UpDate - Vol. 11, No. 26, Page 11
April 9, 1992
Chase Manhattan CEO calls for balanced federal budget

     The outlook for white collar jobs in corporate America is bleak,
Chase Manhattan CEO Thomas Labrecque told students and business
executives attending the College of Business and Economics' 15th
Annual Student/ Business Executives Conference.
     The conference is designed to bring together business majors,
faculty and upper-level corporate management to exchange ideas about
topics of mutual interest.
     In an auditorium filled to overflowing, Labrecque suggested that
the recession is not the cause of joblessness-not this time. Labrecque
said the reason jobs are still being destroyed and the recession is
not abating is because corporate America is in the process of
restructuring.
     "The need to restructure is a result of the excesses of the
'80s," Labrecque said. He told conference participants that
corporations bought too much real estate, created too much debt and
generated too many jobs in the '80s.
     "The restructuring of corporate America is not just a
reevaluation of balance sheets. It is the significant redefinition of
what a business does and how it does it. It is eliminating
unprofitable lines of business, consolidating activities and stripping
away layers of overhead. It is closing a company's plants in Syracuse
and Muskegon, moving to triple shifts in its plant in Louisville and
eliminating 5,000 white collar jobs in corporate headquarters in
Chicago."
     Competition for capital by poorly managed companies and by
corporations trying to pay back takeover debts is the cause of this
downsizing more than any other reason, Labrecque said. "That necessary
thrust for increased productivity means a higher rate of job
destruction."
     Labrecque said there is no way to determine how long jobs will
have to be eliminated before this downsizing stops, but the government
could help by reducing the federal deficit.
     He said Congress should set a target date for balancing the
budget with no way of negating that commitment except under emergency
conditions. He suggested that federal expenditure reductions could be
achieved with a 2 percent across-the-board cut in all federal programs
in each of the next five years.
     "We should commit to a target of a balanced budget in fiscal year
1997," Labrecque said. By combining the budget cut with an income tax
rate surcharge of 5 percent, he calculated the deficit would be gone
within 5 years.
     Labrecque contends the American people would accept the surcharge
because the impact is greater on the rich. "A 5 percent surcharge on a
34 percent tax rate means that your tax rate, in the year of the
surcharge, goes from 34 to 35.7. If your tax rate is 15 percent...what
you're really talking about is 15.75....so, the program is means
tested," Labrecque contends.
     He said in the last 32 years the country has taken more than it's
produced and still hasn't paid for it. Unless this generation
increases national savings by lowering the deficit, the next will have
to pay it back and "we will have sacrificed their futures," Labrecque
said.
     At a noon luncheon, Eleanor Craig, associate professor of
economics, warned students and business executives that election year
bedfellowing-like that of conservative Pat Buchanan with his
traditional enemy the trade unions, who are attempting to arouse their
constituencies against foreign competition-could push President Bush
to make decisions that Craig believes would be harmful to the country.
     The president has been a staunch supporter of free trade and has
made it part of his long-term economic strategy but now, under
flailing from the right and left, Bush seems to be waffling, she said.
     "If the coalition of protectionist elements in the Republican
Party and labor union movement bash Bush into losing his free trade
religion, then Bush bashing will have resulted in long-term harm and
poor economics," Craig said.
     Throughout the day, business students met with representatives of
34 corporations.
     Also attending the conference were State Banking Commissioner
Keith Ellis, University of Delaware Board of Trustees Chairman Andrew
B. Kirkpatrick Jr., State Sen. Andrew Knox, Secretary of State Michael
Ratchford and University of Delaware Provost R. Byron Pipes.
     -Barbara Garrison