TRADE AND INTERNATIONAL ECONOMY

25) Fast Track Reauthorization, the World Economy and International Trade (Released by Rep. Dick Armey, May 1991).

This briefing paper looks at the long-term impact of a free-trade agreement with Mexico and our ability to compete with the rapidly forming trading blocks in Europe and the Pacific Rim. It addresses concerns about Mexican labor and environmental standards, job gains from increased trade with Mexico, and the outlook for U.S. exports. It concludes that the best choice for the United States is to lead the world toward open markets for goods and investment and warns that Congress must not allow special interests to strangle the world trading system.

26) Foreign Direct Investment in the United States (Testimony of Michael R. Darby Under Secretary for Economic Affairs, Department of Commerce, before the JEC on September 20, 1991).

Michael Darby discusses the nature and extent of foreign direct investment (FDI) in the United States in his testimony. Though measuring costs and benefits is difficult, current information indicates that, on net, the United States has benefitted from the large inflow of capital from abroad during the 1980s. A view from the industry and firm level shows FDI to be advantageous as well, and he highlights a number of foreign-owned firms' contributions to the U.S. economy. Any potential costs of FDI to the U.S. economy so far appear to be minimal, and further states that the United States is the largest foreign direct investor in the world. His testimony covers five case studies which examine FDI in the electronics, automotive, steel, chemical, and banking sectors. These studies indicate that FDI contributes to the overall health of the economy by providing needed capital to United States manufacturing; contributing to R&D spending; and transferring cutting-edge technologies into the United States.

27) "Monetary Reform in the U.S.S.R." (Testimony by Allan H. Meltzer, American Enterprise Institute before the JEC on July 9, 1991).

Allan Meltzer focuses on three central points. First, there is no single blueprint with which to turn a centrally planned economy into a market system. Second, a significant reform of institutions must be undertaken. Third, a market economy can only be achieved by way of major structural changes. In a detailed discussion, Mr. Meltzer describes how credibility, flexibility, and applicability affect the successful conversion of the Soviet Union to a market economy. Finally, the danger of monetary overhang, which could lead to hyperinflation, can be controlled by proper Soviet action, as detailed by Mr. Meltzer. He concludes that the United States should limit itself to offering technical and humanitarian assistance to Soviet privatization efforts.

(Copies of the material listed in these pages can be obtained from the Republican staff office of the Joint Economic Committee, 805 Hart, Washington, D.C. 20510. Phone: (202)224-7943)

Mr. ARMEY. My bottom line is, though, I frankly would have to oppose this request and recommend that it not be honored. I think we could tighten our belts and get better work out of our staff with a smaller request.

[The information follows:]

The chairman and vice-chairman of the Joint Economic Committee are requesting a 6.6 percent increase in the JEC's budget for the coming fiscal year, or a baseline increase of $264,000 per year. As the committee's Ranking Republican, I cannot support this request. Senator Roth has authorized me to inform you that he also opposes this funding request. As you know, Senator Roth will again assume the position of JEC Ranking Republican in the next Congress, when the funding level before us takes effect, if he is not serving as a committee chairman in a Republican controlled Senate.

I must admit it's tempting to go along with the increase. I've wondered why more Ranking Republican members don't fight the explosive growth in committee staff size over the years. I've wondered how come some of the fiscal conservatives in my party have been quiet while annual funding for legislative staff grew by about $770 million between 1980 and 1990, a baseline increase of about 60% percent over the course of the decade. Now I know.

If you approve this request for a 6.6% increase, which is about 3% higher than a true cost-of-living adjustment would amount to, the JEC will have seen its budgetary baseline grow by $609,000 per year in a two-year period, or about 17% in one Congress. Under the rules, over $150,000 of that money flows to the minority side, and that's where the temptation comes in.

I'm extremely proud of the minority staff at the JEC. As a professional economist myself, I'm in an interesting position. I have staff under me whose professional economic skills I respect very much, and I'd stack them up against any economic shop in the country. In fact, I'd like to submit now for the record, without objection, a Resource Guide Senator Roth and I are sending out next week, which is a directory of the many economic studies, reports, and legislative analyses the Republican members of the JEC released over the past year. This is some of the best work out there, and I'd love to

But a 17% increase for the JEC does not pass the first test it must meet in my eyes, which is can I justify this to the people back home? Can I go back to Texas and tell my constituents, who worry about their jobs if they haven't already lost them, that Congress's Joint Economic Committee is possibly the one entity in Washington that merits a radical increase in appropriations?

I can not, and I don't think the members of this committee can either.

The implications of this increase extend into the out years. Assuming a 4% cost of living increase in the committee's funding every fiscal year results in a difference of about $309,000 in the annual baseline by fiscal 1997. In other words, a freeze today would result in a saving of $1,430,000 over a five year period, and that's assuming COLAS. It may seem like small beans up here, but we must start somewhere and as one who has fought growth in Federal spending since coming here, I'm willing today to put my committee's money, the taxpayers' money, where my mouth is. If other committees and government agencies were to follow this example, we could be talking about billions of dollars over time--and I'll spare you the old quote about a billion here and a billion there.

I realize that snaring a big baseline increase for your committee is the kind of bold move that is appreciated on Capitol Hill, but it's also the kind of bold move that is generally regarded as excessive beyond the beltway.

I suggest the JEC be subject to a hard freeze, which really would not be so hard given the 9.4 percent increase granted just last year. Both sides of the aisle should be able to provide merit and cost of living raises to our staff with the $345,000 increase in annual funding realized last year.

I also oppose this 6.6 percent funding increase for fear that making the JEC a $4.3 million annual appropriation will make it a juicy target for Congressional reformers who already doubt its necessity. I like the JEC and believe it can perform a valuable role as Capitol Hill's only in-house think tank, but like most other government entities, its rate of growth needs to be curtailed.

Mr. FAZIO. Mr. Lewis?

Mr. LEWIS. Mr. Chairman, I have for the Chairman and the ranking member as well as, both ranking members, a series of questions that I would appreciate your responding for the record, but they do take the thrust of Mr. Army's suggestion here that over time we have expanded staffing at the Joint Economic Committee, and over time there has been concern on my side of the aisle that there has been a flavor that reflected more of a partisan tone in working out analyses that have been done. That concerns me a great deal.

When one of our joint committees gets to the point where it has to be professional press to send out their releases, I begin to wonder about the function of some of that staff. I would appreciate it, Mr. Sarbanes, if you could address yourself to some of those questions.

I understand you do have a committee press secretary. Is that a necessary part of an economic staff? What kind of staff turnover do you have among your professional personnel? That kind of question, I would appreciate some comment on, now and for the record as well.

STAFF OF THE JOINT ECONOMIC COMMITTEE

Senator SARBANES. We would certainly be happy to submit extensive written responses to your questions for the record.

A few years ago we were able to get an increase in the staff, before this very subcommittee action, and I think you will recall a very well justified case that was made at that time. There was an increase in order to be able to address a number of areas that had been neglected, for instance, for many years the committee had no economist in the agricultural sector.

We now have one, we think a very good one, as a matter of fact. We have filled in a gap that existed in that regard. The committee has had a press secretary for as long as I can remember, certainly before I ever even went on the committee, and that has continued. We think it serves an important purpose.

Mr. HAMILTON. Will the gentleman yield to that point?

Jerry, if I may say so, you have got an unusual fraternity in the economic policy makers. There is a limited number of economic journalists in the country, and it is a kind of a closed union, in effect. And the JEC tries to have some impact on the policy debate in the academic community and in the private sector community. And you really do need kind of an outreach effort there, it seems to me, in order to be a player.

And I think one of the things that was hatched under Senator Sarbanes' leadership is that the committee has become a more active player. And to acknowledge one of your points, maybe in a more partisan way, but it is frequently cited in press clippings and the academic journals and the rest, and that reflects the quality of the staff.

I think if the committee is going to be a player, they have got to break into that community.

Senator SARBANES. The increase last year was 9.4 percent, this