A Senate Democratic task force has warned that Congress and the administration must produce a positive policy to help strengthen American industry or face irresistible political pressures to bail out one faltering company after another.
The report, written by a small group of Democratic senators led by Adlai E. Stevenson (D-Ill.) is part of a larger report on economic policy under preparation by the Democratic caucus as a prod to the Carter administration and a defense against Republican attacks this fall. An advance copy of the report was obtained yesterday prior to its consideration by the Democratic Senate caucus.
The full report is expected to be ready by the end of September, when the White House plans to announce its own industrial policy.
"The trends are ominous," the report concludes. "In the past decade alone, sliding U.S. competitiveness has cost the nation an estimated $125 billion in lost production and more than 2 million industrial jobs." A reversal of that trend will require painful and far-reaching changes in the distribution of jobs and resources, the senators said.
Among these are a wholesale revision in the current Trade Adjustment Assistance program that aids workers whose jobs have been lost due to import competition. The program now provides grants to jobless workers to supplement unemployment insurance payments and other temporary benefits.
But the report warns that as many as 100,000 auto workers may have lost jobs permanently as the U.S. auto industry shrinks in the face of import competition and model changes. They will require retraining in other skills and relocation to other areas where jobs are more plentiful, the report says.
Some Trade Adjustment Assistance benefits could be paid directly to employers who hire TAA recipients, and the program should be expanded and renamed, aimed at industries that are shrinking, whether or not the cause is imports, the report said.
The political tensions within the Senate on this issue are apparent in the report. While it argues in many places against a policy of bailing out slumping industries like the American automakers, for example, it also supports a speedy hearing on demands by the United Auto Workers and the Ford Motor Co. for restrictions on Japanese imports.
The stand against bailouts reflects Stevenson's views; the support for auto import restrictions was written in by other task force members, Sen. Donald W. Riegle Jr. (D-Mich.).
Other sections of the report deal with the need to increase capital investment in industrial modernization, and to promote government-aided industrial research.
The report criticized the Republican "10-5-3" capital recovery plan, which would permit a 10-year depreciation of plant investments, a 5-year write off of equipment and machinery investments, and a 3-year write off of newly purchased vehicles. The report says the peak annual costs of a 10-5-3 plan could reach $85 billion, too high a price.
Instead, it recommends an expanded investment tax credit with "refundable" credits or grants to companies that already have excess tax deductions due to heavy losses. "Refundable credits would not be rewards for past inefficiency or bailouts for failing businesses," the report says. It did not propose a cost for this aid.
A government-owned Industrial Development Bank should be established, managed by directors from federal agencies and the private sector, the report proposed.
The bank could guarantee loans and make grants to help develop new products and processes, and support essential public services, such as rehabilitation of the nation's railroad beds, the report said.
It did not support proposals for a new agency based upon the Reconstruction Finance Corporation formed during the 1930s Depression, which would channel aid to particular companies threatened by declining profits or bankruptcy. "The existence of a 'bailout machine' might generate additional pressures for ill-considered subsidies for politically powerful industries," the report said, in an apparent reference to the Chrysler loan guarantees approved by Congress last year.
"Clearly, all parties -- management, labor, communities -- have a stake in preservation of the status quo," the report said. "Yet equally clearly, either the status quo must change dramatically or subsidies must be maintained."
The report criticizes Congress and the Carter administration for short-changing government-backed research on industrial technology. "In the 1980s and beyond, a renewed commitment is required to develop new transportation, steel production, energy and machine tool technologies, to maintain our leadership in microelectronic, biotechnologies, and space applications, and to exploit new opportunities for basic science," the report says.