Adam Smith

Mr. SMITH of Washington

Mr. SMITH of Washington. I think that is a very important point. When we look at a lot of the products out in the market today, it would be very interesting for everybody in society to sort of track one of those products, how it came into being, the steps that were taken, the investment that was necessary, the people power that was involved, and it makes us understand the importance of research and development. I think biotech is a great area to look at this. Everyone is aware of the drugs that have come out that have generated tremendous amounts of money, but we also have to look at the process that these companies had to go through to get to that product. Basically they were working for sometimes as much as 8 or 15 years without ever generating any revenue, without ever getting any return on the product that they were trying to develop. I am not talking about not making a profit, I am talking about not generating any revenue, because their product was not yet developed and being sold. If you have that type of situation, who is going to spend money for 8 years and not have any revenue? We need incentives, we need incentives for investors and incentives for the companies to make that sort of long-term commitment. It is not just biotech products, but the engine we are talking about was researched for years before someone generated one and they could generate the electricity that they were looking for.

Mr. SMITH of Washington. Mr. Speaker, I do not know that I will take up that entire 60 minutes. I want to briefly respond actually to some of the comments that we heard in the previous hour, and then talk about the new economy and how we can adopt our government to address the issues that it brings to the fore. I was interested to hear for an hour, the 2000 campaign is still a ways away, and for any of those who are wondering whether or not it is going to be positive, I guess the gentlemen who preceded me have answered that question in the negative. It is going to be relentlessly negative. Amongst the charges that we heard tonight, I understand now that Vice President Gore wants to get rid of ambulances and fire trucks. If the other people are to be believed, that is a core of his policy. Those who were not listening to the comments, what they were saying is Mr. Gore has concerns about the internal combustion engine and would like to replace it. They implied that since these engines are now in ambulances and fire trucks, for him to oppose the internal combustion engine must mean he wants to get rid of ambulances and fire trucks. I think this sort of extreme negative campaigning is bad for our entire system of government. I think my colleagues on the other side of the aisle, many of their issues I actually agree with. I think we can get up and talk about what we stand for and move the country forward, instead of relentlessly trying to pummel whoever emerges as the leader of the party we are opposed to. I do not think that serves democracy and I am somewhat saddened to see that, as I said, 20-some months before the campaign even starts we are full bore on the ripping apart of the person who we think is going to lead the opposite party. Let us talk about a few positive issues, what we stand for and the direction we want to take the country in. Towards that end, that is what I want to talk about today. I talk as a member of the New Democratic Caucus. We try to each week as new Democrats to present a message, an issue that we want to talk about, that we think the country needs to address and that our government needs to address. New Democrats are essentially moderate, pro-business, pro-growth Democrats within our caucus, and the issue that I want to talk about today has to do with the new economy and how our government can institute policies that address the changes that that new economy brings to our country. First of all I want to talk about what I mean by the new economy. Everyone has heard about the Information Age, about the global economy. It has almost become a cliche to say that we live in a global economy that is based far more on technology, but just because it is a cliche does not make it any less true. It is the dominant feature of the last few years of the 20th century and will be the dominant feature as we move into the 21st century, as our economy changes. We must adjust to it. We must understand what moves and motivates this new economy and adopt the policies that adjust to those changes to best serve the people of this country. It is a good news/bad news situation. The good news is it creates so much opportunity, the advances that we have had in the technology from computers to telecommunications to all points in between, to software, have created tremendous amounts of choices and tremendous amounts of opportunities in a wide variety of fields. It also creates challenges. The central challenge that it creates is adjusting to change. The world simply changes more rapidly today than it did previously. Therefore, we have to be ready to make the adjustments as new technologies come on board, as the world changes. I am 100 percent confident that we can do this; no question about it. We can benefit from the dramatic increase in productivity, in growth, that high tech industries give us and adjust to the changes, but not if we do not think about the issues in a new light, think about what the Information Age, what the global economy means to the policies that we need to adopt. To strip this to its core, what I am talking about is people. The reason I care about technology issues is because of the district I represent. The Ninth District of the State of Washington, it is a blue collar district, and one of the most important things that the leaders in our community, whether they be government or business, can do is ensure that a strong economy exists so that the people of districts like mine and throughout the country can get good jobs, make enough money to take care of their family and pursue their dreams and their interests as they see fit. Maintaining that economy is what is going to bring it home to everybody. Not just the top 5 percent, not just the Bill Gateses of the world, but every single person in the country who needs to have a good job to support their family or just support themselves can benefit from policies that embrace the high tech new economy. It is going to be important to real people from one end of this country to the other. I think when we talk about the high tech new economy it is important to break it down. There are really five areas of the new economy. First of all we have computers, and in that I include software and hardware. We have the Internet. We have telecommunications; biotech, which is primarily health care products that are developed; and lastly we have all of the products that those first four things help create. I think there is a mistake sometimes that people make, that technology is just a certain sector of our economy; there are certain, quote, high, unquote companies and then there are low tech companies. Every company is affected by technology. Obviously, some are more affected by it. Intel, Cisco Systems, Microsoft, these are companies directly in high tech. But even a company, even a retail store that sells clothing apparel is affected by the quality of the software that they have, that can track their inventory and track their customers and find out new opportunities. One of the examples that I think shows this is a small company that is actually starting up in my district that is trying to develop, coincidentally, back to the internal combustion engine, a new engine that will generate power. I have not figured out a way to make it drive an automobile, but what it can do is it can generate energy and replace some of the old methods of generating that energy. The advantage of this new engine that is based on the ram jet physics, stuff that I do not even begin to understand except to say that it works and it generates energy much more cleanly and much more efficiently than current methods, the person who was able to generate this product had worked on the technology in the defense sector. He had worked on it with jet airplanes but they had never quite made the connection down to the more civilian use of generating energy. He was able to generate that because of the rapid advancing in computers and software that enabled him to test theories more rapidly. Stuff that would have taken decades to get through to test, he could literally do in a matter of weeks, and that enabled him to test theories and move forward and get to the point where he actually developed the engine. In the biotech sphere, I talked to some folks in the biotech industry just last week, and they said from 1985 to today they have been able, through the use of computers and software, to reduce the time it takes them to analyze data to the point where a project that they did in the mid-1980s took them 5 years to analyze, that data today they could do in an afternoon. This application spreads all across our economy. So those five sectors need to be encouraged and fostered to grow because they impact all aspects of our business. As we get into an increasingly competitive global economy, we want our companies in the U.S. to be the ones that advance fastest and furthest and do it first so that we can take the advantage and get the economic benefit of that for our country. Therefore, we need to adopt policies that reflect this. We need to look to the future and say, as the world changes, as technology moves forward, what do we need to do to be ready for it? Certainly we cannot go with policies that we had 50, 20, even 10 years ago, when technology has changed. Remember 5 years ago the Internet was pretty much a nonfactor. It was an idea. It was out there, certainly, but the explosive growth in the last five years was not foreseen but by the smallest number of people. Now that affects every aspect of our economy. We need to be ready for those sorts of changes. Towards that end, I have six main policy areas that I want to make people aware of, that we in government need to address to try to adjust to this high tech economy. The first one has to do with export controls, and this is one that actually applies to more than just the high tech economy. It just becomes more of a factor because of the global nature of our economy that the Information Age makes possible. We have a number of policies in this country that restrict the exportation of our products, specifically restrict the exportation of technology products or create unilateral economic sanctions against the export of all products. This creates a problem for one simple fact, and for one simple reason: Ninety-six percent of the people of this world live someplace other than the United States, yet the United States is currently responsible for 20 percent of the world's consumption. What that means is that if our companies are going to grow, if markets are going to increase, they are going to have to have access to markets outside of this country. Currently, our policy on unilateral economic sanctions places sanctions on dozens of different countries that limit our ability to export. Now, the reason we place those economic sanctions is because we disapprove of something that that country has done, and that makes a certain amount of sense, if our action to place those sanctions would change the action by that other country that we disapprove of. But the reality is it does not. All it means is they go someplace else to buy their products. In essence, what we are doing is we are punishing these other countries by telling them that we will not take their money and that is not much of a punishment. It drives them into the arms of our competitors. We need to rethink our unilateral economic sanctions policy. Multilateral sanctions make sense. If we can get enough people together, enough of our allies together to condemn an action, condemn a country and place sanctions on them, then that can work. But taking the action unilaterally does nothing to advance the policy aims and only hurts us economically. In the technology realm, we place restrictions on the exportation of encryption technology; that is, technology that is used basically to protect data on a computer, to make sure that people cannot access it who you do not want to access your information. We also place restrictions on the exportation of so-called supercomputers. The problem with that is because computers are leaping ahead so fast and so quickly, a laptop basically could have been, will some day be a supercomputer and is close to getting there under the definition that we have in policy today. We need to understand that in trying to restrict the exportation of this technology, the world has changed. I think this is one of the key areas that shows how we need to adjust. In the old days, we did not want this technology to get out there because it had national security implications, and it clearly does. If one has good encryption technology, if one has good computing technology, it affects one's ability to have weapons basically to commit harm, to do a variety of things. It has military significance. But the question is, how do we prevent other people from getting that technology. Can we simply as the United States put our arms around it and say we are not going to let it out and nobody else is going to get it? No. Encryption technology in particular. One can download it off the Internet, dozens of other countries sell it. It is going to get out there. In fact, this is going to hurt our national security. Because if we restrict the exportation of encryption technology in this country, our companies will slowly fall behind. They will not be able to get the customers because they will not be providing the best product. As we fall behind and other countries get further ahead of us in this technology, we lose our ability to be the leaders in the technology. The encryption companies, software companies in this company who produce encryption technology cooperate with the FBI and the NSA to help them, show them the advances in the technology. That helps us be ready to deal with the national security implications. If we lose that leadership role, countries in other parts of the world are not going to share that information with our National Security Agency or the FBI. We need to be sure that we allow the exportation of that encryption technology so that we can continue to be the leaders in that area. Another important area is education, and that gets to the change points. In a rapidly changing world, we need to constantly update our skills. We live in a society where all of us are going to need to continually be learning. We need to adjust our education system to understand that. In the good old days when basically all one needed was a high school education and could go out and get a job and probably take care of their family; my father did, he had a high school education, got a job as a ramp serviceman for an airline and ready did not update his skills very much during his 32 years with that airline and was able to take care of his family. In today's world, we need to update our skills. We need to make sure that our education system is ready for that, and that our education system is also ready to educate our children in technology issues and to enable them to change as rapidly as they need and update their skills. The Internet is the key to all of this. The way the system basically works, what computers and software enable us to do is they enable us to generate and store a large amount of data, and that is very valuable, as in the engine example I cited earlier. By being able to generate that information, they were able to develop a product. That is the start of it. The Internet basically is the step that enables one to transmit that data. Back to the example of a retail clothing shop, if it is a chain, if they have 25 or 30 stores spread throughout the country, they can share data. Basically being in any one of those stores is like being in the home office and by being able to share that data enables the company to move forward, or, if they are designing something, they can trade the design back and forth and not have to be in the same place. What we need to do is we need to encourage the Internet. Overregulating the Internet would be one of the biggest mistakes our government could make. It would put us in a position of restricting its ability to grow, and it is very important that we allow the Internet to grow and prosper and do the things for our economy that it has already started to do. There is also an issue, and this is primarily in the area of biotech, but also in other areas of patents. We need patent reform so that people have the incentives necessary to develop new products, secure in the knowledge that they will be able to keep the patents on those products and benefit from them. Otherwise, they will not get into the field and try to develop them. Research and development is also a critical element. We have in this country the research and development tax credit. Unfortunately, it is only good for one year and every year we have to come back and renew it. Well, we need to make that permanent. The reason is because if one is a company planning for the future and deciding how much to put into research, a lot of these products are not developed in one year, and if one does not know if the resources are going to be able to be there for more than one year, it hampers one's ability to make that investment. We have the opportunity to permanently extend the R&D tax credit this year and give companies that incentive to go out there and continue to develop the new products that they need to develop. Lastly, and this is tied into the Internet, we have the issue of broad band, basically access to the Internet. The Internet is great, but currently only about 20 percent of households in this country have access to it, and a much smaller number, very minute number, have access to so-called broad band Internet access. Put simply, broad band means that the Internet moves more quickly for us. Now, if one is just sending e-mail or simply surfing the net, that may not be such a big issue, but if one is trying to send data, if one is developing that new design, if one is in the automobile industry, one develops a new design for an automobile and one wants to send it out to one's top 25 executives throughout the world, to be able to send that much data over the Internet requires a larger pipe. Otherwise, it will take forever to send the data out and to download it to whoever has received it. The most important thing in this area is we need to build the infrastructure. Think of the Internet today in the same way that the railroad was in the 20th century. In the 20th century, the railroad gave us the ability to connect our country, but first, we had to build the track, and it was very expensive to build that track, so we gave incentives to go out there and build it, and it made a lot of sense because it helped grow our economy rapidly. We need to do the exact same thing with broad band technology. We need to give companies ever incentive out there to go out there and build the infrastructure. Lay the fiber, lay the cable, put in the phone lines, do whatever is necessary to connect as many people in this country as possible, not just to Internet access, but to fast, broad band Internet access. Overregulation can kill this. If we regulate companies too much so that they do not have the proper economic incentives to go out there and build the infrastructure, it will not happen. Because yes, there is a pot of gold at the end of the rainbow if you are the company that best develops Internet access, but you have to make a major investment up front to get there and you may not be willing to do that if the environment is too regulated. Those are just six issues that I think we need to touch on, but the important thing is simply to embrace change, understand the new economy. We cannot fight it. It is not an option. It is here. We need to understand it and try to make sure it works. I think one of the greatest challenges for this country is to make sure that it works for everybody. Because right now, it works fairly well for the top 20 percent, but the potential is there to make it work for everybody, and we need to understand it and go about addressing the issues in a way that make it available to the entire country, because it has the massive potential to keep our economy moving forward, to keep productivity high, and to create good jobs. That is why I think that the new economy and the high tech aspects of that new economy is so critical. I am pleased to have with me the gentleman from New Jersey (Mr. Holt), who is going to address these issues as well.

Mr. SMITH of Washington

Mr. SMITH of Washington. Mr. Speaker, I rise today to talk a little bit about our new economy, the information-based economy, and all the transitions that have been happening during this decade and really since about the mid-1970s and into the 1980s. It has been a dramatic change, one of the largest changes arguably in human history in terms of the direction of our country; and it has been shifted towards a new economy, based primarily on technology and information. And one of the most important challenges that we in this body will face in the years ahead is adjusting to that, is figuring out how to understand how our economy has changed and, as a consequence, how we need to change to embrace that. One of the biggest arguments that I want to make off the start is this is not an option. The new economy is not something that we can choose to opt in or opt out of. It is a fact of life, and we need to be prepared to adjust to it. And there are some policies that we can adopt. But, more than anything, right up front we need to increase our knowledge as policymakers, I urge all Members of Congress to do this, of the changes that have occurred in our economy that have moved it more toward a high-tech economy, and what changes do we need to make as policymakers to address that. I would like to lay out five broad categories today and just say that, as a member of the New Democratic Coalition on the Democratic side of the House, we are working very closely on these issues, working with leaders in the technology field, leaders in the education field to try to make the policy changes that are necessary because I think it is critical that we address those. The biggest one, of course, is education. We need to shift our education systems from K-12 to beyond to embrace the idea of life-long learning and the importance of technology. The three R's are still absolutely necessary. But if they do not have some knowledge in there about computers as well, they are going to be left behind in the new economy, and we need to make sure that that is included. We need to make sure that people understand that the world has changed, they are not simply going to be able to get through high school and then move into a job and never have to update their skills. They are going to have to be willing to constantly update their skills, and we in government are going to have to provide the access to the updating of those skills, whether it is Voc, higher education of any kind, retraining on the job. We need to create those incentives. But at the beginning, at the front, before we get to that, we need to change our K-12 system to make it more aware of the needs of technology and of the need of teaching kids how to learn and how to learn for life. Secondly, we have to invest in research and we have to give our companies in this country the incentive to make those investments. An important issue is going to come through Congress at some point this session that would permanently extend the R&D tax credit. That will have a critical impact on our economy. Research and development is absolutely necessary to keep up with the break-through technologies that seem to be happening on a daily basis. We need to give our companies the incentives to make those investments. Currently, we only offer the R&D tax credit for one year and then we play this game of roulette in the next year as to whether or not we are going to let it go on from there. Companies cannot plan in that sort of an environment. They do not know whether or not they are going to have the money to do the research over the long haul. We need to make that permanent. Third, we need to build the technology structure. This is about broad-band communication, giving people access to the Internet. The Internet has the ability to be the greatest equalizer of all time in terms of knowledge. It is not going to divide us. It is going to give anybody with a PC and a link to their phone line to get to the Internet the ability to gather knowledge which they never would have had access to before. But we have got to give companies the incentive to build that infrastructure so that people will get that access. This means deregulation and allowing that competition to flow so that we will build the infrastructure and get access to the Internet beyond just the urban areas which have it now and out into the rural and suburban areas where it is desperately needed. Fourth, we need to leave the Internet alone. Overregulating the Internet can potentially strangle its ability to get that information out there and help companies grow. Too much regulation would be a very bad thing, and we need to leave the Internet alone and not overregulate it. Lastly, we need to increase exports. We need to get access to more markets. Ninety-six percent of the people in the world live someplace other than the United States. If we are going to increase markets for all goods, we are going to have to do it overseas. I want to emphasize that this is not limited to certain technology areas, the Silicon Valley or Seattle or the research triangle or Boston. Any company one can think of is affected by technology. We just heard today that we had another 4 percent increase in productivity this last quarter. That is driven almost exclusively by advances in technology and helps grow the economy everywhere. Regardless of what business you are in, technology can help make that business more productive, help make our economy stronger and, most importantly, help people get and keep good jobs that will enable them to raise their family and take care of their bills and obligations. We must embrace the new economy and the high-tech economy so that we can prepare for the future.

Mr. SMITH of Washington

Mr. SMITH of Washington. Mr. Chairman, this issue is all about personal responsibility, taking responsibility for one's own actions. In this case, when people do not take responsibility for their own actions, others have to pay. We all pay more for everything that we buy because of the costs companies have to incur to cover those who do not pay their bills, and in particular, small businesses can be killed by this. If just a couple of critical creditors do not meet their obligations, small businesses can go out of business. We have a responsibility to honor our commitments. I think the worst message that I have heard in this whole debate is that what is really to blame is the marketing, that we should blame people for advertising credit, and it is their fault, it is not the fault of the person who fell for the marketing campaign, who accepted the obligation, accepted the money. It is somebody else's fault. When someone gets a credit card and charges it, they are responsible for paying it. Who does not know that? Everybody knows that. To say that it is not the individual's fault who has incurred the debt, but the person who gave them the credit, sends a terrible message to our country, that you do not have to be responsible for your own actions. Second, it hurts those who can responsibly use credit. I got one of those credit card applications, 10 or 15 of them, when I was in college. I used one of them and got a credit card and I paid it off every month. Because of that, it helped me with some financial spending ability, and helped me establish credit. I would hate to think that people who can use credit responsibly would be denied it because of those who cannot. One final point on the means testing issue. It is criticized that the means testing is based on your income from the past. First of all, what else can you base it on, really, except the existing record? But secondly, that is exactly the way we calculate child support payments, by your past income. Just like with child support, in this bill if there is an extenuating circumstance, if you go from being a $100,000 a year marketer to somebody working for $5 an hour at McDonald's, you can go to the judge and have that taken into consideration. It is just a misstatement of the facts to say that somehow those special circumstances are not considered in this bill. They are, just like they are in calculating child support. I do not think anybody on the other side of this debate would say that we should only base child support payments on projected future incomes, as offered by the person who has to meet the obligation. The means testing system works, and so does the bill.

Mr. SMITH of Washington

Mr. SMITH of Washington. Mr. Speaker, today the House will vote on bankruptcy reform, and I rise today to urge all Members to support this bill. The bill ultimately is about personal responsibility. It is about holding people accountable for their own actions. Worse, the current bankruptcy situation puts us in a position where others are held accountable for those actions. They are the ones that have to bear the price of other people's choices. Worst, it basically spreads out from the middle class to the poorest of the poor. Those are the ones that have to pay more for retail items and for a variety of items because some people run up obligations that they either have no intention of meeting or do not meet. Also, small businesses are particularly devastated by bankruptcies. In many small businesses, one or two clients not paying can be the difference between being in business and out of business, and when they go bankrupt and do not pay, those small businesses suffer. This bill does not eliminate bankruptcy, it is out there as an option, but it makes changes to hold people accountable and responsible for their own financial decisions to make sure that, if they can pay, they do pay. We should not have a situation where people can declare bankruptcy, run out on their obligations to others, drive up costs for everybody else and still live a life better than 95 percent of the rest of the world. We need this bankruptcy reform bill.

Mr. SMITH of Washington

Mr. SMITH of Washington. Mr. Speaker, the fastest growing segment of our economy has been the high tech segment of our economy driven mostly by computers, software, the Internet, biotech, and also the products that our increasing technology enables us to create. It is what has been most responsible for the strong economy we have enjoyed in the last 7 or 8 years and, more importantly, will be the cornerstone of what the future is going to hold. The more we can do to move the high tech economy forward, the more jobs that we could create and the stronger an economy that we can have. Now we deal with a lot of complicated issues in Congress. Mostly our goal is to try to improve the lives of the people we represent. There are a lot of very strong difficulties in doing that, but the one thing that most clearly, positively affects the lives of the people all of us represent is a strong economy. That is means opportunity, opportunity for good jobs and a decent wage so that you can take care of your family and build for the future. High tech is critical to that. That is the first component of what I want to talk about, the high tech economy. The second component is exports and basically creating markets for our goods, specifically for our high tech goods. Ninety-six percent of the people in the world live someplace other than the United States of America. Now in the U.S. we still manage to consume 20 percent of the world's goods, services and products, so what that means is if we are going to have growth in any aspect of our economy really, not just the high tech aspect, we are going to have to look overseas. We are going to have to look to that other 96 percent of the world out there and increase their consumption of our goods. Bottom line: Increase exports, and in particular, increase exports of high tech products. Those are the two things that need to come together, the importance of getting at that 96 percent of the rest of the world and the importance of continuing to allow our high tech economy to thrive. If that high tech economy is going to thrive, we are going to have to get access to those other markets. Our companies in this country are going to have to get access to those other markets for one central reason, that we are the leaders in most aspects of the high tech economy. We are far from alone. Countries throughout the world are developing their own Internet technology, their own telecommunications technology, their own software and hardware technology. We have competitors out there, and if they have access to markets that we do not have access to, that is inevitably going to catch up with us. It is going to give them the ability to grow and prosper and then feed more money back into research and development to develop the next best product, and in the high tech community, as my colleagues know, today's best product could be just totally out the window tomorrow as technology leaps ahead. You have to be the one in the position to leap ahead, and to get there we have to give our high tech products access to those foreign markets, and we are failing in three areas right at the moment. Number one, we have too many broad based economic sanctions that are unilaterally imposed by our country. We unilaterally decide that our country's companies will not be allowed to do business with dozens of other countries for dozens of other reasons. This does not work because while we make that unilateral decision, our competitors do not. Our competitors sell products to those same countries, so we do not have any impact on the country that we are trying to impact except to force them to buy good goods from our competitors. But two other areas are specifically problematic for the high tech community. One is encryption software, and skipping a complicated analysis, encryption software is basically the software that enables you to protect whatever is on your computer, to make sure that only you can see it and no one else can. This is very important for a variety of reasons, privacy reasons but also competitive reasons. Any computer technology, computer product, software product that is sold requires top-of-the-line encryption technology, but our country does not allow our companies to export top-of- the-line encryption technology. We place caps on how much of it can be sent out, depending on the product and depending on the service. That puts us at a disadvantage with our competitors and gives them a chance to get ahead of us in the high tech economy and jeopardizes future economic growth. We do this because we are concerned about the national security implications of encryption technology, and they are there, there is no question. The better encryption technology you have, the better you are able to either protect your national security or breach somebody else's. The mistake we made is in assuming that by placing controls on the export of our companies' encryption technology, that somehow stops the rest of the world from getting it. Encryption technology can be downloaded off the Internet. Dozens of other countries sell and export top-of-the-line encryption technology. All we do is place ourselves at a disadvantage and in the long run hurt our national security interests. We hurt them because we hurt our own companies' ability to be the leaders in leap-ahead technology. There was a great relationship in this country between the National Security Council, the FBI and our high-tech companies. They can work together to develop the best products to help with our national security concerns, but not if the company developing the best technology is from China or Germany or even Canada. They do not have the same cooperative relationship with the FBI that our own companies can have. We need to change encryption technology export, for the good of our economy and for the good of our export sector.

Mr. SMITH of Washington

Mr. SMITH of Washington. Mr. Speaker, one of the most important issues we face as a country and will continually face is the issue of economic growth, basic prosperity, creating an economy where all of our constituents can have good jobs that last and enable them to take care of themselves and their family. We must always be thinking of ways to increase economic growth, to increase economic prosperity to provide those jobs. I think that is one of those basic and fundamental services that I think of myself providing for the people I represent in the 9th District of the State of Washington, is to try to help do what we can to encourage a strong economy, and one of the cornerstones of a strong economy is exports. In order to create a possibility for economic growth, we have to have a strong export market, and a few basic facts make this point clear. Ninety-six percent of the world's population lives outside of the United States. But despite the fact we only make up 4 percent of the world's population, we consume 20 percent of the world's goods and services and products. So we can basically look at those figures and realize that if we are going to have economic growth, it is probably going to have to occur outside of the United States. We are going to have to do something to get access to that 96 percent of the world that does not live here. There is massive potential for growth in those markets for all of our products. Technology products, goods, services, you name it, exports are an incredible possibility for growth. Currently we have a number of policies in the U.S. that restrict the ability of those exports to grow, and that is what I want to address the House about today. Now, there are some very good reasons for why these restrictions on exports exist. Unfortunately, as times have changed, those reasons are no longer valid, so it is very important that we reexamine our policy of restricting exports. And there are two that I want to touch on today. One is unilateral economic sanctions, and the second is restrictions that we police on the exportation of certain technologies, certain software and certain computers. When we look at the issue of unilateral economic sanctions, it is important to first look at why we do it. We do it because we want to change the policies of other countries, policies that we are absolutely right in condemning and wanting to change, policies such as restrictions on religious freedoms, restrictions on democratic freedoms, restrictions on economic freedoms, and basic human rights concerns. Unilateral economic sanctions are perceived as one way to get other countries to change those policies. But the problem is we live in a global economy, and in a global economy a unilateral, which means only us, the U.S., placing export restrictions on our companies doing business with other countries, does not get us there because those other countries have dozens of other options. They can go to other countries and get their goods and services elsewhere, and all that happens is that we lose market share and those policies that we are concerned about do not change. Economic sanctions, in order for them to work, must be multilateral in order for them to have full impact. I brought a chart with me today to show my colleagues, in red, the countries that we have placed some sort of economic restriction on. In other words, these are countries that there are some sort of restrictions on U.S. companies exporting to them. These are markets that we are shutting off or reducing access to for U.S. companies. Mr. Speaker, the important point here is it just does not work. If it worked, if we could actually change human rights policy, change democracy policy, change economic repression through a policy of unilateral economic sanctions, certainly it would be worth doing it, but it does not work. We need to reexamine that policy. Mr. Speaker, we have a bill in the House to do that sponsored by the gentleman from California (Mr. Dooley), who spoke earlier on this issue. I think it is critical that we support that. On technology, we restrict it for a slightly different reason. We restrict it for national security concerns. Perfectly valid concerns, but the question is: Do our restrictions on encryption software and computers actually help national security? I would argue, first, that they do not and, second, that they actually hurt our national security interests. This technology is not something we can put our arms around. It is growing so fast and in so many countries other than the U.S. We are not the only ones making encryption software in computers. Other countries are doing it. Therefore, these countries that we want to restrict access to will get access to it anyway. All we will do is hurt our own companies and hurt their ability to grow. This is not a choice between commerce and national security. In fact, I would argue that our national security could be best enhanced by opening up these markets to our U.S. technology companies so that U.S. technology companies can continue to be the leaders in technology and, therefore, share that technology with our national security interests. We are not going to be able to get the sort of interplay back and forth between the private sector and our defense companies if Germany or Canada or any number of other countries suddenly is out in front of us in technology. We will lose our national security edge. So, paradoxically, the policy of restricting the ability of our technology companies to have access to other markets for goods like computers and encryption software winds up harming our national security policies. The world has changed. It is global, and technology is very accessible. We need to reexamine old policies that no longer accomplish what they set out to do.

Mr. SMITH of Washington

Mr. SMITH of Washington. Mr. Speaker, I rise today to discuss our Nation's export control policy. Obviously, economic growth is a key to a prosperous future in this country, but that fact points out how important exports are. When we look at the world right now, we have a unique situation where, though the United States represents only 4 percent of the world's population, we currently consume 20 percent of the world's goods, services, and products. In other words, if we are going to have economic growth in the country, we are going to have to open up foreign markets. We are going to have to export, and take advantage of that 96 percent of the world's population that does not reside in the United States. When we look at it once again, the recent trade deficit figures just released today show another record trade deficit. There are a lot of issues that contribute to that. Today I would like to talk about just a couple that have to do with our export control policy, the policy of the United States in limiting the number of goods and products that can be exported from this country. These are limited in a couple of ways. One of them is through what are called unilateral economic sanctions. That is basically where we as a country decide we disapprove of some action of another country, and then decide that we are not going to allow U.S. businesses to export to them. I completely agree that we as a country need to stand up for things like democratic freedoms, religious freedoms, economic freedoms in the rest of the world, and do everything we can to encourage and promote those, but policies of unilateral economic sanctions do not get us there. Basically, all they do is force those countries to buy their goods from some other place. The reason for this is the changing economy. As we have all heard, it has become a cliche now, we live in a global economy. What that means is if we attempt to impose our will on another country through unilateral economic sanctions, we will fail. It will not work, because that country can simply go to any one of the other members of this global economy and purchase what they want. All we accomplish in that situation is restricting our own companies' abilities to export. Multilateral economic sanctions make a certain amount of sense. If we can get enough of our global partners together, as was in the case in South Africa, as is the case in Iraq, to institute export control policies so that it is not just us alone, the United States, then the policies can work and can exercise some influence to make some changes, as they did in South Africa. What I am opposed to is the proliferation of unilateral economic sanctions that do not succeed in their stated goal and harm our economy. There are several bills in Congress right now that will attempt to change that policy. I am proud to be a cosponsor of the House bill, and I think we need to move in that direction. I have brought a chart with me to illustrate the point. This chart shows the number of countries in the world that currently have some export controls on them; in other words, the number of countries which U.S. businesses are somehow limited in their ability to export to. We can see that it is a large number of countries, as they are represented in red. They cover a substantial portion of the globe and a substantial number of people; in other words, possible markets that we are losing out on as a country. If we could change that policy and open up those markets, it could be a boon to U.S. industry, and I must once again point out these policies have not had much effect on changing the policies of the other countries that we want to see changed. So unilateral economic sanctions have reached the point where they do not work. All they are is bad for U.S. companies. If we want to expand and grow, we are going to need access to these markets. We need to make those changes to get there. There are a couple of other aspects of our export controls policy right now that are particularly troubling because they focus on technology. In other words, they focus on the highest-growing segment of our economy, and indeed of the world's economy. They are controls on encryption software and on computers. Basically, the U.S. has a policy right now that basically looks at technology and says, we need to develop the best technology here in this country, and then for national security reasons, we are going to put our arms around it and prevent the rest of the world from getting it, it will be protecting our national security. There are a number of flaws with this theory, but the biggest one I want to point out is, once again, the global economy. There is access to this technology from other countries other than the U.S. We cannot stop that. By implementing these policies, all we are doing is restricting U.S. companies' ability to participate. The biggest point I want to make on restrictions of technology, this is not, and I repeat, not a choice between business and national security. If that was the case, absolutely, we would choose national security, end of story. The point is it does not help because these countries access the information elsewhere. Take encryption as just one example, a simple software designed to protect programs. We restrict the exportation of top-of-the-line encryption technology, but top-of-the-line encryption technology is available from a number of other countries, and in fact we can download it off the Internet. Our restrictions do not prevent these other countries from getting it, they only prevent our countries from being the ones that are able to sell it. In the long run this even harms national security by restricting our ability to develop the next best technology. We need to reexamine our policy of export controls for all of these reasons.

Mr. SMITH of Washington

Mr. SMITH of Washington. Mr. Speaker, yesterday we took the first step on a long process of passing a budget this year, and a very important budget it will be as it will lay out priorities as we move into the next century. It will in fact be the last budget of the 20th century. As we move forward, we need to set our priorities. This will be a long process as we go through the summer and into the fall in deciding what those priorities should be in passing a budget. I rise today to emphasize the importance of fiscal discipline, fiscal responsibility, and paying down our debt as we move through that process. I feel that should be the number one priority of this body in the budget process and for the future, as it is what can best help the people of this country. We still have a significant financial problem. The news has gotten better in recent years. We have reduced the yearly size of the deficit, and we actually have the possibility of moving towards a surplus. All of that is good news, and many people on both sides of the aisle and many Congresses through the past 6 or 7 years can rightfully take credit for that, but the job is not done. I worry a great deal as I listen to the debate and listened to the debate this past week on the budget resolution that people have lost sight of that fact. We are talking about surplus politics, and I think we do so prematurely. To begin with, we still incorrectly, from an economic standpoint, count the surplus in the social security trust fund as income to the Treasury, and use that surplus to claim an overall surplus when in fact we have an overall deficit. Last year's numbers make this point clearly. We had a $100 billion surplus in the social security trust fund. The rest of the budget actually ran a $30 billion deficit, so presto, we have the $70 billion surplus that everybody has been talking about, it does not really exist, but that surplus in the social security trust fund is already obligated. We have to pay it back, plus interest to the Treasury, so that the trust fund can pay out the social security benefits that all of us, or all of us hopefully some day, that many of us, are due. So it is not money we can count as a surplus. To count it that way is to spend it twice. When we spend money twice, we wind up in debt as far as we are. The second critical point in this is we still have an overall debt. That $70 billion surplus, mythical though it may be, even within the grounds of that myth is only a 1-year surplus, with quotations around it. The overall debt continues to grow. It is approaching $6 trillion. On a yearly basis we pay $215 billion to service that debt. That is 15 percent of the budget, 15 percent of our budget, and $250 billion that basically goes simply to pay off past excess. It does nothing to meet our obligations at present or in the future, and it should be reduced. Now is the time to do it. We have a very strong economy. We have unemployment at 4.2 percent. We have virtually nonexistent inflation, a booming stock market, with growth to match. If we cannot begin to pay down that debt now, we never will. We will never get there if we do not take that step right now. We need to step up to that as a priority. I am concerned, as I look at the debate that we had on the budget resolution, that we are not heading in the right direction. I basically look at the budget resolution of this week that was passed in the House as a bad news-good news situation. The bad news is, it is not a particularly good budget resolution, and the debate was even worse, from a fiscally responsible and economically accurate standpoint. But the good news is it borders on meaningless. What really is going to matter is the 13 appropriation bills that both bodies have to pass between now and October. There is no way that those 13 appropriation bills are even going to come close to matching what was in that budget resolution. I say that is good news because the budget resolution overpromised in a number of different areas. Essentially by holding back key specifics, the budget resolution was able to promise in a number of interesting areas, promise more spending on defense, although they added another little trick in there that they promised budget authority but not necessarily outlays. What is the difference between budget authority and outlays, we ask? It is the difference between promising to spend money and actually spending it. There is a big difference between those two things. Beyond that, the pledges for increased spending in defense, in education, while at the same time including a massive back end tax cut, and by ``back end'' I mean it grows in the out years, in the first 5 years it is not too much, in the second 5 years it is more, in the third five years it is even more, all of that, for all of that to work within any sort of fiscally responsible framework requires cuts in the rest of the budget that nobody is prepared to make, and therefore were not spelled out in that budget resolution, for some very good reasons. If they had been spelled out nobody would have voted for it and it would not have passed. So the budget resolution was more or less a political document, an effort to try to gain favor in some areas by playing various tricks and smoke and mirrors games with the budget numbers. So it is not going to happen, but we are going to have a situation where we are going to have to pass a real budget. What is going to happen is all of those promises that were made during the budget resolution debate are going to be very tough to meet, in reality. What is going to happen? My fear is that what is going to happen is exactly what happened in the 1980s, long before I got to Congress, actually when I was in high school and college and watched with horror as my predecessors in this body spent all of our future money. Basically what happens is an agreement is reached that goes something like this: I will take your tax cut if you take my spending increase. That works out just fine for that Congress. They are able to pass out a lot of goodies and make every one happy, but it sets up a situation that I, among others, walked into in the mid 1990s. Basically it is like showing up at the time that the credit card bill comes due. It is not a lot of fun and it is not good for the country, because I understand the Federal Government has many positive things that it needs to do. It has spending programs in the areas of education, in the areas of defense, environmental protection, medical research. It has tax cuts it can do. All of those things are important, but they are not peculiar to this one moment in time. Ten years from now, 20 years from now, 30 years from now, and beyond, residents of this country are going to have needs in all of those areas, needs that they will not be able to meet if we spend the money now irresponsibly. I am afraid that we are headed in that direction by overpromising, by talking about the politics of a surplus and where can we spend the money, where should we spend the money, what tax cuts we should do, way beyond what we can actually afford to do, and not even taking into account the nearly $6 trillion debt that we have run up over the course of the last 30 years. Let us be fiscally responsible and start paying that down. Worse than that, the debate, as I watched it, degenerated into a criticism of the Clinton budget and a battle over who is, quote, setting aside more for Social Security. There are a couple of problems with this argument. First of all, it allowed many of the majority party who supported their budget to not even really talk about their budget, but rather try to focus their attention on proving that the President's budget that he introduced 3 months ago was bad. That may well be. In fact, an amendment was offered by a Member of the majority that was supposedly exactly the President's budget. It was defeated, I think, with only two votes voting in favor of it. From the time that budget was introduced, many things have changed, many other ideas have come up. The budget is a dead issue. Yet, that is what the majority party spent most of its time talking about. I would have much preferred them to have spelled out some of the specifics of their own resolution. I also would have much preferred them to be a little bit more honest in their analysis of that budget. I brought a chart with me which I saw frequently on the day that the budget resolution was debated being brought up and put forth by the majority party as evidence that their budget was better for Social Security than the President's was. I bring this chart up mainly for illustrative purposes to show how-- well, dishonest might be too strong a word; we are supposed to not say things like that in this honest body--let us say how disingenuous the debate was. I will put that chart up now. This chart shows the commitment on Social Security. It is interesting. The Republicans' argument throughout the whole budget was that their budget sets aside 100 percent of the Social Security Trust Fund or, sorry, 100 percent of the surplus for Social Security, whereas the President only sets aside 62 percent. The interesting thing is, and they absolutely had to be aware of this fact, the 62 percent that they are talking about, or sorry, the 62 percent that the President was talking about was 62 percent of the entire surplus, whereas the number that the Republicans were referring to in their budget was 100 percent of the Social Security surplus. So basically the President was talking about 62 percent of a much larger number. In fact, a fascinating fact is this 62 percent of that much larger number is almost exactly the same as that 100 percent. In other words, there is no difference whatsoever. Yet, the majority got up here and argued repeatedly that their budget was better because it set aside 100 percent instead of 62 percent. It is just exactly that sort of disingenuous use of fact that colored the debate and got us way off the topic. That topic ought to be fiscal responsibility. If we want to do something about Social Security and Medicare, and that is really a third point in addition to the two prior points about how our budget situation is not as rosy as it is, those being, one, that we still count the money that we borrow from the Social Security trust fund; two, we have an existing debt; three is the coming bills on Social Security and Medicare once the baby boom retires, those exploding bills that are out there and what we are going to do about them. Nowhere in the budget resolution does it say anything about any sort of Medicare or Social Security reform to deal with those problems. If we do not, that is going to further exacerbate our financial situation. The level best thing that we can do for dealing with those programs, well, there is two things: one, we can reform the two programs, but two, is to not spend the money now. Because the interesting thing about this chart is both the President and the Republicans are being somewhat disingenuous in arguing about how much money they, quote, unquote, are setting aside for Social Security. We cannot bind future Congresses in that way. As future Congresses pass budgets, they will decide whether or not to spend this money on Social Security, Medicare, or someplace else. It will require a year- to-year decision to decide what to do with that. So to say that we are setting it aside now is somewhat empty rhetoric except for this point: It is arguable that the extent to which we are fiscally responsible now, in other words, the extent to which we do not spend money or do not give out tax cuts that further inhibit our ability to have revenues for Social Security and Medicare, to the extent we do that, we will be in a better position to deal with Social Security and Medicare in the future. So the number one biggest test, aside from all this baloney with the charts, this effort to confuse people by taking two separate numbers and treating them as the same when they are not, look at the budget and see if it is fiscally responsible. That is the test on whether or not we are preparing for dealing with the coming increases in cost and Social Security and Medicare. Again, when we look at the budget resolution we passed this week, it promised $800 billion in tax cuts over 10 years. Actually, that number balloons even further in the next 5 years, over a 15-year period. It also promised massive increases in a number of different areas of spending. All of that will jeopardize this chart considerably. That is what we need to look at as we debate the budget in the months ahead. Because, as I said, the hard work is yet to come. We have basically done the smoke and mirrors, twisted the numbers around to make them look as good as possible. Now we actually have to pass realistic appropriations bills. That is going to be far, far more difficult than simply passing a piece of rhetoric. I rise today to urge fiscal responsibility. Balance the budget and pay down the debt. That is the best thing we can do for society today and in the future. Mr. Speaker, I am pleased to yield to the gentleman from Arkansas (Mr. Berry), a colleague who will help in this argument. I appreciate his coming down.

Mr. SMITH of Washington. Mr. Speaker, I thank the gentleman from Arkansas for those well-said words. Mr. Speaker, I yield to the gentleman from Florida (Mr. Davis) who is a member of the Committee on Budget and has done an outstanding job of standing up for fiscal responsibility for both his constituents and the rest of the country as a member of that Committee on Budget. I appreciate his support.

Mr. SMITH of Washington. Mr. Speaker, I thank the gentleman from Minnesota. To conclude this topic, I will just go back to where I started from. This is going to be a long process. The budget resolution that we have passed is but the first step. Passing the 13 appropriations bills over the course of the next 6 to 7 months will be the important step. That is where we will make the decisions. And as we approach those decisions, we have a clear choice. We can do politics as usual. And politics as usual basically means that we over promise and play political games to try to make it look like we can keep more promises than we possibly can in the hopes that the people we are making those promises to will not notice that we have not kept them or, better yet, will find somebody else to blame for the fact they have not been kept. That is the politics of taking one person's tax cuts, another person's spending increases, doing a deal, and just worrying about the debt later. That process is what got us into this mess in the first place. I understand how powerful that process can be. Not a day goes by that I do not have somebody come into my office and present a very credible case for a need. Whether it is a need for spending increases or a need for a particular tax cut, they make very powerful arguments. And we must look at each one of those situations and make disciplined decisions. But we cannot look at each one of those and simply say, well, gosh, is this an important program; would we like to spend money on it; and, if so, we must. We must look at that side of the equation, but we must balance it against the overall needs of a fiscally responsible budget and not promise more than we can possibly give out. I fear that the old politics of the 1980s, of basically winning elections one check at a time, whether it is a tax cut or a spending increase that makes some group happy, is where we are headed again. And when I see people talking about the so-called politics of never-ending surpluses, I see us drifting into that direction and it worries me. Because the other choice is to be fiscally responsible in how we approach the budget and be disciplined, and place as an overarching priority that shall not be bent that we first balance the budget and, second, begin paying down the debt. Now, the good news is that because of that strong economy we can do both those things and still do some other things. We can increase spending to help our men and women of the armed forces and we can do some tax cuts. But we cannot do everything that everybody has laid out on the table during the course of this budget resolution debate. And if we promise too much and get ourselves too far down that road so that we feel we cannot go back on those promises, what will suffer is fiscal discipline. And, more specifically, what will suffer is our children and their children and the future generations of this country who, once again, will grow up to be handed a credit card bill as the first thing that we give them. That is not leadership. That is not what we were elected to do. Now, I know a good many people say the way to get reelected is to bring home stuff. Whatever it is, a bridge, a swimming pool, a new school, whatever, we must bring home something to our constituents so that we can show them that we have made a difference. In each election what I want to be able to say that I brought home to the people I represent is fiscal responsibility; a balanced budget that is going to keep our economy strong and keep our commitment to future generations. That ought to be enough for Members of Congress to bring home. That is the message I am getting from my constituents; be responsible, be disciplined. Yes, we have needs, but there is no reason we cannot meet those needs within the parameters of a balanced budget and paying down the debt. Make that the top priority. Mr. Speaker, with that I would like to now yield to the gentleman from Arkansas (Mr. Vic Snyder), who has been a leader on fiscal responsibility and making sure that we have a fair and balanced budget.

Mr. SMITH of Washington. Mr. Speaker, I want to follow up on that last point about keeping the economy strong. I came into Congress in 1996. Before that, I served 6 years in the Washington State senate, so I started there in 1990. I came into the body in the State senate during down economic times, during a time period when our treasury had a $2 billion shortfall; and in the State of Washington, $2 billion is a lot of money. We had to figure out how to deal with that in terms of cutting spending and raising taxes and basically dealing with covering the debts of government. That is a horrible situation to have to deal with as compared to the situation that we are in right now with a strong economy generating strong revenues, so that we can fund programs and hopefully pay down the debt. If we can pay down the debt, if we can be fiscally responsible in a way that keeps the economy moving forward, that will have benefits that spread all across the country and must be a top priority. I want to touch on one other point. Basically, I figure a lot of people might be tuning in and saying, what is a Democrat doing talking about a balanced budget and fiscal responsibility? Well, I feel that I am a member of the new Democratic Caucus, the new Democratic Coalition that is very interested in focusing on issues like fiscal responsibility and paying down the debt. Because, though we believe in government, we do believe that government has a limited role to help in areas like education and infrastructure and protecting the environment. We also recognize that if we are not fiscally responsible, we will not be able to do that. We will not have the confidence of the voters in the first place that their tax dollars are being well spent. Second of all, as I mentioned earlier, these are not one-time needs. We are not the only generation that is ever going to need these things, and if we spend all the money now, we do a grave disservice to the future. I have been very pleased with the number of my Democratic colleagues who have made paying down the debt and getting a balanced budget the number one priority in this budget process. I think it speaks well for the direction of the Democratic party today. That, Mr. Speaker, is an excellent intro for the gentleman from Minnesota (Mr. David Minge), who has been probably the leader in our caucus on fiscal responsibility and paying down the debt, and I yield to him at this time.

Mr. SMITH of Washington. Mr. Speaker, I yield back the balance of my time.

Mr. SMITH of Washington

Mr. SMITH of Washington. Mr. Speaker, tomorrow on the House floor we will begin the budget process. We will debate in the full House for the budget resolution, and the budget resolution is the parameters under which we will pass the spending bills later on in the session. So this is the first attempt to get a look at what our budget is going to look like for the fiscal year 2000. I rise today to talk about fiscal discipline and to urge fiscal discipline in that process, and I do so from the perspective of a Democrat, but a New Democrat, and I would like to explain that a little bit at the outset because I am a member of the New Democratic Caucus back here in Washington, D.C., but that is not something folks may necessarily be completely familiar with outside of Washington, D.C. The basic premise behind the New Democrats is that the Democratic party needed to change to address some of the legitimate concerns that the American public had with our party. Essentially we in the New Democratic Caucus believe that the Democrats did have to make some changes in some of its policies in order to address the concerns the public had expressed with us and the reasons that we started losing elections, quite frankly. We had to understand some of the changes that were going on in society and some of the changes that were going on in government and address them in manners that had not been previously addressed, and one of the biggest ones is fiscal responsibility. Now, as Democrats, we believe that government can, in fact, in certain areas be a positive force in peoples' lives. We can look to Medicare, Social Security, the interstate highway bill, the GI bill, laws that have protected our environment by cleaning up air and water; all of those areas have made a difference. So it is not that we do not believe, as some of our colleagues on the right, in the Republican party, sometimes believe, that government can ever do anything right; it is just that we believe that they need to do it in a fiscally responsible manner, and there is a variety of reasons for that. First of all, all of the needs that we have as a society: education, defense, cleaning up and protecting the environment, medical research, taking care of our veterans, providing health care and pension security for our seniors are not one-time needs. Our generation is not going to be the only generation that is going to need to address those concerns. It is going to be ongoing in the future. And if we spend all of the money right now in this generation, we are going to be doing a grave disservice to future generations. In fact, that is more or less what happened in the 1980's. Basically, as my colleagues know, there were a lot of compromises that were reached in this body in the 1980's, and I always characterize those compromises as being basically: Okay, we will take your tax cut if you take our spending increase, and we will just spend as much money as possible to make as many people as possible happy right now today. Put it on a credit card and forget about tomorrow. Well, Mr. Speaker, I first got into politics in 1990 when I was elected to the Washington State Senate. Basically I got elected right about the time the bill came due, and I know how difficult it is to do what we need to do as a government when the previous members of a legislative body have spent all the money and then some. It is completely irresponsible, and it mortgages the future of our children. Future generations will need infrastructure, they will need money for transportation, they will need money for public education, for cleaning up the environment, and if we have spent it all, they will not have it. So, being fiscally responsible should in no way be antithetical to the beliefs of the Democratic party. We need to emphasize it and make it a big priority. One of the other problems with running up such a severe debt, other than spending all of the money that future generations could spend for needed and necessary programs, is that the more money we spend, the more debt we go into, the higher the interest payment. This is a concept that everybody in America understands whether it is a mortgage payment, a car payment, a credit card bill. We understand that not only do we have to pay back that money that we borrowed, but it keeps going up in the presence of interest that accumulates on our bill every month. Mr. Speaker, I have a chart here that helps illustrate that problem in the Federal Government. Basically the third largest expenditure behind Social Security and national defense of our Federal Government is interest on the debt, $243 billion or 14 percent of the budget. That is money that does not go to educate our children, that does not go to provide health care for people in poverty, or seniors or people who need it. That does not go to help our environment, to help with medical research, to help with veterans, to do any of those things. It goes to pay for the irresponsible spending of those who went before us, and we should be keenly aware of that number because, as the deficit goes up, this number keeps going up as well. And finally there is another benefit to being fiscally responsible that goes beyond this that the next chart, as I will demonstrate in a minute, reveals, and that is that basically, if we can pay down the Federal debt; because keep in mind this number here is a yearly number. We are running up a deficit on a yearly basis; we are getting close to balance, but we are not quite there, but more on that in a second. But we also at the same time are incurring overall debt. We are borrowing more and more money. So even if we get our budget balanced, one of the critical things we need to do is start paying down the debt. If we start paying down the debt, that helps interest rates go down, and if interest rates go down, there are benefits all across the economy, and I will demonstrate a few of them on the other chart. One of the biggest ones that we can all relate to is a home mortgage, and basically if we can pay down the debt so that the public or the government sector is not gobbling up all the money, other people can have more access to it at a better rate. And my colleagues can see here, if you just reduce the mortgage interest rate on a 30-year fixed rate from 8 percent down to 6 percent, you can save yourself a great deal of money on the monthly payment, and over the course of a year you can save yourself a great, an even larger, sum of money. So, Mr. Speaker, this is another problem with being fiscally irresponsible, all of which brings me to the budget that is going to be laid out here on the floor tomorrow by the majority party. It fails to be fiscally responsible. It is not just Democrats that have trouble being fiscally responsible in the past. It is Democrats and Republicans. One of the things I always try to say whenever people get into an argument over whose fault the debt is, as my colleagues know, is it the Reagan/Bush presidency or is it the Democratic Congress; as my colleagues know, I believe in saying it is both of their fault. They made the decisions to spend more money collectively than they can possibly cover. So it is not just one party or the other that is responsible for this, but now, as the budgets are being rolled out, if the Republican budget passes, it will be the Republicans who are responsible for further fiscal irresponsibility because their budget sounds themes that are eerily familiar: massive tax cuts totaling well over a trillion and a half dollars over the course of 15 years, at the same time accompanied by massive spending increases primarily in the areas of defense, and education and in some arguably laudable areas. Keep in mind, as I said earlier, this is not an argument against spending money. This is an argument of spending too much money and going into debt so that we create a fiscally irresponsible situation. And lastly the last thing reflected in the current Republican plan is not only do they dramatically cut taxes and dramatically increase spending, but they also offer no plan at this point to do anything about entitlements, about Social Security and Medicare and Medicaid, all of which in their present framework are going to cost far more than the current budget structure could possibly accommodate. Medicare goes bankrupt in 2008, Social Security stops running a surplus in 2014 and goes bankrupt in 2032. All of those facts combine to make this Republican budget very fiscally irresponsible and to put us in a position of basically snatching defeat from the jaws of victory. We are just this close to balancing the budget. Personally I do not think that we should count the surplus in the Social Security Trust Fund as income to reduce the overall deficit, so I do not think we have a balanced budget yet, but even if you do not count that money, we ran a $30 billion deficit this past fiscal year as opposed to the nearly $300 billion deficits that we were running in the early 1990's. So we are getting close. I rise today basically as a New Democrat to urge fiscal discipline, urge us to get the rest of the way and to reject the Republican budget. I have some of my colleagues here who are going to help me in this argument, and I will at this point yield to the gentleman from North Carolina.

Mr. SMITH of Washington. Mr. Speaker, just in concluding the discussion this evening, as we are guided in our budget discussions, I think there should be some central principles. One of the most important principles in achieving fiscal discipline is to not play sort of the divide and conquer strategy; not get to the point where the sum of the parts adds up to more than we would like the whole to add up to. We have heard about a variety of programs this evening. We have heard about a variety of tax cuts. There is merit to all of them. What we have to do in putting together a fiscally responsible budget is put them all on the table at the same time. I guess what I mean by divide and conquer, it is really more of a divide and pander strategy, which is to say we take each issue area which may be a priority for somebody, whether increased defense spending, increased education spending, increased spending for health care, an estate tax cut, a capital gains tax cut. There are all groups out there, as well as individuals, who have their favorite. They come and talk to us about them and we want to make them happy. It is sort of the nature of being a Congressman that we want to make our constituents happy, so we want to promise all those things, and that is where we get into trouble. What we have to say is if veterans are a big priority, then make it a priority and make it work in the budget. Make the sacrifices in other areas to make sure that we can do that. But we should not promise more than the budget can contain. That is what leads us to fiscal irresponsibility. That is what, sadly, the Republican budget we are going to hear about tomorrow does. It promises all across the board and does not meet the test of fiscal discipline, getting us into the position of paying down our debt and be responsible to the future. We are not the only ones who have needs. Future generations are going to have needs. Whether it is tax cuts or spending programs, if we take it all now, we will be mortgaging their future. Mr. Speaker, I see the gentleman from Texas (Mr. Stenholm) has joined us, so I will yield to him to talk also about fiscal responsibility. But I urge more than anything that we balance the budget and start paying down the debt. It is the responsible thing to do for our future.

Mr. SMITH of Washington. Mr. Speaker, it gives me pleasure at this point to yield to the gentleman from Minnesota (Mr. Minge). He is a Blue Dog as well as a new Democrat. He has a budget proposal himself that I think is very fiscally responsible and I will be happy to hear about.

Mr. SMITH of Washington. One quick point, Mr. Speaker, and then I want to yield to the gentleman from Connecticut (Mr. Maloney). When looking at fiscal discipline issues, I think tax cuts are fine. I do not think that there is necessarily a prejudice against cutting taxes. I think in certain areas we need to do it. Nor do I think that tax cuts are any greater threat to our fiscal discipline than spending. I think too much spending leads to the problems we have just as much as too much tax cuts. What I would emphasize in any budget is to look at the overall budget and keep one primary goal in mind: balance it. If we think that we can find room for some tax cuts by cutting spending someplace else, great, let us put it on the table, let us talk about it, and let us weigh those options. Whatever the spending program may be, whether it is veterans spending that the gentleman from Arkansas (Mr. Snyder) alluded to, or the capital gains tax cut and the marriage tax penalty that the gentleman from New Jersey (Mr. Andrews) alluded to, put it on the table and talk about it. The problem is, and what we have yet again with the Republican budget, they sort of throw everything on the table and promise they can do it all, all the tax cuts, all the spending increases, and just kick it off down into the future and let the credit card grow. That is the problem. Nothing against tax cuts, but we need to weigh them against spending increases or decreases and figure out what is best, with one fundamental goal in mind: balance the budget and pay down the debt. We cannot do that if we promise away all the money in both directions. With that, Mr. Speaker, I yield to the gentleman from Connecticut (Mr. Maloney).

Mr. SMITH of Washington. Mr. Speaker, I yield to the gentlewoman from California (Mrs. Napolitano).

Mr. SMITH of Washington. Mr. Speaker, in terms of the budget, there are two key facts out there that are not getting a lot of headlines that need to be highlighted, because I think part of the problem and part of the rush towards spending all of this money or cutting taxes, one or the other, is the perception that we have these never-ending budget surpluses. There are 2 key limitations to that fact that need to be pointed out. Number one, a significant portion of those budget surpluses is within the Social Security Trust Fund. That is not really surplus money. That is money, as the gentleman from New Jersey (Mr. Andrews) just pointed out, that we have to pay back to the Social Security Trust Fund. So to count it as income and spend it now is like spending money twice. That puts us into a fiscal irresponsible situation. Second is the coming expense of the entitlements of Medicare and Social Security and, to a lesser extent, Medicaid. We all know the statistics on those. They are very dire. Basically, there are more people who are going to be in the retirement community who are going to be eligible for Medicare and Social Security. They are living longer, and health care costs are going up, all of which is combined to create a situation where the expenses for entitlements are going to explode in the next 10 to 15 years and beyond. My colleagues need to factor those two things in before they go passing a whole lot of money around thinking that we have surpluses that we do not in fact have and will not have in the future. Mr. Speaker, I yield to the gentleman from Arkansas (Mr. Snyder).

Mr. SMITH of Washington. Mr. Speaker, I yield to the gentleman from New Jersey (Mr. Andrews), and I thank my friend, the gentleman from Washington State. It is good that this gentleman from Washington (Mr. Smith) came to Washington. We are glad he is here. I very much agree with the sentiments of my friend, the gentleman from Wisconsin (Mr. Kind). I have daughters who are 6 and 4, and I do look at these decisions the same way. When I was fortunate enough to come here in 1990, we were borrowing $400 billion a year to run the Federal Government. This year we will take in approximately $100 billion more than we spend. Tomorrow and in many days that follow tomorrow we will make a choice as to what to do about that. As my colleagues have said very clearly and very well here tonight, there are many temptations in the short run. Virtually everyone who visits us in the Capitol wants more money from the Federal Treasury in the form of programs, or they want to send less money to the Federal Treasury in the form of taxes. I believe that we have to do something this year that is totally contrary to the political impulse, and that is to avoid instant gratification in exchange for what makes sense in the long run. For us to do what is right here, I believe we need to make a choice that says no to an awful lot of things that are worthy of saying yes to. I wish that we could double college scholarship Pell Grants. I wish that we could spend more on cleaning up Superfund sites. I wish that we could do more to expand child care opportunities right now for people. I wish we could get rid of the marriage penalty and further cut the capital gains tax. I frankly think we should get rid of the estate tax as well. We get a lot of votes and a lot of constituencies that would support everything that I just said. But I think the choice we have to make is whether or not we help people a little bit right now with a modest, almost symbolic tax cut, or whether we invest in their children's schools, defend their country through a stronger military, protect their environment, and most especially, assure that they will have a secure retirement with a Social Security check and a full health benefit through Medicare. The choice that will be on this floor tomorrow is rather clear. Both sides in fact want to place the lion's share of the surplus into Social Security. We have different ways to do it. I frankly think the way that the gentleman from South Carolina (Mr. Spratt) is proposing is the right way to do it. But the big difference is what to do with the rest of that surplus, and here is the difference: We choose Medicare in the Democratic Party. The majority party chooses a short-term reduction in taxes, which is alluring, which is popular, which is politically expedient, and which is wrong. The most risky and difficult way, the most successful way, if you will, to let the deficit genie out of the bottle again is to start reducing taxes because it is a politically expedient and easy thing to do. It is a surefire recipe for higher interest rates, less confidence from the markets, and a return to the chaos that affected this country's economy when I arrived here nearly 10 years ago. A lot of people deserve a lot of credit for bringing us to a point where we now have black rather than red ink. Our President deserves credit. Members of the majority party deserve credit. Members of our party deserve credit. Most of the credit belongs to our constituents who get up every day, earn their living, send their tax dollars here, and sacrifice for their family and their community and their country. I would hate to see all of that sacrifice given away, eviscerated because of a need for short- term political expediency. The right answer with that hundred billion dollars surplus is to fund the massive unfunded pension liability that was created for 30 years around here by putting it back into Social Security where it should never have been taken out. Then take the bulk of it, the remainder, and make Medicare sound for at least the next 10 years so that, when people retire, they understand that an illness is not a financial death sentence. It is difficult to resist what is popular in the short run, but it is right, and it is necessary. The budgets that will come to this floor tomorrow compel us to make that choice: the next election or the next generation, a good headline tomorrow or a good retirement for the people that we represent today. I urge my colleagues on both sides of the aisle to put aside their partisanship, read these budgets, look through the eyes of young men and young women who are growing up in this country, and pass the resolution put forth by the gentleman from South Carolina (Mr. Spratt) on behalf of the Democratic Party tomorrow.

Mr. SMITH of Washington. I thank the gentleman very much for those fine comments. One quick comment before I recognize my friend, the gentleman from Wisconsin. This is not easy. That is the reason it is called discipline. We all have people come back here and ask for a wide variety of programs and tax cuts. I have always felt, I long for the day when somebody walks into my office and asks for $10 million or $20 million or $50 million for some program or tax cut, and I can look at them and say, that is a complete waste of money. That is not going to do any good for anybody, anywhere. That is not true. Every dime we spend would do some good for some people. That is why we have to be disciplined to make sure we do not spend more money than we take in. The Federal budget is $1.7 trillion. We can do a lot and we should, but we should not give in to the pressure of taking it issue by issue and saying, we just have to spend the money. We have to think about the future, and think about the fact that it is their money that we are spending if we are not disciplined now. Mr. Speaker I yield to the gentleman from Wisconsin (Mr. Kind).

Mr. SMITH of Washington

Mr. SMITH of Washington. Mr. Speaker, I rise, too, to talk about the budget that is coming to the floor this week, and I have some grave concerns about that budget in terms of fiscal discipline. The budget the majority party is proposing has several elements to it. Massive tax cuts. At the same time, it also has massive spending increases. And unrelated to the budget, but at the same time related to the budget, there is no plan on the table for any sort of structural reform of our existing entitlement programs, so they will simply go on spending at their current rate. Those three items, put together, are a recipe for complete fiscal disaster. We are so close to a balanced budget, we are so close to finally having a legitimate claim on being fiscally responsible, that I hate to see us lose it now. One of the biggest problems, in response to the comments of the previous gentleman, yes, the existing trust funds, the money that is going into Social Security and Medicare, are protected. The problem is those trust funds will not last long under the current system. The spending will go way beyond those existing trust funds and place us into grave financial difficulties. Medicare is scheduled to be bankrupt in 2008. Social Security is scheduled to go bankrupt in 2032. It is time to be fiscally responsible, and the Republican budget does not get us there.

Mr. SMITH of Washington

Mr. SMITH of Washington. Mr. Speaker, I rise today in support of the R&D tax credit, a program that has done a lot to help our technology sector in the United States, and as these charts show, the technology sector has done a lot to contribute to the job growth in this country. It is the key, the cornerstone to the growth that we are going to experience in the years ahead and most of the growth that we have experienced in this decade to this point. We must do everything we can to encourage the technology sector. The R&D tax credit is set to expire, as it does every year. I urge that we do not reauthorize it, but we make it permanent. The first big point is that the technology sector drives job growth, and the chart that I have brought with me shows how the computer industry and the technology sector in general, first of all, it pays more. The jobs that we have in this sector on average pay twice as much as typical jobs in other areas of the economy. It also shows that the job growth, the jobs that are being created, are coming predominantly from the high-tech sector. Also, in the 10 years ahead, that is going to become even more the case. Technology is what is driving our economy, and the R&D tax credit helps that technology grow. The second chart that I want to show shows specifically how the R&D tax credit helps. It helps because it helps increase the productivity of companies across all sectors. Because computers are a part of a company whether one is in the technology business or not, whether one makes computers or software for the Internet or if one makes airplanes or furniture or just about anything, having money for R&D helps you increase your productivity and more and better jobs. This has just some of the various sectors of our economy that have benefited substantially from the R&D tax credit that has created jobs. That is what this is all about. We may look at these industries and sectors and think well, gosh, I do not work in the pharmaceutical industry or the computer industry, but no matter where one works in the American economy, technology touches us, and the R&D tax credit helps advance that. I would like us to make it permanent this time instead of doing the year-after-year reauthorization. First of all, as I have argued, this is a very good program and should be made permanent, but more importantly long term planning of companies that depend on this tax credit could be greatly enhanced if they knew it was going to be there from year-to-year. They could invest even more in the R&D tax credit over the long haul, knowing that it is going to be around, knowing that every year they are not going to have to come back and try to seek reauthorization. This is a program that should be permanent because it does so much for our economy. Technology touches on a lot of issues, the R&D tax credit being just one of them. I strongly urge that our government get in touch with high-tech issues in the high-tech industry and find out what we can do to help them. It is critical to our job growth. Technology crosses all sectors. Yes, there are the ones that we think of off the top of our heads when we think of technology. We think of telecommunications, we think of hardware and software, we think of the Internet. But just about any industry we have benefits from a better computer system, from better software, from access to the Internet. They can make better products, they can transfer that information all across the world to various segments of their business to help that business grow. This touches everything. We will not find an industry that is not high-tech. I ran into someone from the company Kosco out in my area which sells food and various other products on a sort of wholesale retail basis, and they thought of themselves as not being a high-tech company. But they too are dependent on the computer systems that help them keep track of their inventory, that help them track their financial records, their sales records, and the faster and better those systems become, the more efficient and the more productive their business becomes. It does not matter what sector of the economy one is in. Technology affects us, and the R&D tax credit can help us have better jobs that pay more and will also help create more and more jobs for those who do not have them yet. Mr. Speaker, I strongly urge this body to adopt a permanent authorization of the R&D tax credit as soon as possible for the sake of our future economic growth.

Mr. SMITH of Washington

Mr. SMITH of Washington. Mr. Speaker, I rise today to urge fiscal discipline and fiscal responsibility as we work on the budget for the next fiscal year. Back in the 1980s when we were running up our yearly deficits and consequently our overall Federal debt, there was a phrase that politicians used to utter in dealing with the problem which was, ``The balanced budget has no constituency,'' which is to say that when you spend money or cut taxes, there is somebody or some group of somebodies who are going to be happy about it. It has a constituency that you can please. Who benefits from the balanced budget? Who specifically? Well, obviously the entire public, both present and future, of our Nation benefits from it, but in purely political terms, those folks in the 1980s and 1990s had a point. The constituencies were definitely more well defined for all of the programs and tax cuts that were being proposed and passed. I just stand up today to say that fiscal discipline and fiscal responsibility should still be a priority. Since I have been elected to Congress, a lot of folks have been talking to me about what it means to be a Congressman, how can in essence you prove that you have done a good job. I talk a lot about my emphasis on fiscal responsibility and balancing the budget and there tends to be this look like, ``Well, that's just not good enough.'' As they like to say, you have to have something to bring home, something to put your name on, whether it is a new bridge, a new bus stop in your district, a new swimming pool, you name it, something that you went back there and fought for Federal money to bring home. I understand that. In fact, I will say that many if not most of all of these programs are indeed worthwhile. Spending money on all of those things will help the district, help the State, help the future of the country. But we also have to remember that we need to be fiscally responsible because, a couple of reasons: First of all, in the future, folks are going to need all of those things as well and if we spend all their money now, they are not going to have them. And second of all, when you run debt up too high, you drag down the economy, drive up interest rates and create job loss, which makes it even more necessary to spend Federal money and it becomes a downward spiral. What I want people to recognize is that being fiscally responsible and paying down the debt does have a constituency. That is the legacy that I want to leave in my district. I think that is something to bring home, to go back to the people of the Ninth District of the State of Washington or any other district in the country and say, ``Yes, maybe I didn't fight for every last Federal dollar but I fought to balance the budget for your benefit, your children's benefit and their children's benefit.'' I think all politicians on both sides of the aisle should have the courage and stand up for that. As we head towards this year's budget, there is going to be a major battle. There is incredible pressure to spend money or cut taxes in thousands of different places. The thing about it is, these programs do have some value. As I have often said, I wish just once in my time as a public official somebody would walk into my office and say, ``We've got this plan to spend $5 million on fill-in-the-blank,'' and I could honestly look at that person and say, ``That's just a complete waste of money. That doesn't do any good for anybody and there's no way we're going to do it.'' Of course when you spend money, there is always an argument that it is helping people, and it does. But you have to look at the long term as well. If we spend all the money now, we will be forfeiting and mortgaging our children's future, and that is not fair. At this particular time it is particularly frustrating, because we have a strong economy. We have unemployment of just over 4 percent, we have inflation of below 2 percent. We have a strong economy so that we do not have to spend as much money. The economy is taking care of people. The government does not have to do as much. Now is the time to be fiscally responsible, because if we do not do it now, a few years from now when the business cycle turns on us, it is going to be a thousand times more difficult, because people are going to need those programs and that help or that tax cut even more. Now is the time to be fiscally responsible, balance the budget and give something back to our future. I think all politicians in this body should be proud to go back to their district and say, ``Don't judge me by whether or not I brought you back a highway or a bridge or some other Federal program. Judge me by the fact that I had the foresight and the discipline to balance the budget and take care of our economy for today and tomorrow.'' That is what I think we should be doing back here in Congress, despite the overwhelming pressure to spend money. Spend it, fine. The Federal Government spends a lot of money, $1.7 trillion. No reason we cannot spend it within our means. No reason we cannot be fiscally responsible and balance the budget. I urge that we do that as soon as possible and remember that discipline when we go into the budget battles that lie ahead this year.

Mr. SMITH of Washington

Mr. SMITH of Washington. Mr. Speaker, I address the House today to support the Education Flexibility Act, a bill sponsored by the gentleman from Indiana (Mr. Roemer) and the gentleman from Delaware (Mr. Castle). It is a bipartisan bill aimed at giving greater flexibility to local schools to do their job, the important job they do of educating our children. During the past couple of months I have visited 10 or 12 schools in my district, and visited the school districts there to sort of find out what they think of the Federal role in education. The Federal role in education usually accounts for about 4 to 8 percent of the budgets of the average school district, and I wanted to know if they thought that was helping. The answer I got back was, yes, the money helps, but there is too much red tape and there is too much regulation. They want greater freedom so that they can exercise their skills and use the teachers and principals and parents and everybody involved in education on the local level. There is too much Federal red tape, and the Education Flexibility Act would target that red tape. Right now we have a pilot project that allows some 12 States in the country to take advantage of education flexibility. This bill would expand it to all 50 States. And what it would do is give local school districts the ability to get waivers from those Federal regulations. But the important thing about education flexibility is that it combines flexibility with accountability, which is the way it ought to be done. You can get the waiver, the local school districts can get the waiver from the Federal requirements, but only if they have local standards that they can demonstrate that they are meeting. The key word in there is local. Not national standards. They can have their own standards, but they have to have that accountability/ flexibility mix. The Education Flexibility Act that is being proposed and introduced this week offers that mix and is a key to helping our schools move forward with the important job they do of reforming the education system and educating our children. I think it is very important that we go further than the Education Flexibility Act. Right now there is far too much red tape and far too many regulations in hundreds of different areas generated from the Federal Government. That does not really help our local schools but only ties them in knots. I do not want the people working in the schools in my community to spend all of their time filling out forms and justifying their existence to the Federal Government. I want them to be educating the children there and doing the job that really matters. Right now, far too often, they are filling out the forms and trying to qualify for the money and continually justifying what they are doing. We need to change that. We need to shift to local control. From one end of this country to the other exciting things are going on in States and school districts. They are making the reforms necessary. They are moving towards accountability. And right now the Federal Government is too big of a noose stopping them from making progress on that. We need to make changes like the Education Flexibility Act. As a Democrat, I have always been a strong supporter of education, and I support my fellow Democrats in supporting spending the money necessary to help with education and supporting public education. Public education is responsible for over 90 percent of the children in this country getting educated. It needs our support. But we cannot simply spend money on it. We must show that we are willing to move in two other critical directions. One is accountability and the other is flexibility, which means local control. Giving the power back to the individual school districts and the individual schools, and ultimately to the teachers and parents who are closest to the product, closest to our children and closest to educating them and who know best how to do it. We need to make those changes so that we can have the world class public education system we need. The Education Flexibility Act that we introduce this week, as I mentioned, primarily sponsored by the gentleman from Indiana and the gentleman from Delaware, is a critical step. I urge all of my colleagues to support Ed-Flex, pass it as soon as possible, and then go further to encourage the flexibility and accountability that we need in our local schools.