Date: 1982-08-18
Speaker: WILLIAM J. COYNE (democrat)
Chamber: H

Mr. Chairman. I rise in support of H.R. Almost every time I return to my district. I hear of factories in the Pittsburgh area that are closing or reducing their operations. The loss of skilled workers who operate these factories is critical. When these workers join the ranks of the unemployed or are siphoned off into other occupations. America loses a vital resourcethe experience and knowledge built up over many generations of industrial labor. We need to enact H.R. 5540. the Defense Industrial Base Revitalization Act. to help make American industry more competitive. If we would find ourselves in a crisis. it will be too ate to remedy the decline in industrial plants and their cadre of skilled workers. This is why it is imperative that we enact H.R. 5540 so we can begin the job of restoring the productive capacity needed to sustain our defense posture. This bill has several related thrusts. It offers financial assistance to modernize aging and industrial plants and equipment. It offers training and retraining programs to provide workers with necessary skills. It offers means to reduce U.S. dependence on other nations for strategic materials. It provides assistance to institutions of higher learning for obtaining or modernizing equipment needed to train professional and technical personnel. And it calls for the development of a national infrastructure strategy so the Nations highways. rails. bridges. waterways. and other public facilities can speed production and transport defense materiel promptly to our Armed Forces. Financial assistance to small and medium size businesses may be in the form of loan guarantees. direct loans. purchase agreements. or price guarantees. Aid would go to firms defined as critical to the defense effortcurrent or futureby the Secretary of Defense. This is conceived as a 5year program and would be funded at $1.35 billion a year. States would share the costs of the skills training programs. starting at 10 percent the first year and up to 50 percent in the fifth year. H.R. 5540 emerged from hearings of the Economic Stabilization Subcommittee of the House Committee on Banking. Finance and Urban Affairs. These hearings. held in Washington and many areas of the country. including Pittsburgh. revealed the depressed state of the industrial economy and the dangers this posed to our national security. As a representative of a heavily industrialized area. I must tell you that small- and mediumsize firms are in particularly serious trouble. They are struggling to keep from going under. Without properly targeted help. their situation will remain bleak. Some are saying we should do nothing about this now because the recession is about to bottom out. We have heard these same rosy forecasts for well over a year and should view them with suspicion. Eager as we all are for an economic turnaround. we should face up to facts that dramatize the need for the remedies in this bill. The findings of a recent survey of over 300 small manufacturers in the Pittsburgh area were made available to me by Leo R. McDonough. executive vice president of the Smaller Manufacturers Council of Western Pennsylvania. The implications about interest rates. profits. backlog orders. and employment struck me as pertinent to this legislation. About interest rates. I think many people forget that the prime rate is only part of the story. At the time of this survey. the prime was 16 percent. Of 224 firms responding about their current debts. 38 of them are borrowing at interest rates between 16 and 17 percent. 66 are borrowing at 17 to 18 percent. 73 are borrowing at 18 to 19 percent. 21 are borrowing at 19 to 20 percent 8 are borrowing at 20 to 21 percent. and 5 are borrowing at over 21 percent interest. I do not have to tell you that these are crippling interest rates. To complete the picture. 17 firms reported interest rates of 15 percent or lower. These morefavorable rates are not really available in the financial market. I am told they represent cases where families and friends came to the rescue of small companies that could not afford to raise capital at those typical rates I just cited. Here is what. the survey shows about profits. Of firms queried. 31 percent showed profits up this year. 13 percent showed no change. and 36 percent showed a drop from last year. Those who reported gains showed modest increases while those who registered losses showed steep declines. Moreover. if. the majority of the 20 percent who did not respond were in the loss column. the situation is even worse than these data indicate. Statistics on backlog orders are particularly significant because they foreshadow the future with a fair degree of certainty. The future. based on this reading. does not look favorable. Of the firms responding. 67 percent report backlog orders down from a year ago. Only 32 percent.report their orders are up. I noted earlier that small manufacturers are fighting hard to stay alive. The survey bears this out when you look at layoffs and hirings. These companies had to lay off 1.444 workers during the past year. Yet they managed to hire back a good proportion. or 1.024 workers. A point to emphasize here is that small business is responsible for the employment of over 80 percent of the workers in this country. This is not to downgrade the importance of the large industries. in fact. many of the small firms are subcontractors of large firms. However. if this measure beefs up the small- and mediumsize industries. as I believe it will. the impact on employment should be substantial. Throughout the northeastern industrial belt of this country. these twin problems of joblessness and declining small businesses is especially severe. Surveys cannot show everything. From talking to the owners and managers of the plants in my area. I can report that they are trying valiantly to modernize. to keep in the forefront of their technology. to remain competitive in home and world markets. But they feel the cards are stacked against them. These small business leaders constantly remind me.that the recently enacted tax incentives do not help them overcome the horrendous costs of borrowing so that they can make a profit and thus enjoy the tax benefits. That is why the loans. loan guarantees. and purchase agreements. or price guarantees provided in the bill are needed. As the author of a section of this bill that deals with infrastructure. I should conclude with a word about that. My district. like many other urban areas of the Nation. has not been able to keep pace with the maintenance of its bridges. highways. streets. locks and dams. and other public facilities. Many of these are joint city. county. State. and Federal responsibilities. I am not trying to point a finger of blame at anybody. The evident fact is that deteriorating public facilities are impeding our economy. Heavy trucks have to circumvent many bridges that are now unsafe. In times of national emergency. this loss of time could be critical for defense purposes. Transportation. no less than manufacturing. is essential for getting material to the right places in the fastest possible tine. For these reasons. we have called for an inventory of the Nations infrastructure needs as a first step in developing a comprehensive and orderly strategy for bringing them up to par. An immediate result of launching infrastructure upgrading will be to stimulate employment and the construction sectors of the economy. In conclusion. this bill is needed for our defense posture. and it should have the important side effects of reviving our economy and putting Americans back to work.