The President's council on competitiveness

Nation's Business, May, 1989 by Warren T. Brookes

The President's Council On Competitiveness

One of the least noticed but potentially most important items in President Bush's Feb. 9 address on budget priorities was his plan to "establish a council on competitiveness, chaired by the vice president."

The real purpose of this new competitiveness council, according to White House staff members who developed this concept, is to generate "competitiveness impact statements" on a range of proposals--especially in the area of mandated benefits--that could increase costs for U.S. businesses.

Ideally, every major legislative and regulatory initiative would be reviewed by professional economists and accounting analysts to determine its real costs in lost jobs, additional import penetration, or lost export potential.

Vice President Quayle is just the right person to lead this potentially pathfinding effort. In 1987, with the aid of Robert Guttman, who then was minority counsel on the Senate Labor Sub-committee and now is the vice president's chief of staff, Quayle co-sponsored a proposal--Senate Resolution 218--to require "economic impact evaluations" on all mandatory benefits programs.

That bill was killed when, at the quiet urging of Democratic leaders, both the General Accounting Office and the Congressional Budget Office resisted developing such evaluations.

But Quayle persisted and finally got the Senate on July 14, 1987, to agree unanimously to a "sense of the Senate resolution" as Amendment No. 497 to the Omnibus Trade Bill. The amendment called for "each Senate committee that reports legislation mandating employers to provide new employee benefits to secure objective analysis of the costs and benefits of the legislation to employees, employers, and international competitiveness and shall include an analysis of these effects in the report of the committee."

In other words, find out how much these "compassionate" ideas are going to cost us in the global economic race before we pass them into law.

Sadly, this resolution disappeared when Senate and House conferees took up the 1988 trade bill, but not before Quayle obtained the voting support of Sen. Edward Kennedy, D-Mass., labor's point man on the Hill.

Unfortunately, the absence of this mechanism either in Congress or at the White House undercut Quayle's 1988 senatorial effort to kill last year's plant-closing legislation, whose true costs will be felt in a recession.

Similar legislation in Europe has cost tens of billions of dollars and hundreds of thousands of lost or ungenerated jobs. Yet last summer, proponents made it seem cost-free when its actual economic costs to employers are probably at least $12 billion a year because it more than doubles the effective layoff costs for the average worker.

But without an adequate early warning competitiveness-evaluation system, one of the most dangerously anticompetitive forms of labor legislation quietly became law without a whimper.

The same thing could now be happening as Congress and organized labor have already gained a big head start on the Bush administration with simultaneous drives to raise the minimum wage to $4.65 an hour, and to mandate parental leave for all businesses. These two provisions alone would add at least $20 billion a year to business costs.

Waiting in the wings are two other mandated-benefits issues--child care and health insurance--that could increase business costs annually by an additional $40 billion to $100 billion or more.

Unfortunately, the Bush administration has only begun to crank up its competitiveness counteroffensive. Vice President Quayle recently told this columnist that "we have to get up to speed soon." Indeed so, if the administration is to put real price tags on all of these bills in terms of lost employment and lost output.

For example, then-President Reagan's Council of Economic Advisers estimated in 1988 that raising the minimum wage would increase the federal budget by $2 billion to $6 billion a year. Nonetheless, Labor Secretary Elizabeth Dole this year sent to Congress a proposal to boost the minimum wage to $4.25, with a provision for a training wage at the current level of $3.35 for a worker's first six months.

While there might be some advantages to such a compromise, Congress has largely ignored it, and even Secretary Dole has admitted it would cost jobs and business. Had she had the benefit of a real analysis by the competitiveness council, she easily could have shown that a much better way to increase the net income of lower-paid workers--without risking jobs or competitiveness--would be to expand the Earned Income Tax Credit (EITC).

Indeed, an even more expanded EITC could easily deal with the problems of minimum wage, child care, and welfare reform through a "family living wage," as proposed by House Republicans in March, and the cost would be far lower.

These are just some of the issues that this new council can and should address. Business's only hope in this new administration is for congressional liberals to be regularly and formally forced to face up to what mandated benefits have cost the economies of Europe, where huge increases in social spending and fringe benefits have been matched by slow GNP (gross national product) growth and soaring unemployment levels.