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Speeches and Floor Statements

Keynote Address, The National Association of Manufacturers (NAM) Board of Directors Meeting

by Congressman Paul Ryan

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October 08, 2009 | comments

[Congressman Ryan was introduced by Nicholas T. Pinchuk, Chairman, President and Chief Executive Officer of Snap-on Inc.]

Nick, thank you for your very kind words.

NAM represents so many enterprises that make up the backbone of America ’s private sector economy. By now NAM has a long honorable history of achievements in protecting the well-being of America ’s businesses and its workers.  Yes, we’re weathering some storms now…but if I know the entrepreneurial spirit so well represented here, I believe the best part of our economic history is still in the future!

One of our greatest Founding Fathers, Thomas Jefferson, in his First Inaugural Address, described his idea of good government this way: “A wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, shall not take from the mouth of labor the bread it has earned.  This,” Jefferson said, “is the sum of good government.”

Government should not interfere as people pursue their own “industry,” their jobs and businesses.  Government should not take the rewards of work and effort.  Government’s mission is high but limited: secure the rights God gave to everyone…but then leave the people free to follow their dreams.

Jefferson was speaking not just for his day but for all future time…making the case that free markets and limited government are a moral necessity for human happiness to flourish.

Frugal?  Wise?  Does this sound like the government we have today?

The federal government is spending $787 billion which it took out of the economy, to stimulate the economy.  So far the government has created 25,000 more federal government jobs but the real economy since the Stimulus has lost 2.7 million jobs.

This government enacted a budget so huge that it will double the federal debt in five years, and triple it in ten.

This government’s leaders are determined to make Congress enact a new energy tax in the name of “climate change.”  The proposed “cap-and-trade” scheme will in effect tax energy consumption from transportation to food and electricity, costing taxpayers an average $3,000 a year while raising over $840 billion in additional taxes.

And of course, the leaders of this government are trying to force all Americans to accept a government-controlled health care plan that will undermine the patient-doctor relationship and in the first decade add a trillion dollars or much more to federal entitlement spending.

If our economy were expanding robustly, you might excuse this as naïve “happy talk.”   The current situation, though, is sobering.  The “unfunded liabilities” of our government are “under water” if you compare them to the total net value of Americans’ household assets.  The Government Accounting Office tells us that the government‘s total unfunded liabilities stand at $62.9 TRILLION, while the total households’ net worth, says the Fed, is $10 trillion less, at $52.9 trillion.  Americans are worth less than they owe.

Nine months after a new president was sworn in to end the economic recession, there are millions more workers without jobs…new jobless claims are rising…housing foreclosures are still going up…existing home sales down…consumer confidence falling…and on and on.

The leaders of our government who pushed those trillions of dollars in new federal spending tell us how much they’ve achieved by doing so.  Maybe.  But this isn’t the classic rebound we expect out of a recession.  And if you listen carefully, you will hear the Administration saying that unemployment will remain high for a long time to come.  Economists like Alan Greenspan are saying that after a couple of quarters of modest growth, the economy will slow down again.

Since when did America sign on to life with millions out of work and only government “make-work” programs to employ them?  Our current leaders plainly are looking to Europe , where there is almost no job creation, for their model of government.  They seem to believe we should abandon free market democracy as they have.  Ever since the financial markets declined last year, these government leaders have lectured the American people on all our faults while they enforce regulations that punish success, retard growth, and limit freedom.

Make no mistake: free market democracy, which has made America prosperous and free, is under fierce assault everywhere…from Hollywood , for example, Michael Moore’s “Capitalism: a Love Story” is the current articulation of this attack (by the way, even I appear in it briefly as a defender of capitalism…I wear it proudly!) – and from ivory tower academies to Washington DC at both ends of Pennsylvania Avenue .  The propaganda is unrelenting: Americans are greedy, dishonest, materialist, wasteful social Darwinists.  Only the government keeps Americans from tearing each other to pieces, so we need more and more government to reign in our selfish tendencies.

Democratic capitalism is not just an economic system.  It’s not just a political system.  It’s a culture…the way of life fit for free men and women.  In this culture, people produce, work hard, honestly, and within the law.  They take responsibility for their own lives, and they take risks for the future.  They innovate to meet and satisfy consumers’ needs.  Merit brings success, and extraordinary merit wins extraordinary rewards.  Jefferson and our Founders wanted a culture where effort and reward went together.  That’s what “justice” is!

The European model our current leaders are imitating goes by various names: “Progressivism,” third way, corporatism, the social welfare state, crony capitalism. Whatever the name, it is very different from the principles that made this country exceptional.  European-style models envision bureaucracies intimately involved in the details of running the enterprises of the country, sometimes directly under government ownership or management—say General Motors—or indirectly by rewarding firms that cultivate bureaucratic connections instead of market approval for innovations and other decisions.  Markets that are truly free have wide-open doors of entry, and innovation is always subverting old-line established firms.  Bureaucrats don’t like unpredictability, so crony capitalism closes the doors of entry to newcomers while government agencies develop predictable relationships with a few large entities.

There has been a growing tendency in our government—under both political parties—in this direction, but it has rapidly accelerated the damage since 2008.  In this direction lie the loss of freedom and prosperity, and the acceptance of long-term stasis and managed decline.

This country is moving swiftly to what I describe as a “tipping point,” where the majority of people pay little or no taxes but become dependents on government benefits.  Tax cuts are virtually out of the question because more people have a stake in the welfare state than in entrepreneurism.  The spirit of risk-taking is smothered by an all-providing government.  Citizens who had once governed themselves become supplicants of a bureaucratic state, willing to surrender liberty in return for security.  Whatever you may call that kind of government, it will not be free market democracy.

Consider our government leaders’ zeal to nationalize health care.  By their original reckoning they intended to add 15 percent of the nation -- 47 million people -- to the entitlement rolls.  In the President’s latest iteration, the number is down to 30 million.  In either case they are not even trying to target the real number without health care, because that’s not their point.  Their ambition goes far beyond solving one distinct problem because they would like to transform America into a European social welfare state.

Do we need to go there to manage our problems?  Didn’t Jefferson and our Founders give us guides as valid now as ever before – “the laws of Nature and of Nature’s God” – equality and God-given inalienable rights –constitutional self-government – free market democracy?  America ’s first principles endure.  They still help us understand which “change” means going forward toward freedom and which means falling backward toward a stagnant social welfare state.

To address some of today’s problems in that light, I have developed a “roadmap for America ’s future” which you can find at americanroadmap.org.

First of all, government needs to enact tax reform that replaces today’s gargantuan, incentive-killing IRS code with a simpler system to reward saving and investment, create jobs and spur economic growth.

The dramatic tax cuts of the 1980s and this decade made federal revenues explode.  Incentives matter.  To emerge from economic recession and reignite economic growth, I’d junk the entire 67,000 pages of our tax code and start from scratch.  We should flatten and simplify the tax code dramatically.

I’d let every taxpayer choose:  Either pay income taxes under the current tax code.  Or move to a new two-rate schedule of 10 and 25 percent with generous personal and standard exemptions, but all other loopholes eliminated.  Given that choice, I’m sure that by next April 15 the American people will consign our byzantine tax code to the ash heap of history.

Tax reform should also advance international competitiveness.  In the current global economic recession, doing nothing on trade means losing on trade, and we are.  95% of the world’s consumers live outside the U.S. , but we need political leadership to open these markets to our products.  Pitching in vain to hold the Olympics in Chicago is not the world trade “leadership” we need!  We should boost the capacity of companies like yours to compete internationally in the 21st century.  Rather than building tariff walls that cut off American producers from international markets, I would let businesses write off their expenses instantly.  I would eliminate today’s corporate income tax and replace it with a simply-audited Business Consumption Tax of 8.5% paid on the difference between sales and costs.  My policy of “border adjustability” would level the playing field by ensuring that foreign imports are taxed the same way as American products sold in America .  And every American-made export would leave our shores tax free to compete robustly  in the international market.

Instead of letting Ireland and the Caymans be the havens for world capital, let’s make it America .

Another problem we need to address is the federal budget and growing entitlements.  No responsible person can defend the expansion of federal spending which began years ago but which has exploded under our current government leadership.

In order to function, our federal government has historically taken about 20 cents on every dollar earned in America .  This year alone, the federal “take” rose to 27 percent of our GDP.  If we do nothing to control this growth, we’ll need to extract 40 cents of every dollar just to keep government afloat.  At this rate, the “tipping point” I talked about will be reached in about five years.  Moreover, if Congress refuses to fix our fiscal situation, the bond markets will force us to act, and they will be cruel.

You can’t grow the economy by sucking private capital into the public treasury!  It’s time to put limits on the insatiable appetite of government.  Impose a binding “cap” on federal spending.  Hold total federal revenue by law to around 18 or 19 percent of GDP for the foreseeable future.  By restraining the overall budget including entitlements, we can rein in the cost of individual programs, return powers to the states where they belong, and let the people keep more of their own earnings for saving and investing in the nation’s future.

The American people have a constitutional right to sound and stable money.  For decades, the Federal Reserve has been manipulating interest rates and over-expanding the money supply.  We have to get off the Fed’s “boom and bust” roller coaster.  Instead of expanding the Fed’s intervention in the markets, Congress should stabilize the dollar’s long-term value.

Let me return to health care.  A few months back, our government leaders were determined to push through Congress, with no public debate, a plan that would nationalize one-sixth of our economy.  Americans soon learned what was happening.  They saw that these leaders believe Big Government should make health care decisions for the American people.  Our Constitution gives the federal government no power to nationalize health care.  And Americans want no part of it.

Americans yearn for a health care system that puts them in charge:  A system where you can access your medical records as quickly as your bank records … where you can pick your health care provider from hundreds of competitors based on quality, convenience and price – not because they’re in the right network.  Bureaucracies cannot deliver services effectively because they have no market signals to understand what consumers want.

Without public support, government-driven health care plans have bogged down the Congress.  The Democratic leaders have a problem: their rhetoric does not match the substance.  “If you like the health care insurance you have, you can keep it” does not jibe with hundreds of conversations I’ve had with employers large and small.  They say they will have to drop employees into government health care.  Incidentally, NAM could help Congress understand what’s at stake by undertaking a survey to test how many of your members say they will be forced to drop their workers’ health insurance.  I am sure the result would get the attention of Congressional leaders.

Why are businesses buying health care insurance for employees?   Working people need home and auto insurance, not to mention food, furniture, appliances and many things employers don’t normally purchase for them.  Free markets begin with the proposition that the consumer is king because the buyer’s preferences drive producers to provide the services buyers want.  This is what controls costs, quality, and innovation.  Guess I don’t have to say this to a NAM audience.

Employers are buying health care insurance for their employees largely because of tax benefits enacted in the World War II era.  Now the actual health care consumer or patient consulting with the doctor is no longer at the center of medical decisions.  A worker who would like to change jobs may not do so or may make a different decision because of health insurance issues.  This makes no economic sense.

The Obama Administration should tell Congressional leaders to take their current plans off the table and make a fresh start.  Begin by giving individuals the same tax benefits for buying health care we gave companies over half a century ago.  Provide a refundable tax credit so buyers can purchase coverage in any state and carry it wherever they move.  Unleash the power of information technology on health care – by disposing of antiquated pen-and-paper files that result in medical errors and duplicative tests.  Allow providers to put transparent health care prices and data about quality at our fingertips.

Through a combination of tax credits, high risk pools, insurance choice, regulatory and tort reform, and information technology, we can create a vibrant health care marketplace.  Legislation that a number of Republicans and I have proposed, called the Patients Choice Act, includes these measures.  If the leaders of both parties sincerely wanted to solve today’s health care problems in a way that preserves American freedom and solves the real problems of health care delivery, we could collaborate and easily pass the Patients’ Choice Act.

My friends, if the current economic downturn has anything to teach us, it isn’t that Americans are sinners and government is our savior.  The lesson is that we should put limits back on government and break the shackles of taxes, red tape, and public debt that cripple the entrepreneurial spirit.  The time has come to unleash the American Dream of prosperity and freedom!

Free market democracy is the only system man has ever devised to fulfill human potential.  Every other form of government and economy has proven to be reactionary, undermining prosperity, freedom, and the God-given natural rights to which every human being is entitled.

In the present cultural attack on capitalism, you have a critical role to play.  The producers of America enrich human life in countless immaterial as well as material ways.  Entrepreneurs and investors, workers and savers risk their capital and their labor to create a better future, without knowing whether you will succeed or fail.  Capitalism isn’t just about profit.  Capitalism is the spirit of service in meeting the needs of the whole community.  It answers the call to take responsibility for your own life and those who depend on you.  Freedom is one of the Creator’s noblest gifts to mankind, and not something to be apologetic or guilty about.  Use it honorably, and be proud of the work you are doing!

America ’s enterprising people must stand up for the morality of market freedom.  No one can do this for you.  I am confident that we can withstand today’s assault on democratic capitalism, and bring to life that vision of “wise and frugal government” which our Founders believed could inspire the hopes of men and women here and around the world.

Thank you.

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