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Evan Bayh
Chairman, Democratic Leadership Council; U.S. Senator (D-IN)
In the Senate we are occasionally called upon to answer some questions and my mind wandered back to the impeachment a couple of years ago of the president of the United States.
Under the impeachment rules in the Senate, which were put into place in 1868, the senators are required to sit in silence, under pain of imprisonment, listening to the proceedings.
They then submit questions in writing to be handed up to the Chief Justice who then directs them to the appropriate people-either to the lawyers of the president, or the lawyers for the impeachment managers, the House managers.
So we'd write out our questions, we'd send them down to our leaders and they would hand them up to Chief Justice Rehnquist who would intone in a deep voice "a question for the House managers, " or "a question for the president's lawyers."
Well, one of my former colleagues, a man who we miss a great deal for his sense of humor as well as his courage and intelligence, is Senator Bob Kerrey from Nebraska. He wrote out his question, sent it down to the democratic leaders. Our leader looked at it, looked in surprise, and didn't hand it up to the Chief Justice.
It was only later that we learned that Senator Kerrey had written this question to the House managers: "Are you merely incompetent, or did you intend to lose your case?" So we've had the occasion to answer some tough questions in the United States Senate and I suspect I'll get some tonight, and I will look forward to answering them as best I can.
It is an honor to be here at the Commonwealth Club of California, one of the forums in our nation that allows the speakers to talk in some depth and detail about issues that go beyond just the headlines of the day.
I found the recent roster of Commonwealth Club speakers very impressive: heads of state like Vaclav Havel and Jean-Bertrand Aristide; business leaders like Steve Case of AOL and like Lou Gerstner of IBM; some of my colleagues in the United States Senate-Barbara Boxer and John McCain for example.
As your president mentioned, my father in 1970 addressed this organization about the subject of repealing the Electoral College, a topic perhaps more timely now given the results of last year's Presidential election. But the name that really intimidated me was Erin Brockovich. Now that's is a tough act to follow.
But there's another name that I think is very appropriate, given what is going on in today's economy; the challenges we face in looking to the future. That is the legendary figure who addressed this organization nearly seventy years ago.
In 1932, at the depths of the Great Depression, following the unprecedented prosperity of the 1920's, Franklin D. Roosevelt spoke to the Commonwealth Club. He spoke about the transformation of America from an agricultural to an industrial society, and said the nation would not recover its prosperity until government policy reflected this fundamental change. In words that are something of a motto for those of us who like to call ourselves "New Democrats," FDR said: "New conditions impose new requirements on government and those who conduct our government."
And so today before this club I, too, want to take advantage of this opportunity to address the latest economic metamorphosis sweeping America, and call for a new growth strategy for our New Economy - a strategy that raises our standard of living, nurtures our enduring values, and promotes American interests around the world. Fortunately, we've learned a lot over the last eight years about how to build prosperity. The New Economy, once limited to Northern California and a few other high-tech outposts, was the engine of growth in the 1990's for all of America, and demonstrated that a combination of fiscal responsibility, technology-driven productivity gains and global competition will produce record real income growth for Americans. The results were remarkable. Our economy generated 22 million new jobs. Unemployment dropped to the lowest level in 30 years. Inflation was the lowest since the early 1960's. Real incomes rose across the board for the first time in more than two decades. Poverty experienced its sharpest drop in nearly 20 years. Homeownership rates increased to the highest levels in history. Productivity growth grew at its fastest rate in 25 years.
But the prosperity of the 1990s went much deeper than our national bottom line. It helped us build a nation that is not only more wealthy, but more decent, more compassionate, more just. The lowest unemployment rates on record for African-Americans and Hispanics meant that for the first time hundreds of thousands of minority citizens had the opportunity to become homeowners, to choose where they wanted to live, and to send their children to college.
At long last countless citizens who had felt left out or left behind realized that they too have a stake in America's progress. The spread of economic growth throughout the country meant that struggling communities got a fresh chance for survival. Inner-city neighborhoods once forsaken were resurrected, and fewer people in proud country towns left home forever on their graduation day.
A strong economy, along with an emphasis on personal responsibility, helped us cut the welfare roles by more than half, reverse a 30-year rise in violent crime, and make progress on a host of social problems long thought intractable - from teen pregnancy, to divorce rates, to substance abuse among our children.
But by the end of the last decade, we had begun to take our progress for granted and started to view a growing economy as an entitlement, not an accomplishment-as easy and inevitable, not painfully won. The current economic slowdown should serve as a wake up call for Americans. We must not be complacent, for the comparative advantage we enjoyed in the 90's - superior access to technology, capital, and skilled labor - is eroding.
In the New Economy the global competition for national prosperity will be tougher than ever before. I'm confident the private sector - our workers, scientists, and entrepreneurs, the real engines for growth - will be up to the challenge. But what will government do? Will our public policy hold us back or create circumstances conducive to private sector success?
In the 1990s, clearly we got it right. We reversed the huge deficits and skyrocketing national debt of the 1980s and created what is called a "virtuous cycle" of balanced budgets, lower debt and interest rates, higher investments and rates of productivity growth and an increasing standard of living for the American people.
What concerns me most about President Bush's tax and budget proposals, currently dominating the debate in Washington, is that they threaten to undermine the foundation of the 90's prosperity-replacing the "virtuous cycle" created by fiscal responsibility with a "vicious cycle" of deficits and debt, rising interest rates, and disinvestment. His proposals constitute a narrow ideological agenda, not an effective economic strategy, and completely fail to grasp the realities of the New Economy and the many requirements for economic success in the 21st Century. In some respects, this shouldn't be surprising. The President's tax cut proposal was never intended as a comprehensive economic plan or even a short-term stimulus, but as a political tactic to combat the primary challenge from Steve Forbes. But a candidate's political tactics are no substitute for a President's economic strategy, and regrettably, this President has none.
President Bush's tax cut is so large that it will consume the entire projected non-Social Security-Medicare surplus and probably more. This assumes that the ten-year estimates he relies upon will be accurate - a doubtful assumption at best. Even small changes in the estimates for productivity growth, GDP expansion or healthcare inflation lead to huge deficits and debt.
For example, a mere four-tenths of one-percent difference in average productivity growth will lead to a one trillion-dollar reduction of the American surplus. And the price tag of the President's plan will be much larger than advertised because it excludes some big ticket items virtually certain to occur such as interest on the increased national debt, alternative minimum tax reform, extending existing tax cuts and greater spending for national defense.
Even though the president's projections are very risky, no one can foresee the future, or know with absolute certainty whether his numbers will turn out to be too optimistic or pessimistic. But the important point is that we should have learned by now that when it comes to budgeting for our future it is better to be safe than sorry, much better to be prudent than reckless, much better to risk saving too much for our future than risk returning us to the deficits and debt of the recent past.
But, unfortunately, President Bush's economic agenda is more than fiscally irresponsible; it is narrow and incomplete, relying solely on tax cuts to grow the economy at the expense of everything else. His approach means less for education, less for worker training, less for basic research and new technologies, less for public infrastructure, less for paying down our debt to strengthen Social Security and Medicare. He willingly sacrifices every other priority important to New Economy growth on the ideological altar of marginal rate reductions.
And his proposal is deeply unfair, rewarding one group of taxpayers disproportionately, ignoring the practical reality that some have a harder time making ends meet, and leaving millions of hardworking tax payers with no tax relief at all.
Finally, this Administration is flirting with global economic disengagement at a time when "forward defense" of America's economic interests is more important than ever.
But let me make one point here before proceeding: we Democrats are willing to stand shoulder to shoulder with the President with regard to China at this delicate moment. I want to be clear about that. But there are larger issues concerning our role in the world that we need to debate. It is in America's interest to have expanding foreign markets for our goods, crops and services. It is important to domestic growth that overseas economic crises and the contagion they spawn be stopped before reaching our shores. The Bush team's Cold War approach to the new global economy is potentially very dangerous to American prosperity. They do not comprehend how much the world has changed. They do not understand the need to put outdated ideologies aside and avoid both the moral hazard that indiscriminate intervention creates, as well as the threats to America's economy that unilateral disengagement can bring.
But, of course, the President and his advisors have rejected all criticism just as they have rejected all compromise. They offer instead false choices as outdated as they are untrue. We are told for example that the only alternative to cutting taxes is spending the surplus. Not so. Taxes will be cut. I support a tax cut, as do most other Democrats. But the real question is whether taxes will be reduced responsibly, leaving room for anything else. The Administration protests that the debate is really between small government and large government, and that their tax plan is needed to keep the size of government down. Also untrue. The size of government this year as a percentage of GDP is the smallest since 1966. And it will continue to shrink under either approach, Democrat or Republican.
Finally, we're told the surplus is "our money" and, therefore, should all be returned. Well, of course, it's "our money," just as it's our debt, our Social Security and Medicare, our schools, our children, our workers, our laboratories, and our economic future. The question isn't who the surplus belongs to, but how to use it to maximize our prosperity. That's the issue facing Americans today. In essence, President Bush offers America a "back to the future" agenda, returning us to the economics of the 1980's. He suggests that tax cuts are the answer to all of our economic challenges -- even if deficits, debt, and neglect of other priorities result. But the evidence proves that he is clearly wrong. During the 1980's, job growth was sixty percent slower than in the 1990's. Investment grew only half as much, and productivity gains and wage growth - the real measures of economic success - slowed to 100-year lows.
But demonstrating the fallacy of the current Administration's approach is not enough. For America to be truly prosperous, we must articulate an economic agenda that nurtures the growth of the New Economy and anticipates the challenges over the horizon and around the globe. Here are my suggestions for a national economic strategy that not only Democrats, but all Americans who prefer results over ideology can embrace. First things first, we need to give this economy a quick jump-start. For all its blessings, the New Economy is not invulnerable to the occasional ups and downs of overheated markets, excessive inventories or over-capacity. An immediate, affordable, across-the-board tax cut is an appropriate to stimulate consumption and revive growth. Last week I voted for an $85 billion tax cut that will provide every taxpayer with a $500 rebate this year. This rapid response is clearly needed, and is a smart insurance policy to ensure our economy quickly regains its full potential.
But while we were cutting taxes to get the economy moving, we also struck a blow for fiscal responsibility, a pillar for new economic growth. During the budget debate it was Democrats, joined by only two Republicans, who put fiscal discipline and our long-term prosperity first. This was no small feat given the resources of the Administration and the resonance of the President's bully pulpit. But we persisted and forged a compromise on tax cuts, providing substantially more for debt reduction, strengthening Social Security and Medicare, and making the long-term investments vital to our economic success. And this is critically important because tax cuts alone - even fiscally responsible ones - do not constitute the comprehensive strategy this new economic age demands.
The New Economy's performance during the 1990s proves that the best formula for real income growth is fiscal responsibility plus globalization plus productivity-enhancing investments. Fiscal responsibility, in the form of balanced budgets and debt reduction, keeps interest rates low fueling consumer spending and capital investment. Globalization opens new markets for goods and services and creates competition to keep prices in check. And productivity growth, fueled by constant technological innovation and the increased knowledge of workers, delivers higher incomes.
Apparently, George Bush just doesn't understand this New Economy. Instead of maintaining fiscal discipline, he threatens deficits and debt. Instead of engaging the world economically, he retreats. And, perhaps most disturbingly of all, instead of increasing investment in knowledge and innovation - the keys to productivity growth and a higher standard of living - he cuts back. In a different era, Michael Boskin, chief economic advisor to the first Bush presidency, remarked, "Potato chips, computer chips, they're all the same." How much the world has changed. How little our leaders have learned.
Under the Bush approach federal investment in basic research - the inspiration for innovation and technological advancement - is reduced by hundreds of millions of dollars, ignoring economists' estimates that innovation and the application of new technology generated at least half the growth in Gross Domestic Product since WWII.
Now in contrast to the president's approach, I support a set of measures to ensure America's leadership in technological innovation, research and knowledge enhancement. Our New Economy Agenda makes recommendations in four key areas to spur innovation, productivity, economic growth and job creation. Let me quickly mention the high points. We call for new measures to accelerate digital opportunity for all Americans. Using tax incentives for the private sector, particularly small businesses, and federal financing to reach underserved areas, we intend to make broadband available to every American by the end of the decade. And the digital divide will be bridged by connecting every school and library to the Internet, promoting development of the next generation of wireless service, and fostering competition to keep technology affordable for all Americans.
Our New Economy Agenda fosters greater consumer confidence in e-commerce by promoting secure networks to protect privacy and strengthen cyber security. We reform policies on exports and trade by establishing tariff-free zones for cross-border e-commerce, and assist small business technology development by creating regional e-business development centers. And we require the government to finally join the Information Age by creating a Chief Federal Information Officer empowered to make digital government work. This will make services more accessible and save taxpayers money - $65 to $85 billion could be saved over the next four years if the federal government only accomplished half the productivity growth realized by the private sector.
Our new economic agenda demands significant increases in funding for research and development, a critical weakness in the President's approach. Instead of cutting funding for civilian research and development as the President demands, we should double it. We should make the R&D tax credit permanent. And, unlike the President who seeks to abolish the Advanced Technology Program, we should fully fund this important initiative fostering public-private technology development.
Finally, the New Economy Agenda commits America to enhance the education, training and skills of our workforce. In the New Economy, what you earn depends on what you know. Knowledge and productivity lead to higher wages for workers and prosperity for our country. Here is where tax policy with a purpose can literally change lives. Up to $12,000 of college tuition should be made tax deductible to make the necessity of advanced education more affordable for every American family. Tax credits should be created to help companies defray the cost of remedial education and literacy training for workers. And we should make the Section 127 tax credit permanent and expand it to graduate education to assist employers who provide educational opportunities to their employees. I could devote an entire speech to all that should be done to boost the skills and knowledge of our people. But let me focus for a moment on the education of the most important group: our children.
Ensuring every child a quality education is essential to maximizing the potential of the New Economy. Meeting this challenge will determine more than anything else our prosperity as a nation and the ability of every citizen to participate in our growing abundance.
Unfortunately, it has become increasingly evident that the status quo is not good enough, the answers of the 1960s are inadequate to meet the educational challenges of the 21st century, and too many kids - particularly disadvantaged children - are at risk of being left behind.
So, along with my friend and colleague Joe Lieberman, I have co-authored the most sweeping education reform since the 1960's. We establish a new paradigm: no longer will educational success be defined simply in terms of how much we spend, but instead by how much our children learn. We call for historic levels of new investment in our schools, but require accountability for progress from every school, every district, and every state, each and every year. We give state and local government more discretion in the use of federal resources, but insist upon results. We target new assistance to the most disadvantaged children and harness the forces of competition, choice, and innovation within public schools with a dramatic expansion of charter schools, magnet schools and public school choice.
I'm pleased to report to you that we're on the verge of breaking the gridlock in Washington on education reform and making our new vision of better schools for all of America's children a reality. In fact, if imitation really is the sincerest form of flattery, President Bush paid New Democrats a big compliment last year by adopting our approach as his own. He has dropped his insistence upon vouchers and the result has been good public policy achieved through genuine bipartisan consensus on what is right for America's children. But, unfortunately, President Bush's approach on education reform stands in stark contrast to his actions on the budget, environment, women's and workers' rights, and virtually everything else. If the Administration can be fairly judged by its first one hundred days, I fear their bipartisan approach on education will be the exception and not the rule.
One of the most attractive things about candidate Bush was his pledge to change the tone in Washington, and when he first arrived he said many of the right things. But his words quickly gave way to a divisive agenda. If this highly partisan, ideological approach continues, President Bush will be remembered as one of the most polarizing chief executives in modern times, with unfortunate consequences both for him and for us.
For America has never been more in need of leaders who are genuinely willing to temper passions and bridge divides that too often divide us one from another. The 2000 Presidential election was the closest in our nation's history. But barely half of eligible Americans went to the polls. In 1998, when I was elected to the United States Senate, only 36% of those eligible voted. I'm told our nation now ranks 139th in voter participation. That is a tragedy. We cease being a representative democracy when fewer than half of Americans take part in even the most elementary act of citizenship.
And this, in the long run, is an economic challenge too. For it will take all of us-black and white, rich and poor, young and old, rural and urban, Anglo and Hispanic, Democratic, Republican, and Independent-to address the challenges that face our great nation and to make the most of the opportunities that awaiting us in the 21st Century.
If we are going to re-enlist the legions of the apathetic and the alienated in the cause of leading our country, if we are going to re-engage the people of the United States in the cause of shaping their own destiny, it will only be by offering them a credible, compelling vision of a better American future - a vision that resonates in ordinary citizens' lives. And that is where the right public policies and a New Economy Agenda can contribute to more than just our national prosperity, and why the right leadership in Washington is more important than ever before, because it will take that leadership to enable us to build not only a wealthier society, but a better society, a more united people and a revitalized democracy, so that once again we can live out the full meaning of our national creed: One Nation, Under God, With Liberty and Justice for All. Thank you for having me today.
