The Old Executive Office Building
1:15 P.M. EDT
MR. RUBIN: Hi. I'm Bob Rubin, Assistant to the President on Economic Policy. This is the economic team, and as you know, we will be discussing with you the one-year anniversary of the enactment of the President's deficit reduction program. Saturday is that one-year anniversary. We'll be celebrating it today and tomorrow.
I think it is widely agreed that not only did that deficit reduction program have a profoundly important effect on the economy, but that the benefits of that plan really began occurring from the very beginnings of the development of the plan as the world began to realize that the President agreed to take on that tough set of issues.
Tomorrow the President will mark that anniversary with a press event. We today will take about 45 minutes to go through the various components of what we've been doing in the economic arena and the President's broad-based economic strategy to get this country back on the right track for the short-term and the long-term. We'll very quickly go through a number of the major initiatives -- deficit reduction, economic growth, exports, education, training, trade, small business -- all of which fit into this broad-based comprehensive economic strategy of the President's.
It's also worth noting there are many other initiatives that we will not have time to cover, but are also critically important to that strategy and in which a lot has been done -- for example, our urban initiatives.
Let me make one observation, if I may, with respect to this whole economic strategy, its formulation and its implementation. And that is that none of this would have been taken place except for three things: One, the President came into office with a coherent, broad-based, comprehensive, multifaceted economic strategy grounded in years of thinking about these issues. Two, he was willing to make the tough choices in a whole range of areas like deficit reduction, Japanese trade, NAFTA, health care, where there were much easier political paths to tread had he chosen to do so. But he made the tough choices because he felt that was right for the economy and right for the country. And then once he made the decision, he fought his heart out to implement the decisions and to gain the accomplishments that would, in effect, put in place his strategy.
Finally, let me point out that we give this presentation today as a team because that's how the President conceived his economic advisors should work, and that is, in fact, how we have worked from the very beginning and right through this present day. And that's not just a nicety. It is exceedingly important with respect to policy formulation, coherent policy formulation, strategy development, and then once the decisions have been made, coherent follow-through and implementation in securing success in putting into place the President's economic strategy.
And with that, let me turn the podium over to the President's economic team. They will go through the various components of the economic strategy in brief, and then we'd be delighted to respond to questions.
DIRECTOR RIVLIN: I love anniversaries, especially when there is something good to celebrate. And we've got something good to celebrate today.
This administration, as you all know, inherited a very difficult set of economic problems, really a double problem in the short run -- the economy was not really recovering from the recession -- and in the long run, we were faced with slow growth, low productivity, low wages, low wage growth -- all of the things that needed to be turned around if we were to have the kind of economy that everybody wanted.
And there was agreement in the administration that we needed a major strategy to fix the economy for the long run to get it on a better track and that that had to involve cutting the deficit, which was headed up. We had to get it headed down and shifting what the federal government did more toward investing in the future in skills and technology and infrastructure.
That was as very painful strategy. The reason it hadn't happened before, the reason the deficit was still going up was that the political pain that it takes to cut back on spending and to raise revenues had not -- no politician had wanted to face up to that. But it was also at that moment a risky strategy. It would have been possible to imagine that bringing the deficit down would have been bad for the economy, would have reduced the nascent recovery. But we took a big gamble and it worked.
We cut the deficit by a very substantial amount, enough to reduce the interest rates, jump-start the recovery and get the economy back on the track. The deficit has come down more than we hoped in the numbers that we announced in the midsession review a couple of weeks ago. We were surprised and delighted by the historic decline in the deficit, the first time that the deficit has come down for three years in a row in a very long time.
The deficits that we are reporting now are remarkably different from the deficits projected at the time we put together the plan, and they are even better than they thought they would be.
The deficit for 1994 is now projected to be about $220 billion. That's $85 billion less than was projected prior to the economic plan, and $15 billion lower than we projected even this February. We expect the '95 deficit to be down around $167 billion. It would have been over $300 billion if the plan had not been put in place.
We have cut the deficit as a percentage of GDP approximately in half. We have reduced what would have otherwise been the accumulation in national debt by over $700 billion for the five-year period, which is almost $200 billion more than we projected. We have done it with severe and often painful spending cuts. And the pain was exacerbated by the fact that not only were we cutting in order to reduce the deficit, but we were cutting to make room for investments that were needed for future growth. But that has happened. We have moved the deficit down and investment up at the same time, and have increased spending for programs like Head Start and WIC for infrastructure and for technology.
We're not through. Unless we get health care reform, we will have a recurrence of upward-moving deficits. We have got to have health reform that makes a contribution to the future reduction of the deficit. But we believe we are well on the track to that.
Now, let me turn this over to Laura to talk about the economy.
DR. TYSON: Oh, I see. That's part of our deficit reduction -- eliminate a seat, and then we move around.
The health of the economy: This is a wonderful topic to talk about right now. I would have characterized the problems confronting the administration when we came to office as three -- rising federal deficits, a jobless recovery, and then stagnant family incomes -- a legacy of another kind of deficit, which was a deficit in investment spending, a legacy of a decade of underinvestment in our nation's future.
The President proposed a comprehensive economic strategy to deal with all three of these problems at the same time. Contrary to the dire predictions -- and they were quite dire -- of the naysayers, the economic strategy worked as we predicted it would work to successfully address these three problems. And I think the numbers that we have today, and the numbers we've had for the past 12 months, the past 18 months really, speak for themselves in terms of the economy's reaction to the anticipation of our strategy, then the enactment of our strategy, and now the implementation of our strategy.
Just looking at the period of time from passage of the bill a year ago until now, employment has increased. The economy has created more jobs for Americans. Employment on non-farm payrolls has increased 2.6 million since last August. And 2.4 million of those jobs in this time period were in the private sector. Over half of the new jobs were in high-paying, professional, managerial and technical categories. Output, real output has increased. Real GDP increased by four percent between the second quarter of 1993 and the second quarter of 1994. And this increase occurred even as federal spending declined by 5.8 percent.
Business investment, addressing the legacy of underinvestment in our future, business investment has expanded over that same time period from the second quarter of last year to the second quarter of this year. Business investment and equipment, the component of investment most tightly linked to productivity growth in the future, expanded by 17.3 percent, hit a postwar high relative to GDP. Housing starts advanced. Housing starts increased by 15 percent from the second quarter of last year to the second quarter of this year. Inflation has declined. The past year has registered the lowest level in inflation in 20 years.
And consumer confidence, not surprisingly given what is happening to the economy, has improved. According to the conference board survey, consumer confidence surged by over 32 points from 59.3 in August of last year to 91.6 in July of this year. And it hit a four-year high in June of this year. Now, that's what's happened in the past 12 months since the passage of the strategy. It's also important to emphasize that most economic forecasters are predicting more of the same. They're predicting a bright future for the economy in the months ahead. They're predicting a period of sustained growth with subdued inflation. And they are predicting a broad-based period of expansion, extending to all parts of the country.
Now, frankly, when you look at performance like this, the word I've used to characterize it recently is "fine." This is fine economic performance. Indeed, I think it's important to point out that it's rare -- it's rare that the U.S. economy has performed so well. And I think we should recognize that. We should recognize the successes of the American economy, we should recognize as a contribution of the administration's strategy to these successes. This team of people believes strongly that we've put the right policies in place, and the policies are paying off for Americans.
SECRETARY REICH: I'll be short -- until I die. (Laughter.) When President Clinton came to office, his mandate was absolutely clear. And Alice and Laura have already talked about two aspects of that mandate. One was getting our economic house in order -- deficit reduction. The second was restoring growth in jobs. And we have come through on both.
I want to talk about the third part, which is investing in people -- putting people first. So much has been done, so much has been accomplished, so much new legislation has been enacted that often we lose sight of it. I want to just briefly go over it, because it is an extraordinary record in terms of human resources.
Over the last year, President Clinton's signed into law the School-to-Work Opportunities Act, a crucial element of the administration's lifelong learning agenda. And thanks to this landmark legislation, the United States will no longer be the only industrialized country without a nationwide system for moving young people who are not going on to college necessarily from school to work, giving them the skills they need. And states are already gearing up; money has already gone out to the states for the first round of implementation.
Last year's budgets expanded the Earned Income Tax Credit, providing tax relief for 15 million working families and making work pay, one of the most important initiatives for helping poor working Americans actually make it. In one of the most austere federal budgets in history, we increased investments in unemployed Americans in helping them get back to work. Thanks to increased funding, which doubled from 1993, 1994, 1995 actually for dislocated workers, we went from $500 million up to over a billion dollars. And that means that 150,000 workers, who otherwise would not get the help they need to move from one job to a next with regard to an environment of military downsizing and corporate downsizing and technological change, now are getting that help more speedily, moving to the next jobs.
The President signed into law another of the administration's major human capital initiatives, the Goals 2000 Educate America Act. We now have a set of educational goals, occupational skills standards as well that will certify that our students and workers can compete anywhere in the world. Again, we are now implementing this around the country.
We've established a system of direct student loans to allow young people to repay their student loans gradually, which are already opening the doors to college for many young people who otherwise could not and have not in the past been able to afford it.
The first of 20,000 young people are now serving their communities -- less than a year after the President's commitment to national service was first enacted. Because too many unemployment workers spend a lot of time trudging from one government to the next, we have also provided seed money to help states and localities launch one-stop career centers -- a single location which workers can get all of the help they need to get the next job.
We changed the law so that states can allow laid-off workers to start their own businesses without losing their eligibility for unemployment insurance. I don't know how many of you knew that, but this, again, is one of the innovations that has come along -- very important innovation. What we've found is that starting your own business can be a marvelous way, a very important way of cutting the duration of unemployment, and also getting the economy going.
Congress enacted administration legislation last year to require unemployment insurance offices to determine which of the newly jobless were at risk of long-term unemployment, getting them the help they need quickly and expeditiously.
Now, taken together, these initiatives in lifetime learning represent the beginning steps of one of the Clinton administration's boldest undertakings: turning the unemployment system into a reemployment system, establishing a system of lifetime learning.
We're also implementing the Family and Medical Leave Act, an historic effort to allow working Americans unpaid time off to care for a sick relative or a new child. It is now the law of the land. Regulations were implemented in record time. The Labor Department has been vigorously enforcing the law, settling 90 percent -- 90 percent of the cases without going to an actual lawsuit and in favor of employees.
In other words, we are helping -- we are helping every American face the future with confidence, equipping them with the skills and the flexibility they need to land decent jobs and lead productive lives. We are making America work for American workers.
SECRETARY BROWN: I think what you're hearing laid out this afternoon is really the administration's plan or strategy -- a strategy that the President enunciated at the very beginning of the administration, and that we have been carrying out. And it's a strategy that is working.
In fact, the economy is growing at about the rate that we predicted it would. It is not only growing, but it is creating jobs while it is growing. Consumer confidence is up, business confidence is up, interest rates remain low. Investment in plant and equipment and research and development is up, which certainly bodes well for our economic future.
The fact is that we have created the tools and are now using the tools to ensure the economic future of the American people. The administration is helping the private sector to create jobs. We understand clearly that it is the private sector that fuels the engine that pulls the train of economic growth and job creation, that we in government have a responsibility to be a better partner.
We need to help build the track, and we need to help keep the track clear. There are times in which we need to get out of the way of the private sector; there are other times in which we need to step forward to be better and more creative partners.
And a lot of what we've done has been about redefining the relationship between the public and private sector, to make it understood that if we are going to compete effectively in this increasingly competitive global economic environment, that we've got to work as a team.
The fact is that we're doing just that by boosting exports, by increasing civilian technology, by assisting in economic development and by working for truly sustainable development. Our national export strategy is working. The President announced it at the White House last September and we've been about the business of implementing that strategy. The fact is that American exports equal American jobs.
You know that we have engaged in very high-profile, and I might add highly successful, advocacy efforts demonstrating that we're going to stand shoulder to shoulder with the American private sector so that they can compete in the global marketplace and create jobs here at home by doing so.
We announced earlier the fact that the Saudi government had made a decision to purchase aircraft from Boeing and McDonnell Douglas and all their subcontractors rather than from Airbus. That was a $6 billion deal; a $4 billion deal for the purchase of telecommunications equipment; and just a week ago, the Amazon Surveillance Project, which is a win-win-win situation. It's great for the environment in Brazil and for the global environment. It's great for the United States because an American company, with our help and assistance won that procurement. And it is great for the Brazilian people in that it creates economic growth in Brazil as well.
As many of you know, we have carried that advocacy approach to many countries. I've led presidential trade and business development missions to Russia and to the Middle East, to South Africa, to Brazil, to Argentina, to Chile. And on the 25th of this month, we'll be leaving with 25 American chief executive officers for China, the first major mission to China since the President's MFN decision.
Now, what does all this mean? This is not mission for mission's sake. Those advocacy efforts have produced $21 billion in contracts for American companies and tens of thousands of new jobs for American workers. We're also eliminating need regulation.
There's been a sea change in export controls in America because of the President's leadership and his commitment to assure that we are a competitive nation in the 21st century. Just by the steps that we have taken we have freed $37 billion of exports from restrictive and outdated export controls, while maintaining national security.
We think it's terribly important that we state and restate our commitment to arms control and to nonproliferation. But at the same time, we understand that if products are available throughout the world, we shouldn't inhibit an American manufacturer from selling those products abroad as long as they meet the high standards we've set on issues of arms control and nonproliferation.
I think, importantly, we have taken a whole new look at how we get small and medium-sized businesses into the export marketplace. We've set up a series of so-called one-stop shops, or export assistance centers, to help American exporters. And we've been working arm in arm with Erskine Bowles, the Administrator of the Small Business Administration, and Ken Body from the Ex-Im Bank, so we, in fact, collocate facilities -- the Commerce Export Office, the Small Business Administration Office and the Ex-Im Bank office all in one place. We've opened up four of those export assistance centers in Baltimore, Miami, Chicago and Long Beach, California. We'll be opening 11 more this year. We'll have a hub and a spoke type of mechanism so we'll really have export facilities to help American exporters in over 40 cities in America.
Second is civilian technology. We have been brilliant in America in helping to create the opportunity for the winning of Nobel Prizes. We have been not very thoughtful in using that technology to really drive our economy, trying to transfer technology, trying to commercialize technology. And we are changing direction here by devoting resource to civilian technology and how we create economic growth, how we use technology as a driver of economic growth and job creation.
We're opening manufacturing technology centers around America. When President Clinton came to office, there were seven such manufacturing extension centers in America. There will be 35 within the next several months, and we're going to keep to our plan of having 100 in place by 1997.
Again, this is not just a program, this is an effort to make our small businesses more productive and more competitive so that they can succeed and grow and employ more American workers. The investment in technology doesn't stop there. You know, we are taking our National Institute for Standards and Technology, even while cutting down on expenses all over government. We're taking those efforts of NISTA from about $400 billion in 1993 to $1.4 billion by 1997. Again, supporting a technological expansion. Supporting -- keeping American business on the cutting edge of new technology. Why? So we can create economic growth and new high-wage, highquality jobs for our people.
That also applies to our work with the National Information Infrastructure. Knowing that the benefits just don't flow to telecommunications companies. They flow to our entire economy as we build that infrastructure, as we assure that that telecommunications superhighway doesn't create a society of information haves and information have-nots, but creates a society where we are using our full human potential, and were American business and industry can be more productive and more competitive through the use of telecommunications technology.
Finally, we understand that we've got to speak to the needs and aspirations of people who live in depressed and distressed urban and rural communities. And we have launched a so-called "competitive communities program," to try to provide incentives to get growing businesses to locate in these distressed areas, and provide job opportunity where job opportunities are needed most.
And as we develop these plans, as we implement this plan and strategy, we are forever conscious of the issue of sustainable development. The fact that we've got to assure that as we promote growth, we do so in a way that sustains the resources of our planet. And through the work of the National Oceanic and Atmospheric Administration, we are doing just that.
In all of these areas, we are providing the American people with the tools that they need -- tools that will help businesses create jobs, permit Americans to do better in the future than they have done in the past, and that in fact is the goal of this administration.
Thank you very much. Let me introduce my colleague, Erskine Bowles, the Administrator of the Small Business Administration.
ADMINISTRATOR BOWLES: Thank you. I think the President has made it clear from the first day that he was focused on small business, that he understands that small business truly is that engine that drives the economic train. Therefore, he was the first president to make the Small Business Administration, and, therefore, small business a part of the economic team. He truly does want the input of small business before he makes economic decisions, rather than simply responding afterwards, as we historically have done.
I think the administration has taken a number of bold steps on behalf of small business owners to improve the condition of the small business environment. Let me basically speak about four. The first area of focus was expanding the access to capital. Principally, this has been done by expanding the SBA's 7A general lending program which was expanded by over 40 percent to $9 billion, where we could pump $9 billion of credit into the small business marketplace.
A second way we attacked this problem was through banking reform, revising bank regulations so that they encourage lending, particularly lending to small businesses, therefore, causing commercial and industrial lending to increase by eight percent last year; and also by vastly expanding the access to equity capital for small businesses by greatly revising and enhancing the SBIC, or small Business Investment Corporation, program of a government, which is the government's venture capital program which pumps equity capital into the hands of small business owners.
Over the last several years there have been no more than a handful of these formed with just a few million dollars each. You will see over 150 to 200 of these formed with $10 to $20 million of equity capital from the private sector each, which will mean a $1.5 billion to $3 billion of new capital going to the small business marketplace over the relatively near future.
The second focus of our activity was to create significant incentives for small businesses to grow their businesses. We did this in a number of ways by increasing the expensing provision by 75 percent, from $10,000 to $17,500. This will greatly increase the availability of capital for small businesses. We also reduced the capital gains tax by 50 percent for the investment in new startup small businesses where that investment is held for at least five years. This is particularly important when it's looked at in light of a new SBIC program which will create a number of new venture capitalists, new money from the private sector going to small businesses to create new jobs.
The third area focus was to attack those government regulations that have a disproportionately adverse effect on small businesses -- those government regulations that truly do inhibit the growth and productivity of small businesses. We have done that in several ways. We clearly supported the small business exemption to the Nutritional Labeling Act which reduces the burdens of small food processors. Our Superfund legislation also provided relief for smaller firms. We also, under the leadership of Bob Rubin held a historic conference here in the White House, where we brought together the government regulators from EPA, the FDA, the IRS, OSHA, the Labor Department, Justice and Transportation. And for the first time we put them in the same room with the owners of small businesses to discuss those regulations that have a disproportionately adverse effect on small businesses. Since that time we've held a number of workshops where we really lead to the removal of a number of government regulations.
The last area in this area is we strongly supported the right for judicial review for the regulatory flexibility analysis by adding some real teeth to the reg-flex analysis. This will really reduce the amount of government regulations forced upon small business.
Our last area of effort was to focus a significant part of our time on those small businesses that have truly been neglected over the last several years -- those owned by women and those owned by minorities. We have done this in two ways. By improving the access to capital to women-owned businesses and for minority businesses and also by greatly improving the access to procurement opportunities.
The results of our activities, I think, are quite good. And I believe in results and being judged by those results. In 1993 over 706,000 new businesses were incorporated. That is a record. The SBA has kept records of new incorporations since 1970 and it has never been higher than this amount. And 1993 was also the lowest level of business bankruptcies since 1983. Business terminations were at the very lowest level in five years and profits for unincorporated businesses were up 7.2 percent last year.
And the good news will continue next year. Coopers came out with a report just the other day that said next year 60 percent of all fast growing small businesses plan to make major capital investments next year. I think the state of small business is clearly quite good.
DEPUTY SECRETARY ALTMAN: I would just like to make a couple of brief comments about tax and credit issues. A year ago during the epic struggle over the economic plan we spent a great deal of time trying to explain to the American people who would be paying higher taxes and who wouldn't be. And I think you're probably all familiar with the difficulty we had in getting that message across at that time.
Fortunately, now that we've had an April 15 intervene, the American people know who is subject to higher taxes -- namely, only the 1.2 percent at the upper end of filers -- and who isn't. And that of those who saw tax changes in the President's economic plan last year, the vast majority of those affected received tax cuts particularly through the Earned Income Tax Credit and, on the small business side, through small business expensing.
There was also a widely-held view at that time that the mere prospect of tax increases would slow growth and slow investment and weaken financial markets, and none of that has happened. And we remain confident, as Laura said, on the outlook for this year, and we don't expect to see a meaningful drag from any tax increases. After all, the investment climate itself and whether one has confidence in it -- if often much more important to investors than a difference of three percentage points on the tax rate on earned income.
Secondly, the earned income tax credit. I just want to say two things about it. It has been extended when fully phased-in to 20 million Americans. That's a very large number of people. Fifteen million of those are getting increased benefits, or a bigger tax cut. It embodies a very profound theme, which is that if you work full-time and you have kids at home, you won't live in poverty. And as Bob Reich said, it's an incentive to work and to stay off public assistance. And I think it's one of the most profound achievements that this President has realized.
On credit issues, there have really been two sets of changes. You have a package of Community Reinvestment Act reform, the imminent Community Development Banking bill, and the empowerment zones initiative of last year's economic plan, all of which are aimed at getting capital into enterprises in poor areas. And I think that's an extremely important group of initiatives, and that we will be seeing tangible results of that in the not-too-distant future.
We also are on the verge of seeing on the President's desk the interstate banking bill. Now, for many, many years there have been efforts to get interstate banking. When I served in the Carter administration, we struggled to do that, and many people before us then struggled to do the same.
It's really quite a landmark achievement. After all, most, if not all, of our industrialized trading partners have nationwide banking systems and in the absence of that has been a competitive handicap for this country, and it's been an impediment to the efficiency of our banking system and, indeed, our entire financial sector. And I think sometimes with so much going on, on the Hill between health care and crime and so on, certain very major changes, like interstate banking, don't come into view until the dust is settled.
Lastly, just one comment on interest rates. As Ron Brown said, they remain very low by standards of the past 25 years. You have a 4.25 percent generally federal funds rate, and you have a 7.40 10-year treasury rate. I went to work on Wall Street about 26 years ago, and at most times over that period, these would have been very low rates, and I do not know of almost any corporation which is refraining from financing and investment budget, a capital budget, because of the level of interest rates.
AMBASSADOR KANTOR: Because of all of what you've heard so far, you've got to come to the conclusion that this President's leadership is making sure that America is winning again, and that's exactly what has happened. We're more competitive, we're more productive. We're competing and we're not retreating. And that's where our trade policy comes into play as it connects to all of what we've done in our domestic economy.
Certainly, if you're more competitive and more productive -- and we are the most productive workers in the world because of the President's policy carried out by every one you've seen here, from Alice Rivlin to Roger Altman, what we are doing is now recognizing that 96 percent of all of the consumers in the world do not live inside our borders, they live outside our borders, they are our future. Recognizing that this President put into play a trade policy which has been the most effective in memory, because of his leadership, we are now about to ratify the Uruguay Round, the largest trade agreement in history.
Just today, 458 economists, including four Nobel laureates, and including three persons who opposed the Smoot-Hawley bill back in 1930, delivered a letter to Chair Tyson and to the Vice President, which indicates their support for the Round, indicate it will provide substantial benefits, and also it will provide an increased standard of living. It is truly in the best interest of the United States, it will create about $1 trillion in increase in our gross domestic product over the next 10 years.
I'd like to follow on some comments that were made about our economic program, which was seen by some as being not in the best interest of the country and-or these dire predictions -- I think maybe Laura used the word dire -- let's talk about the North American Free Trade Agreement. It was said we would lose jobs, it would hurt our country, it would hurt us economically. Now what has happened since it's gone into effect? Exports are up 16 percent. In automobiles alone, we've sent 23,000 -- over 23,000 cars to Mexico made by American workers since the first of the year, compared to 3,000 at the same time -- a little over 3,000 -- the same time in 1993.
We have sent about 4.1 million boxes of apples to Mexico versus 2.7 million at the same time in 1993. We have a huge trade surplus with Mexico now, about 800 million of the first five months of this year. We had a trade deficit with Mexico in the fourth quarter of 1993. This NAFTA is no only in the interest of the United States, but its workers and our businesses, and it will continue to grow. It created the largest single market in the world.
But that's not all that's been done. The President invigorated the Asian Pacific economic cooperation forum which includes the fastest growing economies in the world. We have created a trade and investment framework, and we will continue to build on that success in Indonesia in November. In addition, we have reached on -- mutual growth with the ASEAN countries, some of the fastest growing economies, too, in the word. That will also be tremendously helpful as we open markets and expand trade in the future.
We have had a number of agreements with Japan over the past 18 months -- more agreements than anytime in American history. Two of the most notable were on construction and on cellular telephones. Just two days ago we announced, of course, that the first review of the so-called cellular telephone agreement has been a marked success. The Japanese government and its companies have lived up to their obligations. It is working well, the market is opening in Tokyo. We're making phones, we're making base stations and switching equipment here in the United States. It's being sold in Tokyo and it is a joint partnership that is working.
So, as we open markets and expand trade and take advantage of the 96 percent of consumers who live outside of our borders, we can do that only because the President's policies of developing a strong economy here at home are working and working well.
MR. RUBIN: Why don't we do this. I'll be emcee, we'll take a few questions and then we'll adjourn.
Q: Given the litany of accomplishments we've just heard, can I assume there is nothing much left to do for the rest of the President's term?
MR. RUBIN: Who would like to take that? Laura? Anybody could. Everybody -- Mickey. I think you'll get seven answers.
SECRETARY REICH: Let me just give you one. We just did a study in the United States government which indicates if we continue to open markets and expand trade in Latin America as we plan to do, by the year 2010 we'll have more exports going to Latin America than Europe and Japan combined, that's by the year 2010. That's enormously important to us as we build jobs here at home.
DIRECTOR RIVLIN: No, I think there's a great deal left to do. Part of it is passing the legislation that we have already sent to the Hill -- most notably health care, welfare reform, the reemployment act, and there are others. But much more important is implementing the things that we have already done, already passed, or have on the track; and particularly the reengineering and restructuring of government, which is going on in a very serious way in department after department. It's really going to be a very different kind of government several years from now than it is now.
Q? I wanted to ask a question about the phenomenon that this briefing is trying to address, which is that people don't give the President credit for what he's accomplished. Do you think that's because you haven't had enough events like this one, or is it because people have drawn certain conclusions about the President and his leadership and that's preventing them from giving him credit for these things?
MR. RUBIN: Let me take one shot at it, and maybe Ron Brown would like to take a shot, as a person who's spent a lot of time thinking about these kind of things.
I think the President said it very well at another occasion, which is that there is an understandable anxiety or concern after 12 years, or perhaps more than 12 years, during which the middle class has had a very difficult time. You don't recover from that so quickly.
But I think the right thing for us to do is to keep doing what we have been doing, which is to look at the issues, make the best decisions, help the President make the best decisions he possibly can about the economy, and then pursue a sound economic strategy.
And it's his view -- and it seems to me, rightly so -- that if we continue on the track we're on and we continue to be successful and it continues to have the kinds of effects that it's having, in time people will begin to feel better. And they'll begin to feel better not only about the economy, but also about him.
SECRETARY BROWN: I would just say that the question was right. I don't think the President has gotten the credit that he has deserved. He came to office with a plan, with a strategy. The fact is that the strategy is working way beyond the expectations of most people who were very critical of it at the beginning.
The fact is that we are on course. Any objective analysis of the economic data would have to conclude that this President has done an extraordinary job of leading this country to a period of economic growth and job creation.
We are battling through a cloud of cynicism that was built up during the 1980s. I think we are beginning to break through that cloud. We certainly hope that events like this help us to break through it. The American people need to understand what has been accomplished and how it has been accomplished.
Let's take health care for example. We have a lot of controversy and debate about health care because there's been so much misinformation and disinformation. If it was not for this President, we would not have two bills -- one in the House and one in the Senate -- that encompassed the essence of the President's original proposals that we think that the Congress must enact this year.
I don't believe that the Congress can go home in October without enacting real health care reform that provides for guaranteed private insurance for every American that cannot be taken away. That's what the President said he wanted. He said he also wanted to do it in a way that stopped the spiral of health care costs. The plans before the Congress will do that. It is that kind of leadership -- leadership on the economy and leadership on issues that have been swept under the rug for too long, because no one has had the courage in the past to spend the political capital that it takes to make tough and courageous decisions, and that's exactly what this President has done on the economy.
Q: Do you give good luck any role in this? When you came into office you said a $30-billion stimulus package was necessary. It wasn't. Inflation may be low because of excess capacity around the rest of the world. Interest rates may be low because the Fed has been pretty vigilant. Aren't there a lot of things that just would have happened anyway given business cycles?
DR. TYSON: Well, first of all, let me answer that question by making the following observation. If the economy were in trouble right now, I am sure that there would be a lot of observation to the fact that the Clinton administration strategy was totally responsible. So, in a sense, I feel like I should start by saying, I will take as much credit -- we will, the President will, the administration will take as much credit for the current good situation as I'm sure many of you would cast blame on the administration if the economy were not performing well.
That's the first point, and it's actually a correct observation. Now, to go on. What I said in my remarks -- I think it is the case that when economies are in trouble, those who are in office are blamed for that. So given that that is a reality, it seems to me reasonable to make the case as we have made that our strategy has, as I said in my remarks, contributed to the success of the economy.
Remember, we were trying to do many things at once. We were trying to reduce the deficit. The economy itself would not reduce the deficit. That was one of the reasons we had to have a deficit reduction plan, because we looked into the future and said even if the economy does well by itself, the deficit will remain a problem. So that is certainly part of the Clinton administration strategy. That is not part of the economy itself.
The second point I would say is much of what we are trying to do is for the long-term, so, in fact, we're talking about the importance of investment now for living standards in the future -- work or training programs now for living standards in the future.
Take the trade agenda, not something that the economy itself will generate, so to the extent that we benefit from trade liberalization, to the extent that when we passed the Uruguay Round it's our estimate that over the course of 10 years this will mean $100 to $200 billion a year of additional income to the U.S. economy. This is an act of strategy, of policy, of leadership.
That is not to say, however, I mean what I want to end with is by saying that there was an economy we inherited that in the short-run that economy has certain momentum to it. The momentum was by historical standards of recovery, a rather weak recovery and certainly a jobless recovery. And we believe strongly that the policies we put in place took what was a slow recovery, an erratic recovery and a jobless recovery and turned the corner and made it into a sustained expansion with jobs.
Q: Other than getting GATT signed and getting NAFTA through Congress to initiatives that were begun in a Republican administration, how could you characterize trade policy as a success given the fact that you haven't been able to reach any major agreements with the Japanese?
AMBASSADOR KANTOR: Reminds me of the old saying -- the President failing to get a credit for now trade and now economy --the American people are smart. They know when you see a turtle sitting on a fence post, he didn't get there by accident. (Laughter.)
Let's just start with APEC, representing the fastest growing region in the world and the fastest growing countries in that region, the President invited all the leaders, the first time all the Asian leaders have gotten together with a U.S. President since 1966 to Seattle, developed a trade investment framework. We're going to follow up with that in Indonesia in November. Those markets continue to open.
We followed that up with the Alliance for Mutual Growth with the ASEAN countries. We're now following up on our success with the North American Free Trade Agreement, which I will assert, somewhat boldly, would not have passed by the Congress without the side agreements and the President's leadership, which he asserted on October 4, 1992 at Raleigh, North Carolina, Erskine Bowles home state.
We've also, with the Japanese, we've increased our exports to Japan by 8 percent, 8 percent this year -- 16 percent if you take out industrial products, which are, of course, the first victim of the recession which Japan is in. So, therefore, Japan and Mexico -- two places we have concentrated on -- in this administration, Latin America and Asia, exports are way up way above our growth of exports in other region. In fact, this trade policy has been an enormous success because of the leadership of the President and because of the strength of our domestic economy, led by the President and these folks who have been talking to you.
Q: Mr. Ambassador, are you going to get -- authority and the GATT bill next week?
AMBASSADOR KANTOR: Well, I'm not -- I'm just a small player in a very big game here. We're currently in consultations with the Republicans and Democrats in both House and Senate on that issue. Obviously, we want the Uruguay Round ratified as soon as possible, as do I think a great majority of folks in both the House and the Senate. And we're discussing that issue as we speak.
Q: Mr. Rubin, can you explain for us the cause of the recent backup in interest rates, long-term interest rates? And do you see rising interest rates as potentially the only cloud on this otherwise brilliant horizon? (Laughter.)
MR. RUBIN: Let me give you sort of a two-part answer to that, I guess.
When the President first took office and we met with him during the transition, and all of this whole economic team was there, the issue that he faced was how do you get this economy -- somebody, I think, sort of raised this question in another way before -- how do we get this economy going again. We couldn't go to traditional macroeconomic stimulation through deficits because of the enormous deficits that have been developed the last 12 years. So the answer was, let's get in place a deficit reduction program that will get this country on the right track for the long run, but also -- also, by taking the deficit premium out of the bond market will produce lower interest rates, and by producing lower interest rates, generate a recovery.
That obviously was a calculated risk. You couldn't be absolutely sure that we'd have the credibility after so many years of fiscal mismanagement, that would cause long-term rates to fall. And I'll tell you, speaking for myself and having been in the bond market for 26 years, I was very troubled by that. In fact, the markets did accord us the credibility that I think without question we deserved. Long-term rates did go down, the long-term rates generated the recovery, and we now have a good recovery.
Rates then came back up, but they came back up as a reflection of growth. Long-term rates now are at about 7.60. The long-term bond is now about 7.6 percent or thereabouts. It was at 7.7 percent when the President was elected. When the President was elected, unemployment was roughly 7.7 percent. It's now six percent. Growth was negligible except for the last quarter which, in my judgment, reflected the optimism that cornered the election of a new president. I think it's true.
Growth has now been in excess of three percent since the President was elected. You have moderate inflation. So I think that what you have really are much slower long-term interest rates than you had when the President was elected, when taken in the context of economic circumstances. It is very much the view that Laura has expressed and the blue-chip surveys have expressed -- that's the 50 private sector forecasters -- that we can continue to have solid growth with the kinds of interest rates that we're experiencing, or, to put it differently, with the deficit premium out, that long-term rates will, over time, be consistent with the kind of solid growth that we forecasted.
Q: Chairman Greenspan testified that, in effect, rising interest rates should not be unexpected as the economy continues to grow.
MR. RUBIN: Yes. Growth will cause higher interest rates, but that is higher interest rates that are reflecting the growth that you want to have. And as long as you don't have that large deficit premium, which we've had so long, which in my judgment has restored the long-term bond market and had an adverse impact on growth, interest rates over time ought to be consistent with the sort of growth we're looking for.
Q: I have a question for Roger Altman and you. Given the President has said that he wants you to stay on and has full confidence in the people at Treasury, could you talk a little bit about how you think Whitewater is going to affect Treasury's effectiveness? It's been probably the most effective agency in the economic scene.
MR. RUBIN: Well, let me start by saying I think all of the agencies of the economic team have been extremely effective, and I think when you look at this group of people and think of these people as the heads of their agencies, and to think of all of their predecessors, it's really an extraordinary and outstanding group of people. Number two, they work together well. I think it has a lot to do with the success of the economic activities of this administration, although I think the most important thing has to do with the fact that you've elected a President who had a very strong sense of what he wanted to do with the economy, and had to -- as Ron Brown said, the political courage to make the tough decisions that were requisite.
I'll tell you, I've been dealing with Treasury all through this thing, Jim, and I don't think that they've missed a beat. They've functioned with a full effectiveness that they've functioned with throughout, and I have no doubt they'll continue doing so.
And I'll say this thing about Roger. I've known Roger for 20 years. I'd vouch for Roger absolutely anything. The office of governing ethics in effect said there were no ethical violations, and as Roger has been -- as the President said last night, an outstanding Deputy Secretary; there's no question in my mind he'll continue to be so, going forward.
Why should Roger choose to change my -- (laughter) -- what is it about what I said that he can take umbrage at? (Laughter.)
Q: how he sees this as affecting Treasury's effectiveness?
MR. RUBIN: Jim, I'll just repeat my comment. I work with them every day, and I don't think they've missed a beat; I really and truly don't.
I've been given instructions. We have one more question.
Q: A tax question for Mr. Altman. One component of the President's campaign plan was later dropped, was to take around $40 billion extra from foreign multinationals in taxation. Last week, Majority Leader Gephardt signed on to Senator Dorgan's proposal for a unitary taxation approach to foreign multinationals. Is that something that the administration would still consider, or has that been ruled out?
DEPUTY SECRETARY ALTMAN: That's not under active consideration right now, to the best of my knowledge.
Q: Can you rule it out?
DEPUTY SECRETARY ALTMAN: I'd just say it's not under active consideration.
THE PRESS: Thank you.
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