Date: 1992-03-10
Speaker: NICHOLAS F. BRADY (democrat)
Chamber: S

prove their home or buy a car under this Secretary of the Treasury. Department of the proposal. Of these. over 10.300.000 families Treasury. Washington. DC. say they are "very" likely to take positive DEAR NICK: I recently reviewed the Spec- action. ter/Domenici Bill (S/1984) which has the 3. Another 20.700.000 households say they possibility of stimulating the economy in are "somewhat" likely to act per this protwo key sectorshousing and automobiles- posal. major indicators of economic vitality both 4. Of these 31.000.000 households. fully with the socalled experts on the economy. 65% say they would use the maximum but more importantly. with the consumer $10.000. Another 18% report they would use (not to mention the impact this would have more than $5.000 but less than $10.000. This on unemployment). proposed legislation would motivate We amend some of the aspects of the Bill 26.000.000 American families to spend more (see attachment) and put it Into national than $5.000 on housing and autos. with anconsumer research. I found the results more other 5.000.000 families spending less than than interesting. and I believe you and the $5.000. White House should review the data and 5. If they do as they say. these 31 million the approach as a possible major element in families would theoretically transfer over a package of measures for stimulating an $224 billion dollars from existing IRA and economic recovery. 401K funds to the housing and auto IndusWith due respect. I point out that the con- tries. According to the BEA. American famisumer confidence level. which is a major lies spent $647 billion in these two sectors in problem and has been so for many months. 1990not Including maintenance and operwas not addressed. The past is the past but ations. At a very minimum. the proposed if scenarios had been worked out in advance action would produce impactful doubledigit (what if the economy did not respond. etc.). gains in both industries. the Administration might be in a better po- 6. Over half (55%) of the 31 million famisition to be on the attack with Congress. Of lies who say they would make use of IRA course. the media has not helped the situa- and/or 401K funds for housing and autos. tion at all. If you consider that the 198182 report they do not intend to invest at this recession which had almost 10 percent un- time in new or improved housing or buy a employment and interest rates in the high new car without this proposal. In other teens (but a solid banking system and rea- words. the Specter/Domenici proposal motisonable ability to lend). versus what we vates many more people to act now. Using have today where the primary problems of just this 55% figure. the impact would be the lending institutions require not only over $120 billion in incremental spending larger down payments but a stronger con- coming into these two industries at this critsumer creditworthiness as well. we can un- ical time. derstand one of the major problems we face. I am very enthused about these findings. Because I share this concern and was in- - Although the sample size is not large. the trigued by the Specter/Domenici approach. responses are statistically reliable within my company commissioned a study through 3%. Even if one applies a conservative adjustment to these stated consumer actions. the numbers are still very impressive. I have heard a lot of qualitative research recently which suggests the President should adopt a more proAmerican business stance. While we are all believers in free trade. there is a deep seated popular concern that the Japanese are receiving special treatment with respect to their markets versus ours. This viewpoint is being strengthened by the current U.S. auto industry problems and the attendant negative publicity. I believe this proposal is an appropriate response. I do hope this study might be of help to you and the President. We would be happy to have ourresearch analyst come to Washington to go over the detailed results with your staff or whomever you wish. On a related note. a lot of us believe that a cut in the capital gains tax rate would be revenue positive and is the right thing to do. However. I believe the average American family is much more concerned with holding onto or getting jobs. and unless this tax change can be explained simply and succinctly and backed up with facts on how it creates Jobs. we really should let it pass. Our indications are that this will be a detriment with the average person in getting a tax stimulus approved. In my view. the direction proposed In the Specter/Domenici Bill is exactly right for this time and these conditions. I hope you and your family have a very happy holiday. and I look forward to seeing you soon In the New Year. Sincerely. PHIL.