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MAPI QUESTIONS ABILITY OF CLINTON PACKAGE TO IMPROVE THE LONG-RUN GROWTH POTENTIAL OF THE U.S. ECONOMY

 WASHINGTON, Feb. 26 /PRNewswire/ -- The Manufacturers' Alliance for Productivity and Innovation (MAPI) today released a report that says the Clinton administration has identified the proper objective for economic policies -- stimulating the long-run growth potential of the U.S. economy. However, according to MAPI, the Clinton program is "... certain to lead to more big government, but its ability to improve the long-run growth potential of the economy is dubious at best. Excessive government intervention in the market system will raise costs of production and may retard productivity improvement."
 The MAPI analysis shows that the major source of the deficit problem is the rapid growth of government spending. Despite claims of a balance between spending cuts and tax increases, MAPI says that as it was actually presented to Congress, the plan has only about 56 cents of spending cuts for every $1 of tax increases. MAPI concludes that "(t)he administration has failed to make the difficult decisions required if federal expenditures are to be reduced" and calls for a much more even balance between tax increases and spending reductions.
 The new MAPI report, "More Rapid Economic Growth or More Big Government?", analyzes the overall economic rationale for the Clinton administration's proposals, describes the revenue initiatives, and comments on some of the specific energy, technology, and infrastructure proposals of special importance to U.S. industry as set out in the president's report on Feb. 17, "A Vision of Change for America."
 Among the report's specific comments on components of President Clinton's proposal:
 -- MAPI warns that "(t)he administration appears to have a weak commitment to providing the private business sector with incentives to invest in new plants and equipment which is critical to technological progress. In contrast, the new administration has strong faith in government's ability to make resource allocations more effectively than businesses in the private sector.... (I)ntervention in the market system, combined with the emerging expansion of government regulation and mandates on business, will simply increase costs of production and diminish the prospects for greater productivity growth and rising real income."
 -- MAPI states that "(t)he greatest threat to future employment growth comes from the timing of the administration's proposed tax increases," many of which would be retroactive to Jan. 1, 1993. Such timing "... will reduce corporate cash flow, dampen effective demand, and may reduce consumer confidence."
 -- The administration's economic stimulus plan is unnecessary and may prove to be harmful in the long run.
 -- Making additional cuts in Medicare physical and hospital reimbursements through the spending cap mechanism seems ill-advised, and may not produce the savings projected in the president's estimates. Relying on cuts in Medicare spending for such a large portion of the plan's deficit reduction agenda is "not realistic."
 -- In view of the stated goal of more rapid economic growth, the administration's revenue proposals should be evaluated on the basis of whether they are likely to (a) stimulate capital investment and (b) contribute to the goal of budget deficit reduction by rewarding saving and investment and constraining consumption in the medium term.
 -- The Clinton proposal includes a temporary, incremental investment tax credit (ITC) for small businesses. MAPI has argued that only an ITC that applies to the first dollar of qualified expenditures on a permanent basis can provide the sustained incentives necessary to increase capital investment on a long-term basis. It also believes that denying "large" corporations the same investment tax credit available to businesses with less than $5 million in sales "makes no economic sense."
 -- MAPI cautions that the tax proposals affecting U.S. multi- nationals "... would further hamper, rather than enhance, the ability of such companies to compete in global markets."
 -- In the area of research and development (R&D), MAPI advocates that the cost of the proposed new government R&D spending be devoted instead to making the existing incremental R&D tax credit into a first- dollar tax credit.
 -- Although the administration has argued that a fully phased-in BTU tax on energy would have only a modest effect on individuals, its calculations do not account for price impacts on goods produced using energy that is subject to the tax. Moreover, an energy tax tends to impact industries unevenly, which may distort investment decisions in a way that reduces the overall productivity growth rate in the private business sector. According to MAPI, "(t)he logical steps that lead to a tax on energy lead more directly to consumption-based taxation."
 -- Regarding nuclear energy, MAPI believes that any move to halt federal research and development on advanced nuclear power reactors would unduly narrow the options for future energy security. In addition, any proposed cutbacks in nuclear power could add substantially to future economic, environmental and national security problems.
 -- Concern is expressed about the proposed cutback in the Strategic Petroleum Reserve, which MAPI says represents "... a shockingly unwise attempt to save money at the expense of U.S. energy security."
 -- MAPI asserts that "(t)he administration has failed to make the difficult decisions required if federal expenditures are to be reduced. It is easy to advocate soaking the rich,' cutting the defense establishment, and attacking big business' generally. But, none of these politically motivated proposals is likely to do much to generate new jobs and increase investment. An acceleration in the reduction in military expenditures will produce further industrial restructuring and worker displacement."
 MAPI promotes the technological and economic progress of the United States through studies and seminars on changing economic, legal and regulatory conditions affecting industry.
 -0- 2/26/93
 /NOTE: Copies of "More Rapid Economic Growth or More Big Government?" are available by contacting MAPI, 1200 18th Street N.W., Washington, D.C. 20036; 202-331-8340/
 /CONTACT: Peggy Morrissette of the Manufacturers' Alliance for Productivity and Innovation, 202-331-8430/


CO: Manufacturers' Alliance for Productivity and Innovation ST: District of Columbia IN: SU: ECO EXE

IH-MH -- DC016 -- 0866 02/26/93 12:32 EST
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Date:Feb 26, 1993
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