25904 EXTENSIONS OF REMARKS September 30, 1987 EXTENSIONS OF REMARKS A MODEST PROPOSAL ON THIRD result of their overwhelming debt burden, then national trading system, thus increasing in WORLD DEBT their democratic governments will surely fall. stability within the international financial The same is true for the Philippines. This system. HON. ROBERT GARCIA should not be allowed to happen. Confronting (6) In order for the United States trade the debt crisis is one way of preventing it. deficit to decline, substantial growth must OF NEW YORK occur on an international scale, particularly IN THE HOUSE OF REPRESENTATIVES The debt commission, which is patterned in the developing countries. after the highly successful Greenspan Com Wednesday, September 30, 1987 (7) Current policies and existing mecha mission on Social Security, would make a nisms for resolving the debt crisis have Mr. GARCIA. Mr. Speaker, I am introducing thorough study of this problem, as well as pro failed to produce adequate new capital flow legislation today that will, hopefully, help to re posed solutions, by drawing on the expertise in part because of the constraints imposed solve the Third World debt crisis. The bill, of persons from the public and private sector. by the old debt. The heavily indebted coun which I am introducing along with my col It would consist of 17 Members from both tries of Latin America, Africa, and Asia are league, WALTER FAUNTROY, would establish a parties: Seven to be chosen by the President, not recovering economically and the pros bipartisan commission to study the debt crisis. five by the Speaker of the House, and five by pects are small for improvements in coming Identical legislation is being introduced in the the majority leader in the other body. The years. other body by the gentleman from Massachu (8) Negotiations between debtor nations President would designate the chair of the and banks have become protracted and setts, Mr. KERRY. commission, and the commission would issue almost every day brings new announce When I first became aware of the gentle a report to the President 1 year after its for ments of threats of default by debtor na man from Massachusetts' proposal to estab mation. tions or establishment of loss reserves by lish such a commission, I jumped at the idea. I This is not a dramatic approach, but it is an banks. see it as a complement to the fine work that important step in helping to resolve the Third <9> A resolution of the current interna has already been done on this issue, particu World debt crisis. It would force all the major tional debt problem will require- larly the provisions in the trade bill dealing players working on this issue to come togeth an increase in the flow of private cap with Third World debt. er to try and find a solution. Finally, I hope ital, in both debt and equity form, to the de Individuals such as our colleagues CHUCK that this is only a first step, and that we will veloping countries; and SCHUMER, JOHN LAFALCE, and BRUCE MORRI an increase in the role played by the eventually begin to work more closely with our public sector and the commercial financial SON, have worked on innovative proposals European and Asian allies on this issue. It is institutions in providing assistance to the that can only help to alleviate the problem. In only by working together that we can· move developing countries in managing the inter the other body, BILL BRADLEY, PAUL SAR forward. national debt situation. BANES, and WILLIAM PROXMIRE have also con Text of the bill follows: (10) The longer the debt crisis lingers on, tributed considerably to the effort to resolve H.J. RES. 366 the greater the danger to the economic and this crisis. I see the commission as another Resolved by the Senate and House of Rep political stability of the developing nations track in the process of moving debate on resentatives of the United States of America and the financial stability of international Third World debt forward. in Congress assembled, financial markets. Debt is not merely a fi nancial or technical problem; it is at the As chairman of the Banking Committee's SECTION 1. FINDINGS. heart of politics in much of Latin America, Subcommittee on International Finance, The Congress hereby finds the following: (1) The international debt crisis threatens Asia, and Africa. Trade, and Monetary Policy I have conducted <11) It is now time to develop a sound pro a number of hearings on this issue. I know the safety and soundness of the internation al financial system, the international trad gram of international cooperation that can that WALTER, as chairman of the Committee's ing system, and the economic development effectively bring the debt crisis to an end, Subcommittee on International Development of the debtor countries. restore economic growth and vitality to Institutions and Finance, has also looked at (2) Over the past 5 years, the debt service Third World nations, and alleviate current this issue very closely. I think the time for requirements and the virtual cessation of threats to international financial and trad action is now. new voluntary commercial bank lending to ing arrangements. It is estimated that as many as 1 million heavily indebted developing countries have SEC. 2. PURPOSE. jobs may have been lost as a result of the resulted in massive net transfers of capital It is the purpose of this joint resolution to debt crisis. Certainly the U.S. trade deficit has from such countries to creditor banks. establish a National Bipartisan Commission grown because of this problem. While it may (3) While heavily indebted developing on International Debt to develop recommen countries have enacted austerity programs, dations for resolving the Third World debt not be reasonable to assume that the level for substantially reducing their consumption, crisis. trade between the United States and Latin these programs have contributed to nega America that existed before the crisis could tive economic growth, declining standards of SEC. 3. ESTABLISHMENT. have been maintained, it is clear that Latin living, and increased political instability in There is hereby established a commission many emerging democracies. to be known as the National Bipartisan America does offer an important market for Commission on International Debt
e This "bullet" symbol identifies statements or insertions which are not spoken by a Member of the Senate on the floor. Matter set in this typeface indicates words inserted or appended, rather than spoken, by a Member of the House on the floor. September 30, 1987 EXTENSIONS OF REMARKS 25905
September 30, 1987 EXTENSIONS OF REMARKS 25907 nary administrative challenge for the entire scribed in section 401(m)), so long as it during that same period. In Westchester, the federal establishment. meets the requirements of this section." number of homeless children has jumped from It is difficult to justify adding to this (b) Section 8440 of Title 5, United States 714 in July 1985 to 1,373 in November 1986. burden by imposing complex and costly non Code, is amended as follows: At a time when Federal programs should be discrimination requirements which will re (3) By deleting from paragraph (a)(3) the quire federal agencies to develop new com words "the provisions of subsection (b) and" expending to meet the rising tide of homeless puter programs and income data for all fed following the words "subject to." suffering, it is an absurdity for the Department eral employees, including those who do not <4> By deleting subsection (b) in its entire of Health and Human Services [HHS] to pro participate in the Plan. Some organizations ty and by substituting in lieu thereof, the pose curtailing the use of funds under Federal are still unable to comply with the initial following language: shelter programs. These funds have apparent statutory requirements to develop new pay ''NONDISCRIMINATION REQUIREMENTS.- ly been used by several States in violation of roll system capabilities to support routine Notwithstanding any other provision of law, a 30-day statutory aid limitation. This money contributions to the Plan by April1, 1987. the Thrift Savings Fund is not subject to the non-discrimination requirements appli goes to provide temporary emergency housing Exempting the Plan from the nondiscrim for thousands of homeless families across the ination tests of the Tax Code will not result cable to arrangements described in section in inappropriate or excessive tax avoidance. 401(k) of Title 26, United States Code, or to country. Unfortunately, the problem of home Only about 5 percent of federal employees matching contributions 91-059 0-89-46 (Pt. 18) 25914 EXTENSIONS OF REMARKS September 30, 1987 of this important legislation in time for Vet corporate tax rates, high rates of return and of living. As in the case of a household, we erans Day 1987. our long-term political stability. Because of will have to hold spending below income to Sincerely, the recent sharp decline in the value of the cover our debt payments. Paying just the in R. JACK POWELL, dollar, overseas investors find many bar terest on this foreign debt will likely cost Executive Director. gains in the U.S. each U.S. household $500 per year in the Foreign investment in the U.S. brings early 1990s; trying to pay off part of the mixed results. It can provide communities debt will cause greater hardship. For the THANKS FOR NOTHING, SOUTH with the capital needed to create new jobs. first time in generations, we could be pass KOREA! Foreign investment in U.S. plant and equip ing on a lower standard of living to our chil ment can improve company efficiency, and dren. provide quality products for consumers. But The U.S. dependence on foreign capital HON. PAUL B. HENRY foreign investment also means that the divi also restricts our freedom to make economic OF MICHIGAN dends go overseas, and that we can lose policy. If foreign investors reduce their IN THE HOUSE OF REPRESENTATIVES some control over our means of production. lending to us, the tighter supply of credit Wednesday, September 30, 1987 Also, as economic power grows, so does the would force up interest rates, and perhaps political influence of foreign interests precipitate a recession. The Federal Re Mr. HENRY. Mr. Speaker, recently South within the U.S. serve's recent hike in interest rates, to the Korea announced that it was lifting arbitrary Despite the spate of recent purchases, the possible detriment of domestic economic import restrictions on the importation of for percentage of U.S. assets under foreign con growth, may have been to attract foreign eign manufactured automobiles. There was a trol is still very small. Moreover, the federal funds to finance our national debt. Foreign brief moment of elation in Detroit as American government restricts foreign ownership in investors and governments will increasingly industries considered essential or sensitive, call the tune for our monetary policy. automakers thought that there would be a re such as telecommunications, shipping, or The burgeoning debt also undermines our prieve from the unfair trading competition be aviation. It is important to keep in mind status as a world leader. We will find it diffi tween the United States and South Korea in that the U.S. continues to have more direct cult to insist that others follow our econom the automotive market. investment overseas than foreigners have ic or political leadership as our indebtedness That moment of joy was shortlived. Accord here. If we place sharp limits on their in to them mounts. Our failure at the Venice ing to Paul Lienert, columnist for the Detroit vestment, they will limit ours. My sense is Economic Summit to convince our allies to Free Press, imports of American manufac that it is too early to tell whether new limits adopt policies to stimulate world growth tured automobiles may amount to only 200 to are needed on foreign direct investment. We and our reduced influence in Third-World should, however, develop a better system of debt negotiations exemplify the difficulties 300 units this year. Why are the numbers so reporting requirements to monitor foreign encountered by a nation attempting to in meagre? inroads into the U.S. economy. struct others without having its own house Quoting Lienert: Less visible, but potentially more worri in order. • • • Imported cars are subject to a laun some than the purchase of companies or No country has ever managed to remain dry list of taxes, including a 50 percent real estate is the rapid borrowing of the U.S. both a great power and a great debtor. tariff, a 40 percent special excise, a defense from foreign interests. Last year only 16% Americans need to adopt healthier economic tax (equal to 10 percent of the special of foreign assets in the U.S. was in the form habits which reduce our need to borrow and excise> and value-added tax. Thus, a new of direct investment (such as factory owner increase our production and exports. That Cadillac DeVille, which costs about $21,000 ship), and 12% was in corporate stock, while means curbing our appetite for expensive in the United States, retails for the equiva 72% was in debt instruments, such as U.S. foreign goods, selling more exports, cutting lent of an eye-poping $87,000 after all the Treasury bonds and corporate bonds. In our federal budget deficit, and saving and taxes and tariffs are added. A 4-cylinder 1986 foreigners held $995 billion of U.S. investing more. America must once again Ford Taurus, which lists in the States for public and private debt. In just a few short become a nation that produces more than it around $10,000, costs a breathtaking years, the U.S. has gone from being the consumes. $76,000. world's largest creditor to being its largest Thank you, South Korea, for nothing! debtor. The net international investment position of the U.S. in 1982 was $137 billion DIPLOMATIC DOUBLE in the black. This year it will be some $400 STANDARD FOREIGN INVESTMENT IN THE billion in the red. By the early 1990s net UNITED STATES U.S. international debt could reach $1 tril lion. HON. GEORGE MILLER There are several reasons for the rapid ac HON. LEE H. HAMILTON cumulation of U.S debt. Much of the debt OF CALIFORNIA OF INDIANA owed to foreigners has gone to finance our IN THE HOUSE OF REPRESENTATIVES IN THE HOUSE OF REPRESENTATIVES huge federal budget deficits. U.S. consumers have also been on a buying spree, especially Wednesday, ·September 30, 1987 Wednesday, September 30, 1987 of foreign products, and have piled up Mr. MILLER of California. Mr. Speaker, Mr. HAMILTON. Mr. Speaker, I would like to heavy personal debts. In addition, the Fed since the Arias peace initiative was an insert my Washington Report for Wednesday, eral Reserve's tight money policy in the nounced in Guatemala earlier this month, the September 30, 1987 into the CONGRESSIONAL early 1980s drove up U.S. interest rates, of fering foreigners high rates of return. At Reagan administration has let no opportunity RECORD: the same time, a variety of problems-such slip to demean this historic effort. FOREIGN INVESTMENT IN THE U.S. as the declining competitivenes of American Each and every step toward compliance Hoosiers are increasingly concerned about industry, foreign import barriers, and the with the Arias accord by the Government of the growing foreign involvement in our high value of the U :s. dollar raising the Nicaragua has been denounced as ~osmatic economy. They hear about foreign interests price of our exports-led to our current and insincere: the lifting of restrictions on buying U.S. companies, and about the U.S. trade deficit. As long as our imports exceed Radio Catholica, the reopening of La Prensa owing huge sums of money to foreign inves our exports, we must finance the difference uncensored, the creation of a national recon tors. They fear that we are starting to lose by increasing our indebtedness to foreigners ciliation commission, the limited cease-fire. control over America's future. These fears or by selling off U.S. assets. can be overstated, but to some extent they The inflow of foreign capital is not all Most of the world, and those in Central Amer are justified. Increasingly our economic and bad. It can be beneficial if it finances pro ica who are sparing no effort to make this foreign policy decisions may be influenced ductive investments that create jobs and peace process succeed, are encouraged, as by our indebtedness to foreigners. generate the future earnings needed to are many in this body who have opposed the Increased direct investment by foreigners repay our creditors. Unfortunately, our administration's policy of subverting the Nica in the United States has prompted wide growing indebtedness reflects private con raguan Government-a policy many believe spread publicity. Their purchase of U.S. sumption and military spending more than contributed to the antidemocratic restrictions companies ranging from Standard of Ohio investment. U.S. investment as a proportion in Managua. to Smith & Wesson generates feelings of un of gross national product during this decade easiness. Foreign investors now own 46% of differed only slightly from earlier years. The administration sees no hope in the the commercial real estate in downtown Los If we do not generate economic growth to movements toward peace. Apparently, the Angeles. Foreigners flush with cash are at pay the interest on our debt, we will have to President continues to believe that the plan, tracted to American technology, low U.S. pay for it by a reduced American standard which has the unanimous support of the four --~ .... ---- ...... --~ --- •• - :::J• ----~-~~~ September 30, 1987 EXTENSIONS OF REMARKS 25915 Central American Presidents with most to fear Water is a scarce resource. Giving it away DEFENSE REFORM BIG FLOP from Nicaragua, is fatally flawed. just encourages waste. The Interior Depart The administration also continues to refuse ment puts the taxpayer subsidy on most HON. CURT WELDON any bilateral negotiations with President Bureau of Reclamation water at a whopping OF PENNSYLVANIA Ortega or other leaders of the Nicaraguan 85 percent. The lucky recipients of this wind IN THE HOUSE OF REPRESENTATIVES Government. The President tells us that he fall have little or no incentive to conserve will not negotiate with a government which is water. Wednesday, September 30, 1987 militarily and politically allied with the Soviet My bill gives them that incentive. While agri Mr. WELDON. Mr. Speaker, in the continu Union, restricts freedom of the press, cracks business still won't be paying the full cost of ing effort to get the budget under control, down on antigovernment radio broadcasts, the water, it's a step toward ending water wel many have looked to the defense budget for outlaws trade unions, intimidates the church, fare. reductions. As with most areas of the budget, or employs other antidemocratic policies. Finally, there is the question of fairness. we can save money in defense by increasing So it was with a certain sense of confusion program efficiency and management. But we that I read over the weekend of Vice Presi Other water users pay the full price. While cities and suburbs look for new-and costly will not achieve these savings without the co dent BUSH's official visit to Poland, where he operation of those who administer defense engaged in discussions with an antidemocra~ic water supplies, the Federal Government is giving water away to agribusiness. This isn't programs. Soviet puppet Wojciech Jaruzelski who, w1th Not long ago, Congress adopted some of right. Soviet military might, overthrew the Polish the Packard Commission reforms to increase My bill allows the taxpayers to recapture Government, abolished trade unions and jailed efficiency of defense procurement and ulti some of the subsidy agribusiness gets from their leaders, prohibits dissident press and mately, to get more for our defense dollars. media activities, and confronts the Catholic them. It's fair, it's fiscally responsible, and it But as the attached editorial points out, this church. will encourage greater conservation of water. effort has gone astray. Unfortunately, the This is not the first time that I have been This reform is long overdue. I hope my col need for savings has not disappeared. As we struck by the administration's apparent willing leagues will support it. seek ways to implement policies aimed at ness to get off its high horse and engage in H.R. 3384 budget reduction, this commentary may be in normal political relations with countries whose structive. I think most of my colleagues on the antidemocratic nature is repugnant to this Be it enacted by the Senate and House of Armed Services Committee share these con Member of Congress, and presumably to Representatives of the United States of cerns. I hope other Members will take the many others as well; Marcos' Philippines, America in Congress assembled, That part II of subchapter B of chapter 1 of the time to review this editorial. I include the edi Botha's South Africa, Pinochet's Chile, Internal Revenue Code of 1986