'E.O. of Adams National Bank since 1983
Chair of the Economic Development Finance Corporation
Senior advisor to United Nations Environment Program 1981-83
Former Deputy Administrator of E.P.A. under Carter
Deputy director of Carter/Mondale campaign and transition
Barbara Blum's short-term investment policy priorities:
1) Adjusting capital reserve requirement for banks to immediately
increase the source of credit for smail business.
2) Increasing small business expensing provision (which now allows
small business to directly write off the purchase of new equipment
valuing up to $10,000) up to $50,000 level.
3) Investment tax credit or other incentive for pension funds that
participate in economically target.ed investment in the next 12 to 24
months.
4) Centralizing small bUSiness policy program in one agency with real
clout.
�BQl:Yles, Crandall
South Carolina
Executive VP of Springs Industries (Home furnishings and industrial
and specialty fabrics). Springs has 43 plants in 10 states and Belgium
and England; it is largest industrial employer in South Carolina.
Director of John Deere, Duke Power. Wachovia Corporation, and
Springs Industries
,
Former member of Charlotte Branch of Richmond Federal Reserve
"It is too early to determine if the economy has turned around.
Regardless, the major problems in the economy are the structural
and will take years [Q cure. We must invest in the skills of our work
force to be competitive above all else. This must be balanced "1th .
fiscal responsibility.
BOley, Martha
Newark, NJ
President, Prudential Asset Management Company
Primary concern: Ms. Brileyis very concerned with deficit reduction
and reduction of entitlements. "The President must be prepared to
take a le!tdership position, and step outin front to face up to the
issue."
BrOC\y, Kenneth D,
New York City, NY
Founding Partner, Petrus Partners (private investment firm)
Goldman, Sachs & Co (1971-91; partner, 1978; management
committee, 1990; currently limited partner). Headed merchant
banking ,real estate, group; high-tech groups. Advised Dept. of
Transportation on privatization of Conrail, Mexican Government on
privatization of Mexican Telephone Company
President, Alvin Ailey American Dance Theater
Chair, American Federation of Aging Research
Mr. Brody had two questions:
1) If you decide to stimulate in a likely recovering economy, how do
you convince the markets that you are serious about deficit
redu,:tion?
2) If you decide nOt to stimulate and the economy remains sluggish,
how do you convince the American people that you are "putting
people first' and not out of touch like Bush?
'
�..
Cony. Charles A.
Pittsburgh, PA
Chainnan and CEO, USX Corporation (since 1989)
Served for over 30 years with this major producer of energy and
metal products.
Member, Policy Committee, Business Roundtable; Member, Business
Council
Chair, Greater Pittsburgh Chamber of Commerce
Member, Board of Trustees, Carnegie Mellon University
•
Cruz. Frank H,
Los Angeles, CA
Chalnnan, Gulf Atlantic Ufe Insurance Company
Former President, Latino Museum of History, Art & Culture.
Former Vice-President, General Manager, Telemundo Group, Inc.
(Spanish-language TV station with 550 million operating budget).
Board of Directors, Health Network of California
Mr. Cruz has two main concerns: '
1) As a Californian, I am particularly concerned with what you plan
to do to help refocus and retrain the, employees who were fonnerly
in defense jobs to commercial jobs and applications.
2) CUITently in California, we are grossly under-counting the poor
and disadvantaged and thereby grossly inadequately funding their
needs due to the fact that this year we are using a 1980 census for
federal funding.
faux.Jm
Washington, DC
President, Economic Policy Institute
Former Co-Director, National Center for Economic Alternatives
Books: Rebuilding America (co-author); New Hope of the Inner Cicy;
The Scar-Spangled Hustle (co-author)
Gordon. Ellen
Center Harbor, NH
President, Tootsie Roll Industries, Inc.
Tootsie Roll products are manufactured in Tennessee, New York, Mexico,
, Canada and the Philippines.
Founding member and Chalrman, the Committee of 200 Foundation.
�'.
Graves. Earl G.
New York, NY
President and C.E.O. of Earl G. Graves Ltd.
Publisher of Black Enterprise ( a business magazine targeted to African
American corporate executives)
Chairman and C.E.O. of Pepsi-Cola of Washington, DC (Magic Johnson's
partner)
Former Administrative Assistant to Robert F. Kennedy
Mr. Graves had two requests:
1) Will you increase incentives for state and local municipalities to
establish minority enterprise entrepreneurs (MBE) programs?
2) Will you establish federally mandated Enterprise Zones?
Hou2hton. Mary .
Chicago, IL
President and Director, Shore bank Corporation
Chair, Arkansas Enterprise Group; Director, Southern Development
Bancorporation
Oversees commercial bank holding companies implementing
.
community development strategies.
Primary concerns: investment in inner cities and rural areas.
Johnson, James A.
Washington, DC
Chairman and Chief Executive Officer of Fannie Mae
Former managing director in corporate finance at Lehman Brothers
Former president of Public Strategies consulting firm
Former executive assistant to former Vice President Walter Mondale
Primary concerns: housing and its effect on the economy.
Washington, DC
Johnson. Robert L.
President and founder of Black Entertainment Television
First black-O\\I1led company to be traded on the NYSE
33 million subscribers in 2500 markets.
Former V,P. of Government Relations. National Cable Television
Assodation,
Former press secretary to Walter Fauntroy. D,C. Delegate to Congress.
Primary concerns: getting more capital for business ownership to .
African-American entrepreneurs.
�,
.
lobnson. Roger W.
Irvine, CA
Cbair and C.E.O. of Western Digitai since 1984
Chair of American Business Conference (focus on economic growth and
education)
Mr. Johnson would like to see as little short-term stimulus as
pOSSible.
Kamarck, Elaine !::ilJlla
Washington, DC
Senior Fellow, Progressive Policy Institute.
Conducts studies on politics, sociai policy and family economics.
Books include: "The Politics of Evasion;" "Putting Children First" (with
Willianl Galston); co-author of Mandate For Change (1992)
"The nuddle class tax cut is not for purposes of stimulus but for
purposes of fairness."
Lane, Vincent
Chicago, IL
Chainnan of Chicago Housing Authority
National Commission on Severely Distressed Public Housing - Bush
AdmiIUStration
Appointed to Mayor's Navy Pier Development Co.
Appointed to President's Commission on Model State Drug laws
Lle~llyn,
L Bruce
New York, NY
Chairman and C.E.O. of the Philadelphia Coca-Cola Bottling Company
Boards include: Coors, Council on Foreign Relations, C-Span. Essence,
Manufacturers Hanover, Overseas Developmnet Council, United Negro
College Fund.
Former President of Overseas Private lnvestent Corporation (Carter
appointee)
Former Chairman of Freedom National Bank (largest minority owned
bank in U.S.)
�· Mark Reuben
New York City, NY
Chalnnan and CEO, Colgate-Palmolive Company (since 1986)
With Colgate since 1963
Chair, New York City Partnership's Education and Youth Employment
Committee.
Founded "From the Boardroom to the Classroom: Executives in Middle
Schools" (program which involves top executives with NYC middle
school children and teachers)
Co-Chair. School and Business Alliance of New York
McEntee. Gerald W.
Washington D.C.
International President of AFSCME
Vice President of AFL-CIO and member of it's executive council
Member of the DNC and the D,,('s Labor Council
Co-founder and Chalrman of Economic Policy Institute
Vice-President of Americans for Democratic Action
Munro. Don
Hot Springs, AR
Chalnnan and C.E.O. of Munro & Company, Inc. (footwear)
Primary concerns: DefiCit reduction, health care cost containment,
busin'~ss & industry "encouragement's"
Simmons. Adele Smith
Chicago, IL
President, The John D. and Catherine T. MacArthur Foundation
Former President- Hampshire College 197i-1989
Memberships include Trustee of Union of concerned Scientists, since
1983; President's COmmission on Environmental Quality since 1991
Primary concerns:
1) Is the newadmin. going to reexamine the way we currently measure
our economy- our levels of economic well-being and growth - so that our
indices take into account such factors as environmen tal externalities and
resource depletion costs, the absence of which distorts reality and policy?
2) How can administration policies help to surmount the barriers to
conversior posed by the mismatch of defense-industry capabilities and
civilian needs and by the industry-push/demand-pull of the
international anus trade?
�Walsh. Michael.ll..
Houston, TX
Chainnan and C.E.O. of Tenneco, Inc. since 1991 (natural gas pipelines,
fann and construction equipment, automotive parts, shipbuilding,
packaging and chemicals)
Former Chairman and C.E.O. of Union Pacific 1986-91
Former U.S. Attorney 1977 -80
Member of the Business Roundtable
Primary tboughts: tbe short term signais are mixed; and whatever we do,
we must concentrate on long term structural problems.
�.,
"
WORKING SESSION II:
SHORT TERM GROWTH AND JOB CREATION
EVENT:
The second working session will last from 8:30 to 9:45 Tuesday morning. James Tobin, Allen
Sinai and Charles McMillion will each speak for 3 minutes on their short-term economic
projections. They will discuss how rapidly the economy is likely to grow in 1993, how this
recovery compares to average recoveries, and what rate of economic growth is needed to create
.jobs. You win ask the presenters a couple of questions, to be followed by a 45 minute
discussion. There wiJI be a short break before the session on long-term growth.
PRESENTERS:
James Tobin is an economics professor at YaIe1 a Nobel Laureate, and served on,
Kennedy's Council of Economic Advisors.
AUen Sinai is a well-known economic forecaster and chief economist with the Boston
Company.
'
Charles McMillion is an economic forecaster with the McMillion Business Group in
W.ashington, DC.
.
GOAUl:
•
Show that it is still too early to tell whether the economy will bring back sustainable job
growth, in spite of some recent positive economic indicators. Payroll employment and
real income growth have yet to pick up in any significant way.
•
Explore what these experts think are the key criteria you should examine in determining
whether a short-term package will be necessary.
•
Show that the recovery is well below·the rate of other. post-war recoveries.
ATTACHED
•
•
•
•
•
•
Summary of Presentations
Points to note and possible questions for presenters
Background:
•
Arguments for and against stimulus
•
Recent economic indicators overview
•
Current recovery versus past recoveries
•
Economic forecasts for 1993
Points of Contention: possible Q&A on stimulus
Possible Q&A on other short-tenD. measures for business
Biographies of roundtable participants
�SUMMARY OF PRESENTATIONS
Tobin:
lames Tobin will make the case that the economy is still far too weak to bring unemployment
down significantly, and that we are nowhere near being on the growth path to 5.5 percent
unemployment. Tobin will explain why one quarter of 3.9 percent is not significant. He reels
that too many eeonomists uncritically accept the notion that the United States cannot achieve 4.0
percent growth for any sustained period. He still believes that the best policy at this point is to
adopt a major fiscal stimulus package tied to significant deficit reduction starting in the final two
years of the first term of a Clinton-Gore Administration.
Sinai:
Allen Sinal will give a more optimistic view of the economy than Tobin, but will still state that
it is growing too slowly for significant job creation. He predicts that growth will be 3.0 percent
in the fourth quarter. However, he thinks the economy will require 18 months of growth above
3.0 percent before unemployment can be significantly reduced. He believes that 3.5 percent is
the rate of growth where a risk of inllation first emerges, but until then he is not overly
concerned. Sinal does believe that the United States economy is strong enough so that
"recession" is no longer an accurate description. However, he thinks a $10-$20 billion .timulus
.hould be ready to go as an in.urance policy. Like Tobin, he would link this to a long-t.enn
deficit reduction plan.
McMiUion:
McMillion will compare the job growth following the bottom of the 1982 recession with the
same period in the current recession. He will also examine which statistics should be scrutinh.ed
to determine prospects for economic growth in 1993.
�'.
POINTS TO NOTE/QUESTIONS FOR TOBIN, SINAI, AND MCMILLION
1. Point to Note: Economy could stall again.
Even though the U.S. economy has enjoyed six consecutive quarters of growth, the
economy has seen two false starts in the last eighteen months. [lEej
QuestiQll:
The economy has produced two false starts in the last 18 months. Are we likely to sec
another false start now, with fourth quarter growth lower than it was last quarter, and
slow growth in 1994?
2. Point to Note:
E~ployment
under recovery average.
Most recoveries average about 250,<XXJ payroll jobs created each month. yet we have
barely seen that number produced over the last
Indeed, if we had experienced only
an average recovery over the last 18 months, we would have created nearly 3 million
more jobs than exist today. [BLS data)
=.
Question:
The measure of a good economy for most Americans is jobs -- are they plentiful or not.
By that criterion, the present recovery has been a poor one. In the near-term, is the
economy going to start producing the level of job growth we have seen in most other
postwar recoveries?
3. Point to note: Wage growth stagnant.
During the eighties, wages fril, and families were forced to work harder simply to stay
even. Over the last year, real hourly wages have been flru. [JEC]
Qy§tiQn: Another touchstone for families is whether their wages. are rising faster than
inflation. When can families expect to see,real wages begin to improve?
�BACKGROUND: COMMON ARGUMENTS FOR/AGAINST STIMULUS PACKAGE:
Here is an overview of the principal arguments for and against a stimulus package to boost the
economy.
FOR A STIMULUS
1. Economy still weak.
An economy growing at or around a 3 percent rate, as it is
currently, won '1 put a significant number of Americans back to work. Despite the recent
improvements, Americans are still hurting, and want swift action on the economy.
Furthermore, there is a large gap between our "potential" GNP growth and our actual
growth.
2. Business incentives put people to work and increase productivity without ballooning
~ficit. Business tax credits such as an investment tax credit, R&D tax credit, and
capital gains cuts reward businesses for investing and create thousands of new jobs at a
comparatively low cost to the Treasury. The lTC, for example, has been used in varying
forms by every Administration from Kennedy to Ford.
AGAINST A STIMULUS
1. E&QnQmy already dQing better. Growth has climbed to 3.9 percent in the third
quarter, and unemployment is dropping.
2. Stimulus takes too long to help the economy. By the time bids have been made, plans
have been introduced and passed, and workers hired, the economic landscape has
changed.
3. Stimulus adds to the deficit, which reduces savings 'and investment, and drives up
interest rates.
4. Against the investment tax credit: Critics call'the incremental ITC too complex. It
also penalizes businesses that have invested.heaviJy in the past. Also, some economists
think the ITC has little if any effect on recessions and recoveries.
5. Against infrastructure spending. Many perceive the classic pork barrel politics and
a return to the big spending, temporary public works jobs of the New Deal.
�BACKGROUJI.'D: RECENT ECONOMIC INDICATORS
There are many positive signs recently, but payroll unemployment remains low, real income
growth remains sluggish, and the economy is not growing anywhere near the rate of a normal
recovery.
1.
REAL GDP: The third quarter number was revised upwards to 3.9 percent from
2.7 percent, but it has been called "overstating the fundamental strength of the
economy" and representative of "a painfully slow recovery". while the fourth
quarter is projected to drop to 2.0 percent [Blue Chip Survey]. [This may be
higher now in light of the third quarter numbers. Some are predicting 2.5-3.0%)
Even the third quarter "overstates the trend" according to Goldman Sachs. In a
nonnal recovery, real GDP is closer to a 5 or 6 percent rate. The third quarter
jump in GDP was built on factors that may not be sustainable, including 'n
unintended rise in inventories, a surprising jump in defense spending, a sharp rise
in consumer spending unsupported· by rising incomes (thus people may have
dipped into their savings to make purchases), and higher export sales. Since the
trough of this recession 19 months ago, GDP is up only 34% as high as the GDP
gain of the average post-war recoveries during such a time period.
2.
UNEMPLOYMENT: The unemployment rate dropped to 7.2 percent for
November, while first time unemployment claims have also been dropping in
recent weeks. However, firms are working their employees longer and stilllaok
the confidence to hire a number of new employees. The number of payroll jobs
rose 105,000 in November, an amount comparable to only 40 percent of the
250,000 new payroll jobs normally added each month in past recoveries. Worse,
45,000 of the payroll jobs were temporary election workers. Only 458,000
payrQII jobs have been create4 since the recovery began 19 months agQ, ~Qmpaw!
to 3.6 milliQn new payroll iobsllroduced by this sIlIlt<'.lludngcan ,vemlt<' oost-war
recovery. While there was a 35,000 jump in manufacturing employment last
month, there are still 200,000 fewer manufacturing jobs in the economy since
June.
3.
INDEX OF LEADING INDICATORS: Designed to predict economic activity
for 6 to 9 months in the furore, the index rose a moderate 4 percent in October.
Since May, the index has remained relatively flat -- another indication of a slow
recovery. The welcomed rise in October only recouped the drop in this index
suffered during the previous two months.
4.
PERSONAL INCOME: Personal income rose a healthy one percent in October,
but the increase was due mostly to one time factors such as farm subsidy
payments and hurricane relief. Real wages rose in November after being flat
since the year began.
�5.
CONSUMER CONFIDENCE AND SPENDING: Consumer spending surged
in the third quarter, but the gams may be unsustainable because consumer
incomes were flat and the spending came largely from reduced savings. Retail
sales rose a modest 0.4 percent in November after a big 1.9 percent jump in
October. Retail sales during the holiday season are expected to be strong.
Consumer confidence has jumped. hefty 18 points and experts have attributed
much of this bounce to enthusiasm over Governor Clinton's election.
6.
TRADE: Exports aided third-quarter growth, while our whopping trade deficit
with Japan ($45 billion this year) and China ($16 billion) continued to worsen,
Exports will soften in the months ahead in response to slowing growth in Japan
and European Economic Community, Trade accounted for 40 percent of our
growth during the Bush years, but the trade deficit has begun to worsen since
mid-year, and is now slowing growth, One bright sign is the Japanese Diel'.
passage of Prime Minister Miyazawa's $86 billion economic stimulus package last
Thursday, which should boost aggregate demand in 1993, It is also expected to
be reinforced by a one-half point cut in their 3,25 percent discount rate at some
time in the next few weeks.
7.
MANUFACTURING PURCHASER SURVEY: Rose 5 points to an index level
of 55 in November - unambiguously goed ncws.
8.
NEW MANUFACTURING ORDERS: New orders rose 1.7 percent in October,
but all of the gain was in the volatile transportation sector - mosUy in aircraft.
9.
MANUFACTIJRING EMPLOYMENT: Manufacturing employment increased
by 35,000 in November.
Unfortanately, there are still 200,000 fewer
manufacturing jobs in the economy since June, and 1.4 million fewer
manufacturing jobs since Bush took office in January 1989, Even at the 35,000
rate increase seen in November, it will take three and one-half years to recover
all the manufacturing jobs losl since the beginning of 1989.
10,
CONFERENCE BOARD'S ImLP WANTED INDEX: This index inched up to
92 in October (from 90 in September), but remains well below last year's average
of 115, In many cases, finns are working their employees longer, but they are
not hiring a lot of new employees.
II.
HOUSING STARTS: Fell in October to 1.229 million. The failure of the
hOUSing boom is a major reason why this recovery is a mediocre one. Sales of
new single family homes, new housing starts and exjsting home sales have
fluctuated upward, but at a weak pace during the recovery, Moroover, the 0.5
percentage point increase in mortgage interest rates over the last three months
suggests that the modest recovery of homebuilding may soon taper off.
Construction of commercial real estate remains weak.
�12.
RETAIL SALE'l: The Commerce Department recently release<! November's
retail sales data was a good sign. Retail sales were up 0.4 percent in November,
on top of a big 0.9 percent revision upward to the October numbers (to a final
1.9 percent from a preliminary 0.9 percent).
13.
MONEY SUPPLY, The money stock measure wau:hed most closely by the Fed,
M2, inched up in November, but rerrunns at the low end of the Fed's target range
of 2.5-2.6 percent growth. M2 moved down in the last week of November,
hopefully only a temporary drop.
14.
Il\'FLA TION: There has clearly been good news in the area of inflation. Just
last Thursday, the Producer Price Index was actually down, while the next day
(Friday) a Consumer Price Index rose a very modest 0.2 percent. Some analysts
predict that the Fed will find both of these numbers reassuring.
[Source: Joint Economic Committee, based on government datal
�,"
BACKGROUl\'D:
A~
ComparL')on with Past Recoveries
This "recovely" has been far slower and has produced only one-seventh of the job growth of
past recoveries. Unemployment remains high, firms are not hiring, and the economy is growing
at only slightly above half of the rate of a normal recovery.
1.
THE RECFSSION WAS ABOUT AVERAGE:
During the average postwar <=55ion, the United States has lost 1.7 million
payron jobs from "peak» to "trough." In this recession t 1.9 million jobs have
been lost from peak to trough.
2.
THE RECOVERY HAS BEEN SUBSTANTIALLY WEAKER:
This recovery is now 19 months old. By this point in the average postwar
recovery, GDP had usually grown nearly three times higher than it has in the
current 19 month period. (For the whole 19 month period, GDP usually is up
8,4 % -- non-annualized -- while currently the 19 month total has only been 2.9
percent higher than it was .t the lowest point of the recession.)
3.
EMPLOYMENT IN RECOVERY MUCH WORSE:
The average post-war economic recovery has generated 3.6 million jobs 19
months after the trough. If we had enjoyed merely an average recovery, over 3
million Americans would bo at work right now and the unemployment rate would
be between 4 and 5 percent, not 7.2 percent.
[Sources: Roger Brinner of DR! McGraw HiII and Joint Economic Committee]
�,.
B. Economic Forecasts for 1993
Most forecasters are predicting a modest recovery for the upecming year. Without short-term
measures to give the economy some sort of boost, most analysts foresee more of the same: a
slow recovery, with growth in the 2-3 percent range and unemployment holding at about a 7.4
7.5 percent rate. The recent upbeat retail sales figures suggest that 1992 fourth quarter growth
could be close to 3 percent. Some forecasters are anticipating a modest ($20-$30 billion)
stimulus package from the Clinton-Gore Administration.
1. BLUE CHIP FORECAST:
Slow fourth quarter growth, but a 2.8 percent GDP increase for 1993; "steady, yet modest"
employment and modest gains in real disposable income, housing starts, and consumer
spending. Inflation will remain low, and interest rates will rise slowly.
2. DRIlMcGRAW HILL:
Projects 2.6 percent real GDP growth for the next four quarters, with unemployment at 7.3
percent. Trade deficit projected to climb to $155 billion by 1995. Interest rates will remain
constant through 1993. Generally positive, but with the warning that 'until (private
employment rises], it is hard to declare the recovery truly underway.' DR! is predicting
that the new administration will embrace "a mildly stimulative package, with a net budget
impact of about $20 billion in 1994" , will> most of the focus in new infrastructure spending.
DR! also predicts the Fed will hold interest rates where they are for at least the next six
months.
3. ORGANIZATION FOR ECONOMIC COOPERATION AND DEVEWPME."iT:
Predicts 2.3 percent GDP growth for 1993, with the unemployment rate rising to 7.5 percent
by the end of the year. Predicts residential construction to grow at double digit rates.
OEeD has called for the U.S. to dramatically reduce its budget deficit through aeross the
board tax increases and spending cuts.
4. GOLDMAN SACHS:
Calls slow economic growth for 1993 "baked in the cake": a 2 percent growth prediction.
They note that recent declines in initial unemployment claims do not mean that firms are
hiring, but that many people have simply stopped looking for work. Many businesses are
still looking for ways to cut costs. Despite the post-election confidence, many consumers
remain wary about their economic future: .. the fundamental determinants of consumer
spending -- income and confidence -- remain shaky". Goldman is predicting that the new
administration will delay spending cuts or tax increases instead of embracing a
comprehensive stimulus package.
•
�5, MORGAN STANLEY:
Real GDP is expected to rise 2,3 percent in 1993, A modest stimulus package ($25 billion)
would boost real GDP growth by about 0.4 percent, but this boost would be offset by falling
export prospects. This will JlJll be a hiring-led recovery, The unemployment rate is still
expected to remain above 7 percent throughout 1993 due to restructuring and cost·cutting
in response to global competition. Much of the corporate cost-cutting will encourage a
productivity-led recovery, but this will only be sustainable with "enhanced human capital
to reinforce the benefits of a leaner 'and more competitive cost structure. "
6, MERRILL LY1'iCH:
The economy is expected to grow at a stronger and steadier pace during 1993 than during
1992 but all signs suggest that the recovery will remain subdued compared to past
recoveries. Real GDP should grow at around a 2 percent rate in the fourth quarter and not
much faster in the first quarter of 1993. By 1994, Merrill Lynch expects that the economy
will grow .3 percent.
7. THE WEI'A GROUP (Wharton Econometric Forecasting Agency):
The 3,9 percent GDP growth last quarter overstates the economy's underlying growth pace,
which is in the 2.5-3% range, Still, the host of rosier economic indicators corroborate the
WEFA forecast of a gradual rebound. With inflation under control and real wages per hour
going nowhere, the key to a sustainable recovery continues to be employment growth.
WEFA expects that companies will strut rehiring at a gradual pace and that GDP growth will
pick up commensurately. In Short, the rebound in indicators has been expected and supports
a forecast of an underlying GDP growth rate of 2.5 - 3.0 percent for the short term,
6. THE BOSTON COMPANY:
The Boston Company is predicting slightly better growth over the next four quarters - in
the 3.0 to 3.5 percent range. Unemployment will gradually edge down to 6.7 percent,
although the growth of the labor force makes this number "unpredictable". 2 to 3 percent
inflation is predicted, while the Fed is not expected to ease or tighten monelllry policy
significantly, The Boston Company predicts the new administration will advocate a $20
billion net new stimulus package of infrastructure spending, a 10 percent targeted investment
lax credit, a small business capital gains cut, and a modest middle class lax cut. The
stimulus is expected to be coupled with a multi·year deficit reduction package.
�...
7. BEAR STEAR.".S,
"1992 has been a pretty good year and 1993 will be even better.' Bear Stearns is predicting
3.0 percent growth for the fourth quarter of 1992 and 3.5 percent growth rate for 1993.
Low inflation is expected and the labor market is expected to improve. A major monetary
expansion is underway, but the Fed is expected to keep monetary policy "where it is for the
next six months. Bear Stearns expects the new administration to dramatically scale back any
short-tenn stimulus package and focus on deficit reduction instead.
�••
POINTS OF CONTENTION: STIMULUS PACKAGE Q&A
I. Upbeat Economic Outlook Implies No Short Term Stimulus?
QuestiQn: During the """'paign, you promised to jump-start the eeonomy. We have
learned since that the eeonomy has taken off, rising 3.9 percent in the third quarter. Do
we still need the stimulus you promised1
.:\n~W:4 I would like nothing more than to sit back and let the eeonomy soar skyward
on its own. That would make my day. But the eeonomy is too serious, and the
economic pain so many Americans have felt for SO long has been too harsh for me to
decide all is well based only on a few good signs. People want to see real job growth
and they want to see their incomes and standard of living rise. I have not decided
wheth"r we will have a short-term plan, but I can tell you this: I will have a plan ready
to go for any economic seenario. We have seen upticks before, only to be disappointed
during this recovery. In fact, this is the third time in the last 18 months our economy
has shown signs of recovery. It feU back both times before, and it could happen again.
2. Stimulus Criteria?
Question: You have not closed the door on a short term stimulus package even though
growth soared to 3.9 percent last month. What will it take 10 convince you that the
recove,ry is for real'}
.:\nswer: There is no single number or single indicator. I will be lOOking at a number
of economic factors in deciding whether a short term stimulus package is needed, or what
its size should be. The key factors will be the number of new jobs being created,
especially in manufacturing. and what is happening to incomes. Both of those figures
looked up in November, and we all can only hope that marked the start of a trend. But,
keep in mind that during the Iypical postwar recovery. the U.S. eeonomy has grown 5-6
percent in the first year. That is a high standard. but we are still experiencing a very
mediocre recovery by historical standards.
3. Stimulus
Innatjonary~
Question: Since the election, growth has accelerated. Wouldn'l a plan to deficit-finance
a stimulus package be exactly the wrong preseription now -- speeding up growth too
much and producing inflation1
Answer; Inflation is the lowest in memory for many Americans and that's good news.
And, with American plants and factories working al a low 78.5 percent of capacity, it
would take several years of rapid growth to approach the range where inflation beeomes
a worry again. Indeed, just last Thursday, the Producer Price Index was down slightly
- 0.2 percent. On Friday, the CPI was up just 0.2%
�-,'
4. Budget E:nforcement Rules?
QyeSliQn: . What kind of budget enforcement rules would you consider to ensure you
reach your budget targets?
hnsw~ The tr.msition team is tackling that right now, and that is what the economic
team :;eated here with me will be getting \0 work on very soon, When we move \0 the
issue of deficit reduction later this morning, I want to tum the tables and hear what kind
of, teeth you think it should bave.
5. Social Security Cuts?
~l2n:
Does that mean you might rai~', taxes on social security benefits or cut social
security or medicare benefits?
I\nsw~
It is far \00 early for any speculation like that.
6, If no stimulus,
win you stiD ,have incentives andlor infrastructure spending?
Question: If you decide that shon-term stimulus isn't needed, does that mean you will
not be proposing private investment incentives or a big new infrastructure investment
progrnm?
An.llier: We need to increase private and public investment to improve the longer term
ability .of our workforce and industry to compete in a global economy. Those
investments form the hean of my strategy to prepare America for the 21 5t century. They
will go forward next year regardless of whether we also pursue a shon term stimulus
progrnm.
.
,
13
.
�
Dublin Core
The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
Title
A name given to the resource
Clinton Administration History Project
Creator
An entity primarily responsible for making the resource
Cinton Administration History Project
Council of Economic Advisers
Department of Commerce
Central Intelligence Agency
Department of the Interior
Department of Defense
Corporation for National Service
Council on Environmental Quality
Department of Justice
Domestic Policy Council
Department of Education
Department of Energy
Environmental Protection Agency
Federal Emergency Management Agency
General Services Administration
Small Business Administration
Social Security Administration
United States Agency for International Development
National Economic Council
Office of Management & Budget
Office of National Drug Control Policy
Office of Personnel Management
Office of Science & Technology Policy
Office of the Vice President
United States Trade Representative
Date
A point or period of time associated with an event in the lifecycle of the resource
1993-2001
Description
An account of the resource
<p>The Clinton Administration History Project describes in detail the accomplishments of President Clinton's Administration for the period 1993-2001. The records consist of the histories of 32 agencies or departments within the Executive Branch. In general, each organization associated with the Project submitted a narrative history along with supporting documents. These narrative accounts are primarily overviews of the various missions, special projects, and accomplishments of the agencies. The supplementary records include substantive memos, press releases, briefing papers, and publications illustrated with photos and charts.</p>
<p>Agencies:<br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Council+of+Economic+Advisers&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Council of Economic Advisers</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Central+Intelligence+Agency&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Central Intelligence Agency</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+Commerce&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of Commerce</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+the+Interior&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of the Interior</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+Defense&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of Defense</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Corporation+for+National+Service&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Corporation for National Service</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Council+on+Environmental+Quality&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Council on Environmental Quality</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+Justice&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of Justice</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Domestic+Policy+Council&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Domestic Policy Council</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+Education&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of Education</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+Energy&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of Energy</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Environmental+Protection+Agency&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Environmental Protection Agency</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Federal+Emergency+Management+Agency&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Federal Emergency Management Agency</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+General+Services+Administration&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the General Services Administration</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+Health+and+Human+Services&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of Health and Human Services</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+Housing+and+Urban+Development&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of Housing and Urban Development</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+Labor&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of Labor</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+National+Economic+Council&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the National Economic Council</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Office+of+Management+and+Budget&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Office of Management and Budget</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Office+of+National+Drug+Control+Policy&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Office of National Drug Control Policy</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Office+of+Personnel+Management&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Office of Personnel Management</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Office+of+Science+and+Technology+Policy&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Office of Science and Technology Policy</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Office+of+the+Vice+President&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Office of the Vice President</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Small+Business+Administration&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Small Business Administration</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Social+Security+Administration&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Social Security Administration</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+State&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of State</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+Transportation&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of Transportation</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+the+Treasury&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of the Treasury</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+United+States+Agency+for+International+Development&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the United States Agency for International Development</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+United+States+Department+of+Agriculture&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the United States Department of Agriculture</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+United+States+Trade+Representative&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the United States Trade Representative</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?search=&advanced%5B0%5D%5Belement_id%5D=39&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=History+of+the+Department+of+Veterans+Affairs&range=&collection=21&type=&user=&tags=&public=&featured=&exhibit=&submit_search=Search+for+items">History of the Department of Veterans Affairs</a></p>
Is Part Of
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<a href="http://clinton.presidentiallibraries.us/items/show/36051">Collection Finding Aid</a>
Provenance
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Clinton Presidential Records: White House Staff and Office Files
Publisher
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Clinton Presidential Library & Museum
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Adobe Acrobat Document
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1474 folders in 111 boxes
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Paper
Dublin Core
The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
Title
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NEC – Economic Conference, December 1992 [2]
Creator
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History of the National Economic Council
Clinton Administration History Project
Date
A point or period of time associated with an event in the lifecycle of the resource
1993-2001
Is Part Of
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Box 38
<a href="http://clintonlibrary.gov/assets/Documents/Finding-Aids/Systematic/Administration-History-finding-aid.pdf">Collection Finding Aid</a>
<a href="http://catalog.archives.gov/id/1497354">National Archives Catalog Description</a>
Provenance
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Clinton Presidential Records: White House Staff and Office Files
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Adobe Acrobat Document
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Clinton Presidential Library & Museum
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Reproduction-Reference
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6/24/2011
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1497354-nec-economic-conference-december-1992-2
1497354