About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline

LOG IN
LOG IN


1 J. D. Foster, Public Investment and Deficit Reduction 1 (1993)

handle is hein.taxfoundation/taxfaazc0001 and id is 1 raw text is: FOUNDATION June 1993, No. 3 Public Investment and Deficit Reduction House Ways & Means Committee Testimony ByJD. Foster In Spring 1993, the Tax Foundation Chief Economist was invited to testify before the House Ways and Foudtion and Means Committee on the Clinton administration's proposals for public investment and deficit reduction. The following testimony was presented by the Tax Foundation's Chief Economist, JD. Foster, to the Committee on April 1, 1993. As with any program the size of that proposed by President Clinton, there are good points and bad points. For example, making permanent many of the transitory provisions of present law, such as the research and experimentation tax credit and the low- income housing tax credit, represents good tax policy because, among other things, it brings more certainty to the tax law. Businesses and individuals simply cannot undertake long-term planning with any confidence when there is continued uncertainty in the tax law. President Clinton's call for a net tax increase of $274 billion ... comes at a time when American taxpayers are already shouldering the heaviest tax burden in U.S. histoty. In contrast to its many good provisions, President Clinton's plan also proposes major tax increases for individuals and corporations. President Clinton's call for net tax increases of $274 billion over the next five years through explicit taxes and another $32 billion in various user fee increases, for a total $309 billion net increase, comes at a time when American taxpayers are already shouldering the heaviest tax burden in U.S. history. Mr. Chairman, let me begin by placing the President's program in economic context. We really have one central economic problem in this country today-one problem that either captures the effects of other problems, or is itself the cause of the other problems: Low productivity growth. Whether your main concern is wage growth, job growth, international competitiveness, or the futures we leave to our children, it all boils down to increasing productivity. Productivity, measured as output per hour of all persons in the nonfarm business sector, grew at about 2.4% between 1959 and 1969, slowed to 1.3% from 1969 to 1979, and slowed further to 0.8% between 1979 and 1989. This general pattern has been repeated in most of the major industrialized nations. Some of the slow productivity growth is demographic in nature. As the baby boomers entered the work-force it shifted the balance of skills to relatively less-skilled workers. The same occurred as the percentage of women entering the labor force increased. New entrants typically have fewer skills, and lower productivity, than more experienced workers. Eventually this surge of less-skilled workers will produce a surge of highly- skilled, experienced workers and improvements in living standards should accelerate. There are a host of other reasons for the slower productivity growth, however, which do not appear to be self-correcting, including: * the shift to more service-oriented industries, 11 UEF