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Joseph Lieberman
Member, U.S. Senate (D-CT); 2000 Democratic Vice Presidential Candidate
Thank you, dear friends, for your welcome. I'm delighted to be here, particularly to be on this stage [ACT Theater]. I feel as if I should be dressed in a toga. And though, as you know, I had aspirations for the vice presidency last year, standing on this stage today, my fantasies could become slightly more imperial.
In any case, it is great to be here. It's always a pleasure to be in California; I love this state. And it is particularly a joy to be in this beautiful, shining city by the Bay, although I guess life is not as reliably illuminated here as it has traditionally been.
Look, I sympathize with all in California who are experiencing power failures. You could say that I know what it's like because I experienced my own form of a power failure last fall and it was no fun - although our troubles were not caused by energy deregulation. They were caused more by judicial interposition.
I wander just for a moment. Your applause encouraged me to say that I was recently at a dinner where President Bush was in attendance and I said that I have no bitter feelings about what happened last year.
I said, "Mr. President, for instance, if the rumors are true and Chief Justice Rehnquist retires sometime during your term and you move to nominate Justice Scalia to become the chief justice, I don't want you to feel that my mind is totally made up." I said, "The odds are against me voting to confirm Justice Scalia. I'd say the odds are about five to four."
Perhaps the ultimate comment on this final piece of shtick here is that I had the honor to speak at the Gridiron dinner in Washington about three or four weeks ago. And the journalistic media community does a series of skits and songs at that dinner. And they did one about the Supreme Court, and the woman obviously portraying Justice Ruth Bader Ginsburg did a song to the tune of Ave Maria whose words were "Oy Vay Scalia." And there's nothing more I can say about what happened last year that would top that.
But I do thank all the people of the Bay Area and California for the extraordinary support that they gave Al Gore and me. And I thank, while I'm here - and know that I'm speaking to folks back here in Groton, Connecticut via the radio - I thank the people of Connecticut who were good enough to return me to the Senate, where I have the honor of continuing to pursue some of the programs and values that we spoke about in the campaign last year.
And that's why I'm so honored to have the opportunity to address the Commonwealth Club, which has such a long and proud history - not just of discussing, but of acting upon the issues of the day for almost a century now. You've enlightened this community and indeed the country - you have raised both up. And that's something for which all who are associated with this club should be proud.
Today, I want to speak with you about the health of our economy, about the current slump that we're in, the longer-term prognosis and the role that I think government can play in nourishing the conditions for economic stability and true, long-term prosperity. As you know well in the Bay Area, these are difficult times for Silicon Valley and the rest of the American high tech, IT community. The Internet, for all of its promise, has not repealed the business cycle. Soaring expectations have yielded to slumping stock prices, sober evaluation of profitability and stringent corporate budgets.
Countless start-ups have been washed away by the angry tides of the stock market. Industry giants like Amazon.com are unable to squeeze profits out of billion-dollar sales and those that have shown profits are now warning of or are in fact experiencing weaker sales to come. Even the infrastructure of the dot-com economy represented by the once untouchable Cisco Systems and Intel and Sun Microsystems are looking at lower earnings, as we are painfully aware today after the announcement by Cisco yesterday.
Unfortunately, significant layoffs are affecting workers at large and small companies surprising a lot of younger workers who know only of economic growth in their working lives. The runaway boom of the 1990s has run smack into a pileup of inventories, dropping prices, and towering debt. Businesses that a year ago were eagerly adding the words dot-com to their names are now looking for more traditional paths to profits.
Venture capitalists are safeguarding their money. Consumers are losing their confidence, and the average investor has learned hard lessons. Add to all of that the energy crisis that now threatens the California economy and therefore the national economy and we've got some real troubles.
But, if I may, as Franklin Roosevelt instructed Americans in much, much worse circumstances, I hope you agree with me that we have nothing to fear today except fear itself. The current slowdown is a macroeconomic correction deepened I'm afraid by the Federal Reserve's tight money policy last year.
The Internet and the information technology sector more generally will continue to transform the economy as changes are adopted by different economic sectors at varying speeds. But the success of our high technology depends as much or more on economic fundamentals as on innovation.
The Internet is not a panacea for our economic troubles. It is a new means of driving growth when we get our economic priorities right. The Internet was, is and will continue to be a revolutionary medium for all of us, including business - not just because it connects people in businesses with unprecedented range and speed, but because it lowers costs.
The choices that we make this year about taxes, about the budget, about fiscal discipline are the choices that can stimulate or further stall the high technology economy. The fact is if we can step back from what some may see as a calamity at a close range today, America's economic indicators remain quite strong.
Productivity grew at a healthy rate in the fourth quarter of last year, unemployment has stayed at relatively low levels, inflation is under control, and most important, we in America remain the world capital of innovation. So I would say that this is not a time for panic. It is a time for perspective.
Looking back eight years ago, I think President Clinton and Congress made the right and responsible choices to discipline a federal government that had been drowning in red ink - to bring down the deficit and interest rates with it and to help unleash the awesome potential of America's innovational and entrepreneurial genius.
We created the climate for growth and, in the private sector, created the unprecedented prosperity resulting in the lowest inflation in decades, millions of new jobs that have kept our workforce producing at levels literally unknown in the history of the human species, technological advances that made us the envy of the world and the capital of the global economy, and long-term projected federal government surpluses that are now measured not in billions, but in trillions.
Well, now we face a new set of choices about what to do with this bounty that the American people have worked so hard to attain and how to do deal with the current economic slowdown.
The big question I think is how do we use the projected surplus best for us and for our future economic growth? How do we take advantage of the opportunity we now have to strengthen our economy for today and expand it for tomorrow? How do we continue to grow America's middle class?
To me, the biggest threat is not the short-term shakeout we are experiencing, but the long-term vision that we are lacking. The central point that I want to make today is that government leaders must offer not just a tax plan, but a prosperity plan - a strategic blueprint for how to climb out of the prison hole, extend and expand our economic growth, and widen the circle of opportunity to allow more Americans to share in our prosperity.
President Bush, I'm afraid, has no such blueprint. The president has offered us a tax plan, not a prosperity plan. The Bush plan cannot answer the kinds of questions we should be asking about what kind of country we want to have in ten years. Because it does not ask the right questions, it can't provide the right answers. It lacks vision and therefore wastes this moment of extraordinary opportunity.
If we are to restore business and consumer confidence, we've got to have a clear idea of where we want to go and how best to get there. And I think the key to the tax and budget debate that's going on in Congress will be whether Democrats and Republicans can engage the American people in a broader debate about each party's vision of the country - our economy, our values, our priorities and our future.
As a New Democratic, I believe we have an obligation to champion expanded opportunity in the innovation economy and mutual responsibility for the debts of the 1990s and 1980s and the retirement IOUs that are piling up ahead in Social Security. Above all, these decisions should be made by Americans, as a community that strives to transcend narrow self-interest and find common ground.
What we need is a New Prosperity Agenda based on fiscal responsibility and wise investments - an agenda that empowers our people to succeed in the near term, but that also guarantees longer-term economic security. The primary goal of this new prosperity agenda must be to protect, stimulate and expand economic growth.
Again, we have learned and should have learned that government's role is not to create jobs, but to help create the environment in which the private sector can create jobs. A tax cut alone cannot do this, but a New Prosperity Agenda can: a new prosperity agenda that would set aside one-third of the surplus for debt reduction, another third for investment education and training and scientific research and other national needs, and a final one-third for purposeful tax cuts to help families, working families, and to stimulate business growth.
Beyond that, our trade policies must remain open and free. We must lower barriers and support fast-track trading negotiating authority for the president to achieve foreign trade agreements and open new markets for American goods made by American workers.
Let me say again that I don't believe that the current economic tumult alters the fact that we are now witnessing an economic transformation of historic proportions from an industrial economy that produces goods to an innovation economy that not only produces ideas and information, but uses those ideas to help us produce goods more efficiently.
The productivity increases of the last decade have been nothing short of thrilling. Now, despite the economic slowdown, surveys recently published in Business Week tell us that business-to-business e-commerce is expected to reach $3.6 trillion in 2003. Consumer transactions over the Net are anticipated to hit $107 billion.
So there's growth occurring and a lot of brightness ahead. And the American people more generally are sharing in that growth in a unique way.
When I was on a campaign trail last year, one of the most memorable experiences I had was at a firehouse in where else - Florida. We were having breakfast with firefighters who worked there. Now let me tell you, incidentally, that firefighters eat pretty well, I discovered on a campaign trail. We asked them, "What do you talk about on a typical morning here at breakfast?" And the answer surprised me. The answer was not sports, firefighting, or family, although I'm sure they speak of all of those. The answer was, "the stock market." And that is a revolutionary change.
In the 1980s just over 20 percent of American households invested in the market. Today, almost half do. And that of course means that many more Americans have assets at risk in a downturn such as the one we're experiencing now, but it also means that they have assets that are available to spur national economic growth and to provide for their own future economic security.
So with that set of understandings about this new economy of ours, let me now discuss what I mean by a New Prosperity Agenda. It must begin with a fiscally sensible budget - a budget that places the highest priority on paying down debt, which will keep interests rate low. And that means people saving money on home mortgages, car loans, credit card bills and student loans.
Low interest rates also, of course, cut the cost of capital for businesses that want to innovate and expand. So we should set aside at least one-third of the projected surplus to continue to pay off America's long-term debt. If the surplus does not turn out to be as large as it is projected and remember it's only a projection then we will not have committed to obligations that might drive us into deeper deficit spending again.
In other words, we can put that further paydown of the debt on hold and use those funds previously set aside for debt reduction as kind of a "rainy day fund" to keep us out of debt.
The next critical component of the New Prosperity Agenda is to invest in the building blocks of the innovation economy - to have learned the lessons about what government can do to help the private sector grow. And that means job training and retraining; it means education and scientific research and development.
Skills and learning not only drive productivity growth; they increasingly determine individual opportunity in this information economy. Workers today must be fluent in the language of information. They must be literate in technology.
Here's an interesting statistic: By 2006, almost half of the American workforce will be employed in industries that are either big producers of or intensive users of information technology. In recent years as you know, we've experienced serious skills shortages and while the current slump might ease the demand for talent, in the longer term, our training rates for engineers, scientists, and skilled and educated workers are alarmingly inadequate.
So we must concentrate our resolve and our resources on changing the way we educate, we teach and train our labor force. That will assist all workers, including women and minorities particularly coming into the workforce and rising up within it. And of course it will have a particular impact here in the Bay Area, from Silicon Valley to San Francisco to Oakland.
We need to start at the beginning and reform our K-12 school system to raise academic achievement for all children - to refuse to accept failure for any child in our schools.
That's the purpose of legislation that several of us in the Senate not only introduced, but are in the midst now of negotiating with the White House, and which will be brought to the Senate floor on Monday of next week. Our bill gives more flexibility to local educators who know better what their students need, and in return, demands results from them in educating our children.
In this, the president actually is in general agreement with us. But, the president's budget submitted last week doesn't provide enough funding by far for our most troubled public schools where disadvantaged children are sent to learn. And that, I'm afraid, is because he spends so much money on his tax plan.
There's a better way to create a direct and progressive connection between taxes and education. Parents, workers, and employees should be given tax credits to make lifelong learning easier. The expenses of employers investing in remedial education to make up for the failures of the K-12 system should be offset with a new education tax credit.
And we should annex tax relief for low and middle-income families struggling to pay for the costs of their children's college education or their own mid-career retraining. These families should be allowed up to $10,000 a year in education costs from their income tax. That would be federal support well spent.
Now, equally as important are adequate funds for basic science and research and development. These are not exciting topics and the payoff from them doesn't come tomorrow, but they are the seeds of an innovative, growing economy. The role of scientific innovation is central to a prosperity agenda.
The story of the American economy after all is the story of scientific breakthroughs leading to economic growth - not just in the high-tech age, but going back to the development of electricity and the combustion engine and the transistor and of course the fiber optic cable.
Each one of these breakthroughs spawned whole new industries that made our work more efficient and therefore more productive. Yet President Bush's budget shortchanges three of the greatest generators of innovative ideas in the federal government: the science programs at the National Science Foundation, the space program at NASA and the science programs at the Departments of Energy and Commerce.
Rather than curtailing our physical science R&D funding, we should be doubling the basic federal research investment promoting education initiatives to expand the technologically trained workforce.
Now, our prosperity agenda should also contain a tax package. But unlike the one that the president has proposed, it should be a tax package with a purpose. And that purpose must be to stimulate economic growth.
So I would say that the final one-third of the projected surplus should be dedicated to tax reductions - some to help America's families and individuals and some to help business so that it can create growth. In the spirit of the innovation economy, we should look to tax incentives that will spur innovation, a skilled workforce and productivity. Let me mention just a few that I have in mind.
In 1997, I was a co-sponsor of legislation to reduce the capital gains tax rate - to help reduce the cost of innovation investment in our economy and to match up money with ideas to create growth. When it passed that year, I think it helped stimulate and strengthen our economic boom. I believe the capital gains rate should be reduced again.
Another proposal introduced by California's own Congressmen Bob Matsui is a great idea which would eliminate capital gains entirely from long-term investments in start-up entrepreneurial firms. That's a way to encourage a stronger venture capital market. Of course, some of my friends in the technology sector tell me they'd like some capital gains tax to go along with a capital gains tax cut. With sound economic policies, I'm sure that government can deliver one, and you the other.
Small firms which lag behind the larger firms in productivity growth should be given tax credits to invest in information technology. Here's a number that surprised me. Less than one-third of smaller businesses are wired to the Internet today, but the part that really struck me is that those that are wired have grown 46 percent faster than those that are unplugged.
A tax credit for connecting to the Internet would be well worth it. One of the most effective ways to spur business investment and increases in economic growth is adjusting depreciation schedules in the tax code to more accurately reflect the lifetime of a product.
Removal of economic and governmental barriers to the build out of broadband should be a top priority so we can erect the next stage of the IT infrastructure. Making the R&D tax credit permanent would encourage industry to invest in research and technological innovation.
Finally, a long-term prosperity agenda also must be attentive to the short-term challenges we face. And while, as I've said, I'm confident that the inherent strength of our private sector will ultimately do most to bring our economy out of its current dip, we in government also can provide some help - monetary policy through the Federal Reserve which is to say to keep interest rates down and going down further and federal government fiscal policy.
Several of my colleagues and I have called for this and last week or two weeks ago in the budget resolution, the Senate did adopt a statement supporting a short-term immediate fiscal stimulus that would put as much as $500 into the hands of every American who paid taxes last year. That should help to raise not only the economy, but consumer confidence.
And we can afford it because it's within the amount of money projected for the federal government to have left over fortunately, on our books when we close them for this year, September 30, 2001.
Ten years from now - just using a decade as a measuring point - we will be judged by the decisions we make today. People will ask: Did we fully understand the awesome changes taking place in our economy and in our society? Did we direct our unprecedented surpluses into investments with the greatest returns? Did we give our workers the tools that they need to seize the opportunities that an innovation economy offers, and were we guided by those time-tested American values of opportunity, responsibility and community?
I think if we keep that "back to the future" perspective in view and use it to help guide us in the decisions that we make today, we'll be able ten years from now to answer those questions affirmatively. But to do so, we must exercise discipline and we must have a plan.
We can't spend money we don't have even though there are temptations to do so. We've got to pay our bills and make investments for the future before we spend money on other things.
A short-term economic stimulus followed by tax credits and personal tax reductions and smart investments to sustain longer-term economic growth: That's a new prosperity agenda and I think it's within our grasp.
The reality is looking beyond the current downturn, America has never been in a stronger position economically, socially, or politically to shape our future. But it's not going to happen automatically. It will take strong and focused leadership.
No people on earth has ever dreamed bigger dreams or tried bolder solutions than we Americans have. It's part of why we have progressed as much as we have in so many different ways.
But I say to you today - speaking at this historic forum - that as great as our past has been and as good as our present is, if we in the public sector work in partnership with the private sector throughout our country, we can confidently say of America's future that the best is yet to come.
Members of the Commonwealth Club, ladies and gentleman, thank you very much for allowing me to share these ideas with you today.
