REMARKS BY GOVERNOR BILL CLINTON STANDARD KNAPP, INC. PORTLAND, CT SEPTEMBER 8, 1992 I wanted to come here because I was so impressed with the story of how this company was revitalized with a partnership between labor and management, with employee ownership, with the kind of spirit that our country needs to compete and win in the 21st century. For more than a decade, as all of you know better than I do, we've been subject to very stiff competition in manufacturing. In the face of it, productivity in manufacturing rose very sharply in the 1980s, thanks to people like you, at about 4 percent a year. Helping us to compete with both the hard work low wage countries, and the high skilled, high wage countries. In our state, we adopted a manufacturing strategy that was specifically designed to help generate expansions in our state and maintain the job base. We provided an investment tax credit for anybody who invested $5 million or more in expanding the manufacturing base, intensified our retraining programs, that did a lot of work to support infrastructure, roads and sewer and water systems needed for manufacturing, provided quality management services and other training programs to smaller manufacturers who couldn't get it on their own. And in the course of that, I learned a lot about what it takes to maintain a manufacturing work force. In spite of all the productivity gains, the percentage of our workers employed in manufacturing has continued to decline in America, and now rests at just a little over 16 percent of the work force, slightly less than one in six Americans works in manufacturing. The comparative percentages for Japan and Germany are 28 and 32 percent. Now, just in the last four years we've lost 1.3 million manufacturing jobs and had a real decline in manufacturing wages of 5 percent. For the first time in American history in the last four years employment in government has exceeded employment in manufacturing. Unlike our competitors, this nation has no national strategy, no comprehensive partnership between business and workers and education and government to create the kinds of high wage, high growth jobs in manufacturing that I think are critical to our future. Not just because of the people like you who work in factories, but because of all those who depend on it. And when we lose manufacturing jobs, if people don't go to work in other manufacturing jobs, as all of you know, they tend to get jobs that pay lower wages with fewer benefits, in ways that weaken the fabric of the communities in which they live. What we've had in America is a series of unconnected piecemeal efforts and trickle down economics. We do have a manufacturing strategy, for example, in defense, because we want to make most of our defense products here, for obvious reasons. We have had a partnership between government and business. You've seen it in Connecticut, where an enormous percentage of your work force has worked in defense industries. But you also see the down side of that, that if there is a defense cut and no corresponding effort to increase that investment somewhere else, then those manufacturing jobs are lost. Under the theory that we have, I think it's pretty clear that we haven't supported manufacturing. The theory of trickle down economics is that if taxes are made low enough on the highest income individuals, and the highest income companies, and the government does nothing else, all the right investment decisions will be made and manufacturing jobs will grow. That's our theory. Our competitors' theory is quite different. They believe that government has to support the free market with real incentives to always modernize plant and equipment, with intense support for constant retraining of the work force, and with aggressive trade programs, not just for larger companies, but for small and medium-sized companies as well. One of the most interesting examples is what you find in the nation of Germany where medium and small-sized manufacturers work together to support export markets that most small companies could never enter, and as a consequence of that, that country which has about a third our population has almost the same volume of exports that we do every year, because they're working together hand in glove, workers and management, business and education, and government. Fifteen years ago, for example, we made 80 percent of the world's television sets and almost all of our telephones. Today we're down to 25 percent of our telephones and 10 percent of our TVs. We've seen industry after industry lose market share, and most Americans today are working longer work weeks for lower wages than they were making ten years ago. That is in no small measure caused by the decline of the percentage of our work force in manufacturing. Just yesterday President Bush had a great photo-op walking across the wonderful bridge that connects Mackinaw Island to the mainland in Michigan, a bridge that was built with steel from a mill that has closed in the last four years. We have to decide as a country whether we want more people like you, whether we want to help people like you to do things like purchase your plants when they're in trouble, give you incentives to do that, clean out the legal barriers to do that, whether we want to help companies like this that are smaller manufacturers to constantly modernize their plant and equipment, have access to the latest research and development, and have incentives and support to retrain their work force. I want to make one thing very clear. No person running for office can reasonably promise to make the American economy the way it used to be. You area far more typical factory, for example, than these factories with 4,000 or 5,000 employees. The average American factory now maxes out at 300 employees, and most people think it's good for productivity, so that people like Art and Mike can know everybody that works in the plant, know the names of their spouses, know how many children they have, know when they're having troubles, to increase the kind of personal connections that lead to productivity. No one can repeal the laws of change which now dictate that the average 18-year-old American going into the work force will change work eight times in a lifetime. And no government can ever replace the marketplace. The issue is whether America will have the kind of partnership between government and the private sector that will give us a high wage, high growth, vital manufacturing society, one that will help us to win in the face of change instead of lose in the face of it. And let me just give you one example, if I might, that doesn't have anything to do with your manufacturing sector. Everybody knows we've lost a lot of auto jobs in the last ten years. And we've lost a lot of steel jobs in the last ten years. But if you look at the Germans and the Japanese, they still don't use any more people to make automobiles than we do. But when they moved people out of automobiles, they moved into other manufacturing technologies, with a future in manufacturing. When our people moved out of automobiles, they moved into the unemployment lines and then by and large out of manufacturing because we did not have a strategy to maintain a constant effort to turn new ideas not new manufacturing jobs in the United States. So I want to make it clear what I propose to do won't make it the way it used to be. Nobody can promise that. No one can promise to stop the laws of change. What we've got to do is decide how to make change our friend instead of our enemy. That is what you have done so well in this plant. Building a new American manufacturing base is not going to be easy. It's going to take hard work and new solutions and constant effort. It's going to take continuous productivity increases, meaning fewer people will do the same work and at the same time opening up new areas of work for Americans who want to be part of the productive work force. We have simply got to become as able as other nations are at finding new manufacturing technologies and turning ideas into jobs in America. Let me just give you one other idea. A lot of you may have at home or your children may have at home a laptop computer with a very thin screen. That thin screen is an American invention. The patent on it was held by an American small businessperson for years. Then Westinghouse bought it. Then finally those screens were produced. There are now eight companies in the world that produce those screens. They're all in Japan. They're all providing high-wage high-growth jobs in Japan. We're not talking about Mexico. We're not talking about low-wage competition. We're talking about a country that had a better system than we did for taking a good idea; giving the private sector patient capital for the time to develop an idea that would put people like you to work, thousands and thousands of people like you to work. That idea should have been working in America. There should have been eight factories in this country producing that American idea. And that's the sort of change that we have to make if we really want to move forward. The kinds of things we have to do frankly don't fall very well within political categories. They're not Democrat or Republican or conservative or liberal. For example, when you had the employee buyout here of the plant, was that a liberal or a conservative thing to do? It was liberal in the sense that it was change and different; it was conservative in the sense it was the only way you could save your job. You were conserving what you had, right? Who cares. It works. That's the point. What we've got to do is look at the new world we're living in, with new ideas, and find out what works. My plan is called, for lack of a better term, manufacturing for the 21st century. It has a simple goal, to turn ideas that work into jobs that work in manufacturing--jobs for the last years of this century, and jobs for the next century. It is based on four simple but proven ideas. Give incentives for people to always modernize plant and equipment here, and fewer incentives to shut plants down and move them overseas. Extend the technologies that work in America to other companies that may not have access to them, especially small and medium-sized companies that can't afford large research and development budgets on their own. Innovate. Constantly, constantly, constantly have the government spending the kind of money that our competitors do in supporting private research into new commercial technologies and export, involving not just big companies, but small and medium- sized companies, in exporting, and making sure that our country gets a fair shake. My plan centers on helping the smaller and medium- sized manufacturers, companies like this company, caught between the pressure of international competition against government- backed conglomerates, and the demands of bigger clients. Today, we don't really have a national policy, or a strategy, or a commitment to help our manufacturers adjust to global change. What we need to do is to go beyond what now seems to be the alternative that you hear debated. Some people say, do nothing and let's just see what happens. What that will mean is what's going on now. Companies like you get more productive and you survive, but overall every year the percentage of the workforce in manufacturing goes down. So some do well, but overall as a nation we're not continuing to maintain our manufacturing base. Others say what we need to do is just have a protectionist policy, and try to have America take care of itself. That doesn't work either. One in five of our jobs today is tied directly or indirectly to global trade. We can't put a wall around America. If we did, it would just slow the world's economic growth further and hurt us even more. What we've got to do is have a new partnership that makes sense to help people who are committed to being productive workers compete and win in the global economy. First of all, let's talk about the incentives. And let's just take any company. I've been all over. Like I said, I've spent a lot of time in manufacturing companies. I've had a lot of plants in my state shut down and move to Mexico. Let me tell you how the tax system works today. Suppose you're running a small American company and you need to buy a $5 million piece of equipment, or a $10 million piece of equipment, to modernize and increase productivity, so you can stay in a place like Connecticut, where the cost of living is fairly high. And you have three choices: you can not buy the equipment and stay in Connecticut and go broke. You can buy the equipment. Or you can shut the plant down and move it to a country like Mexico where the labor costs are lower. Now here's how the tax system works today. If you buy the new piece of equipment, you don't get an investment tax credit for a quicker write-off. But if you shut the plant down, you get a deduction for the cost of shutting the plant down. Then when you start the plant up in another country, you get loss carry-forwards on your income tax, for the years when you lose money. Then when you start to make money in the other country, as long as you keep the money in a separate bank, you never pay a penny of American income tax on it. So I don't--believe me, I don't think there was any evil spirit that designed this tax system. But our tax system was designed with no thought for the fact that we're in a global economy where we've got to fight for every last job we get. So I say we ought to copy our competitors, and give more incentives for reinvesting in modern plant and equipment here, and fewer incentives for shutting the plants down and moving them abroad. If people want to invest abroad because that is good economics, that's one thing. But the tax system in America should work to benefit Americans without being protectionist. And that's what I call for by saying we ought to have a permanent investment tax credit. I also think we have got to encourage, not only in a negative sense, in a positive sense, the continuous production of productive equipment. Senator Lieberman has been very outspoken on this issue. But we spent a great deal of money coming up with new products in the defense area. We do all this basic research, and people come up with great ideas, and then they turn them into things like the Patriot missile which will go through doors or down chimneys; we all saw that on television. And that is critical to our future national defense. We don't want the Patriot missiles manufactured any place else. But the VCR was an American idea; it's manufactured somewhere else. The flat screen for computers was an American idea, as I said; manufactured somewhere else. We now have a list, the same list all the other advanced countries have, of the 20-25 technologies that will produce much of the high wage work of the 21st century. Everybody has got the same list. The issue is, are we going to have all this work done in our laboratories, have our people come up with these ideas, and have then the jobs somewhere else? I don't think it has to be that way. The second thing we have to do is to figure out how to turn these ideas into American jobs here at home, with incentives, and with extension work. And that leads me to the second point I want to make. Over the next five years, I think we ought to create 150 manufacturing extension centers and technology alliances throughout this country. Japan has 172 such centers right now. We can move ahead of them if we move aggressively. These centers serve as incubators for new ideas, and they give an access to new ideas to small and medium-sized manufacturers. Things like, what we did in Arkansas, by taking in all the manufacturing companies that wanted it, ideas for new energy efficiency; ideas for total quality management. We've got plants in our state where 100 percent of their profit now over last year is due not to increased sales but to reduced energy uses. Because of the kind of extension work that we've done. Now, I'm very partial to this idea, because I grew up in an agricultural state. And when I was a boy the agricultural extension service in America played a major, major role in increasing the productivity of farmers all across the country. They didn't get in the way of private agriculture; they simply supported private agriculture with the best ideas. Today, we are still spending over a billion dollars a year in agriculture extension, and only $18 million in manufacturing extension, which is 20 percent of our gross national product. There is no way in the world that a company with 200 employees will ever be able to afford to do some of the things on its own that with just a little bit of money you could provide services for through manufacturing extension networks modeled on the agriculture extension service. There are now seven of them in this country, thanks to Senator Ernest Hollings of South Carolina. If we can prevail in this election, we can put another 170 out there. These kinds of extension centers can fill the technological gaps that companies have, and they can also serve another very valuable purpose, and that is, to help retrain the scientists and engineers who won the Cold War who are now being laid off to do work to rebuild the American economy here at home. There are 200,000 unemployed defense workers, technicians, scientists and engineers, in California alone today. And these people have all this incredible potential to add to our national wealth. But we don't have a system for moving them from the defense sector into the non-defense sectors. The extension centers will help to do this. Let me just tell you that some people say, well, how much money are you going to spend on this? I propose to spend up to $500 million a year, five years from now. You may think that's a lot of money. But let me tell you today, Germany spends 70 times more on research and development to help private industry than we do, per capita. That's the kind of competition we're up against. The overall research and development budget for Japan is twice ours, even though they've got half our population. We have got to do these things if we want to catch up and compete. In the post Cold War world, the people who work in partnership are going to win as nations, just like you win in this plant because you've worked in partnership. The last thing I want to say is, we've got to launch a national export campaign to benefit small and medium-sized producers. We've got mounting trade deficits which we can do something about if we just quit importing as much foreign oil, and I've talked about that on other occasions. But we've got to understand that our future economic security and national security rests on our ability to compete in a global marketplace. Our government--listen to this--spends more today promoting the exports of almonds and walnuts than promoting all manufacturing exports to Japan. Just an example. Big market for us. Now there is something wrong with that. I mean, I'm all for exporting almonds and walnuts. I don't want to get in trouble with the people that raise them. But there is something wrong with that, when you realize the enormous potential we have for exports for small and medium- sized manufacturers. We ought to strengthen the export sections of our foreign embassies, and help American manufacturers sell abroad, just like all of our competitors do. We ought to strip away unnecessary export controls and reduce the incredible bureaucratic mess that surrounds a lot of them. Certain technologies are already available throughout the world. Americans ought to be able to sell them just like other countries, but they can't today. We've got to strip away--I'll say this again--we've got to strip away our ideological blinders. A lot of what we have to do does not fit neatly into somebody's notion of a political party platform of 10 or 15 years ago. We've got to look at the world that we're facing today and go after it. We've got to get rid of regulations that don't make sense. And we've got to permit our companies to join together and do common research and development in global competition as long as it doesn't affect their competitive pricing here at home. For too many years, we have just sat by while other nations have moved swiftly beyond us. We've got to have a new strategy. And it's got to be based on the proposition that since Americans are working harder than most countries, we ought to be able to be more productive, and we ought to be able to make more money, and that when there is American teamwork, and American ingenuity, and American sense of can-do spirit, and a sense of competitiveness, we ought to be winning. We should not be punished by having manufacturing productivity grow, and then having a percentage of our workforce in manufacturing drop. We shouldn't be punished by seeing our productivity go up and our wages go down. For 89 years, this plant has seen thousands of men and women come through its doors to earn a living. It has supported the dream of countless families. It would be a real tragedy if future American families didn't have those same ideas and those same opportunities. Mike was telling me back here when we were talking, when Art was making his remarks, that his niece, Carleen works here, on the same shop floor doing the job that her uncle ought to do. That's the sort of commitment we ought to make to America, that generation after generation should have the opportunity to make things. My granddaddy used to tell me that in the Great Depression in Arkansas people were so poor that they took in one another's washing for a living. Now that is what would happen to America if nobody made anything. There are people who really believe it doesn't matter if we have manufacturing jobs in America. There are people who seriously say, we could have 100 percent service economy. They have not examined the economic realities in which we live. We need a manufacturing base. We need more companies like this one. I have done my best in this election to offer a responsibility strategy for manufacturing, one which we're releasing in greater detail today, and one which is also contained in this little book that Senator Gore and I put together of our various positions in this campaign. It's called putting people first. I hope everyone of you for the next 56 days, whatever your political party, will think about this. I want you to think about what it took to put this plant back together in the tough years of the 1980s, and the kind of things you have to do today to stay ahead of the curve. And I want you to think about what we should do to make sure that people who do what you do are rewarded for their work and their effort, and that this country does not become a second-rate economic power, after we won the Cold War, because we simply didn't have the vision or the will to do what it makes to maintain our manufacturing base. I am determined to see that we do. Thank you very much.