Secretary KANTOR. Thank you, Mr. Chairman, and I appreciate your very kind and generous remarks. I have appeared before this subcommittee, of course, as USTR, and I'm delighted to be here now as Secretary of Commerce, but not under the circumstances. I think all of us would want different circumstances.

FISCAL YEAR 1997 BUDGET

I appear here to present the President's Fiscal Year 1997 budget of $4.27 billion. I'll just make a few brief remarks, Mr. Chairman, if I could, and then, of course, I'll be happy to answer any and all questions that are posed.

This budget supports Commerce programs that are essential to economic growth, job creation, higher wages, and a growing standard of living. It builds on the great successes of my predecessor in this office, my colleague, and my friend of 20 years, Secretary Ron Brown, who lost his life while serving our Nation, as you so kindly and generously remarked, on creating new American jobs and forwarding the cause of peace.

You said something, I thought, that was both profound and that I share: no one can replace Ron Brown. I can succeed him, and I will try to carry on as well as he carried on in this vital job, nor can we replace the military personnel, the business leaders, and, of course, the public servants who perished with him in the cause of trying to undergird the peace in that troubled area of the world. Three years ago the economic challenges facing our country were nothing short of staggering. They were characterized by a sluggish economy and stagnant personal incomes, an unemployment rate of 7.4 percent, high levels of bankruptcies, and a deteriorating competitive edge. For 10 years in a row our country was not the most productive economy in the world. What should have been going up economically was, frankly, coming down, and what should have been coming down was going up.

In the 39 months since this President, President Clinton, has embraced the challenge of change and required both responsibility, in order to create opportunity, as well as said we can win again, we have implemented a competitiveness strategy that recognizes the global nature of the economy, recognizes trade as an ever more important part of our national economy. We've cut the budget deficit by more than half in just these 39 months, provided tax relief for small businesses and for millions of American families-15 million, to be exact, 40 million Americans emphasizing American education and technology.

And the Federal Government is its smallest size in actual numbers since the Kennedy administration. And, Mr. Chairman, by the time we get to the end of this year, we'll have the smallest Federal Government, because we've worked on a bipartisan basis, that we've had since Jack Kennedy took the oath of office in January 1961.

ECONOMIC GROWTH

The results are as real as the challenges that faced America three years ago. Economic growth was up 2.8 percent in the last quarter, defying all the expectations of Wall Street and others who prognosticate. Personal incomes are rising an average of 5 percent

annually in the past three years. Exports increased last year by a staggering $72.4 billion. That's the largest single dollar increase in exports, Mr. Chairman and members of this committee, in human history by any nation.

Over 8.7 million new jobs have been created, three times as many as during the previous administration. Unemployment is down to 5.4 percent, while the so-called misery index-combined, that's unemployment and inflation, as we all know-is at its lowest level since 1968. America has returned to the top of the World Economic Forum's list of world's most productive economies for three years in a row, and the Federal Reserve reports and this is the most important-in 1995, our economy's productive capacity-productive capacity-grew at its fastest rate in 25 years.

Let me make one comment that's not in my statement. No one person, no one party, no one philosophy, no one ideology can take all the credit for all the good things that happened, and I guess no one should take all the blame, either, when things don't go as well. This must be done on a bipartisan basis. As you know, Mr. Chairman, and members of the majority, I will speak to them, all of you, we have worked together on trade. We've worked together on trying to expand our markets and to enforce our trade laws. I will continue to operate in that vein as Secretary of Commerce. You know, there's no such thing as Democratic jobs or Republican jobs; they're just American jobs. And that's my philosophy, and I'll continue to operate that way.

The President in his State of the Union address said, and I quote him, "Now, we move to an age of technology, information and global competition." The Commerce Department has a key role to play in addressing these issues. Our primary mission is to ensure economic opportunity and a higher standard of living for every American. This budget reflects that mission, and it does so in a way that maximizes limited resources.

In a post-Cold War world, where technology and research and communications are so critical, the U.S. has an edge, if not a great lead, right now; we must maintain it. In order to do that, I think we have three goals at the Department of Commerce or three ways we should organize the way in which we view this Department across bureau lines.

One is to restore and strengthen the foundation for domestic economic growth and job creation. There is no way to take advantage of world markets or to build an R&D capacity or our technology capacity or to, frankly, fund a new American education system that really does educate our young people unless we restore our domestic economy, which we're on the way to doing. We've still got further to go.

Two is to build an economic future based on cutting-edge technology and an unrivaled information base. That ranges everything from the Census to economic statistics, to NTIS, and NIST in the technology area.

And, three, to manage our resources and strengths with a focus on keeping our country competitive.

JOB CREATION

Enhance our economic hand today means clearing the way for private sector growth. The Commerce Department does not drive the American economy, but it should work as a catalyst so that the private sector can thrive. One thing that we're most proud of in this administration-and I think everyone in both parties can be that of the 8.7 million jobs created in 39 months, 93 percent are in the private economy. That's the highest percentage that have been created in the private economy since Warren Harding was President of the United States.

To do this, we promote, Commerce promotes and expedites American exports, helps nurture business contacts abroad, protects our firms from unfair foreign competition, and makes how-to-export information accessible to small- and mid-sized companies throughout the Nation, so that market opportunities literally span our globe. And a trade agreement enforcement unit, which has been set up— as you know, I did it as the United States Trade Representative's office; we're doing it in ITA at Commerce; there is a bill, that Senator Hollings and Congressman Gephardt have that would provide permanent resources for it-is of a critical nature.

But the vitality of the American economy doesn't begin overseas; it's firmly rooted right here at home. Commerce encourages development in every community in our Nation, clearing the way for private sector growth by building or rebuilding economically-deprived and/or distressed communities. We promote minority entrepreneurship to establish businesses that frequently anchor neighborhoods and create new job opportunities. In addition, from fishing to transportation, insurance to construction, we work with the private sector to enhance competitive assets.

Even as we look to revitalize our industries and our communities today, this administration works as a partner with public and private entities to build America with an eye on our future. So through technology, research, development, and innovation for our patent system, we're making sure America is clearly winning again.

Providing the information infrastructure helps businesses take advantage of where our Nation is going and plan the road aheadthe new ventures, the investments, the expansions that make our economy grow. Our statistics-a good and full and complete Census and data analysis, and information such as comes from NTIS, which, as you know, is self-funding-are the makings of what is essentially a market study of the United States.

Finally, this request represents part of the assets needed to help America manage its resources to compete in the future. Now that may be as basic as protecting our fisheries, but it also means investing in the most advanced weather forecasting systems, not just so our crops flourish-that's important-but that our $100 billion airline industry, our trucking industry, our shipping industry, isn't hurt by delays or safety concerns.

The private sector is the engine of economic growth, but innovative government investment is vital to help build the launching pad from which American business and industry can soar to new heights.

PRESIDENT CLINTON'S INITIATIVES

In preparing the budget, President Clinton has made critical choices. Within the context of a balanced budget in seven years, the President's Fiscal Year 1997 proposal increases funding for Commerce programs because these efforts support private sector initiatives from which new jobs flow. Our trade, technology, and economic development programs are necessary elements to economic growth, high wages, and our success in the global economy.

We fully understand, like all government, we are being challenged to do more with less, and we take that seriously. We have made some difficult decisions and anticipate that over $2 billion can be saved over the next decade through elimination of the USTTA-that's the Travel and Tourism Administration, as you know-joint projects with NASA and the Department of Defense with regard to the polar satellite program, which is about a billion dollars in savings; re-engineering the 2000 Census, which will save us around $900 million, and eliminating the NOAA Commissioned Corps.

I believe more can be done so our Department is more efficient and more responsive. As part of the President's Regulatory Reform Initiative, we have been reviewing all of our regulations to eliminate obsolete provisions, cut through complexities, and rewrite bureaucratic language. We're deleting 60 percent of EDA's regulations and 45 percent of NOAA's to make government easier to work with. I am pressing this effort across the breadth of the Commerce Department to get rid of the maximum number of regulations. I have now ordered in my first 21 days a pilot program initiated that I call the regulatory offset program, in which we will delete two regulations for every new regulation we put on the books. We're going to do that for six months. I believe it will be successful. I hope we can make it permanent. As a result, I can assure you that by the end of this calendar year we'll have thrown out or rewritten almost half the regulations in the Department of Commerce.

The President's ambitious agenda is to be accomplished with a leaner Department, one with fewer political appointees, with a downsized career workforce, with reduced management layers, and with more workers in the field providing services directly to our workers and businesses that need them. This streamlined Department is already in the making.

Over the last 29 months, Commerce staff has been reduced by lerce 7.4 percent.

If I could move to this chart, over the next-if I might, Mr. Chairman

Mr. ROGERS. Sure.

Secretary KANTOR. Over the next eight months, we're going to go from a 7.4 percent reduction-here's where we are right here-to 5 percent more in just another eight months, by the end of the year, in order to get down below 34,000. We'll be at 33,775. That will-we will have reduced Commerce Department employees by over 12 percent in the four years since this administration came in. We believe we can do this, and we can do it while continuing to maintain our priorities shown in this budget.

I'm also reducing the number of political appointees and the ratio of political to career staff, and I think that's critical that we do that. Just in the last number of weeks, we've reduced from 260 to 219 in terms of political appointees. I'm going to take it below that, but it's the ratio, as well as the number, that makes a difference. And I will assure this committee that we're going to be successful in accomplishing that.

The number of management layers in the Department will be cut. One example is trimming the Import Administration's five layers of management to three, but we're going to take this across the board in our bureaus. I've asked our Deputy Secretaries and Assistant Secretaries to join with me in this effort, and I'll be happy to continue to report to this committee as to our progress in that regard.

We'll increase the number of staff members working in the field instead of at headquarters, providing easier access and more efficient service. We need to put the people where our customers are, and we're doing that on a daily basis, and I will assure you that will occur.

In addition, we have to be more responsive to this body as well, to the Congress. I have already ordered by memorandum that we answer all congressional mail within 10 days of receipt. We've also set up a hotline, a congressional hotline, that is manned throughout every working day all day, where any one of your staff can call or you can call. Some human being at the other end of the line, not a fax machine, will not only answer your call, but get right back to you with at least a preliminary answer to your question. I think that's the least we owe to the Congress and the American people, to respond as quickly as possible to your inquiries, questions, and

concerns.

Given all of this, you might ask, Why has our budget proposal risen from $3.7 billion to $4.2 billion? The answer is hardware and technology grants. Modernization programs at NOAA, Census, the National Institute of Standards and Technology, plus ATP grants, total $500 million, which constitutes the difference between Fiscal Year 1996 and Fiscal Year 1997. Still, this $4.2 billion budget falls within the framework of the President's balanced budget commitment while making critical investments.

I think in my view, personal view, we need to distinguish between expenditures and investments. When we engage in critical R&D projects, applied research, make basic research real to industry across the board based on peer review and matching funds from industry, what we're doing is investing in America's future. When we build a new NIST laboratory for standards, we're investing in America's future. When we have an appropriate and well-funded Census, it means we have a proper count; we're investing in America's future. All of those things are important to America in the years ahead.

Our Nation's performance over the past three years has made us again the world's undisputed economic leader, the greatest exporter, the finest innovator, the engine that drives the world's prosperity. America is winning in the global economy and these resources will keep us there. The sum of all the Commerce Department programs and initiatives is simply this: new jobs, higher