To the Speaker of the House of Representatives and the President of the Senate:
The last 4 years have challenged the American economy, and the economy is meeting those challenges. The longest peacetime expansion in America's history ended in the second half of 1990. While the 1990-91 recession was relatively short (8 months compared to a postwar average of 11), the recovery was quite slow by historic standards but accelerated in the second half of 1992, with real gross domestic product growth over 3 percent and unemployment falling.
It is important to understand that the interruption to growth was temporary. An unusual confluence of forces—the delayed effect of the tight monetary policy in 1988-89 designed to head off an incipient rise in inflation, the oil price shock related to the Gulf War, the credit crunch, the problems in financial institutions, the overbuilding in commercial real estate, the fiscal imbalances, and the substantial current and prospective defense downsizing—all hit the economy in a relatively short period of time. These events occurred in the midst of a worldwide slowdown among the industrialized countries which temporarily slowed America's export boom— Canada and the United Kingdom were in far steeper recessions than the United States, with unemployment rates rising to over 10 percent, and Germany and Japan entered recession in 1992.
While the consolidation and transition were painful, the policies of my Administration have worked with the natural forces of the private economy to lay a foundation for stronger growth ahead. Inflation and interest rates are at their lowest levels in a generation. Consumers have trimmed their installment debt and have taken advantage of low interest rates to refinance their mortgages. Corporations have been raising equity, on balance, for the first time in several years. And, despite the economic slowdown abroad, America is once again the world's leading exporter and is more internationally competitive than it has been in many years, with productivity once again rising at a respectable rate.
In addition to these short-term problems and challenges, which the economy has been successfully weathering, the United States faces serious challenges in sustaining the economic recovery and simultaneously providing a firmer basis for long-term growth in productivity, income, and employment opportunities. Throughout my Administration, I have presented a series of interrelated and comprehensive programs to achieve these goals. I strongly believe my proposals—some of which I was able to implement unilaterally, others of which I have worked with the Nation's Governors to advance, others of which have been partially adopted by the Congress, and others of which the Congress has thus far refused to enact—reflect sound principles. These principles define the appropriate, though limited role for government in improving the foundations and performance of our economy. My fundamental reform agenda included:
- Fiscal Reform. In addition to the existing spending limits, I have proposed setting new caps on the growth of mandatory spending to reduce future budget deficits; restore tax incentives for saving, investment, and entrepreneurship to spur economic growth; and reforming the budget process itself, most notably by giving the President a line item veto and enacting a balanced budget Constitutional Amendment.
- Trade Liberalization. In a series of multilateral, regional, and bilateral initiatives, this Administration has set forth a forward-looking program, opening markets not closing them, in order to expand trade and growth for our Nation and the world. The North American Free Trade Agreement is an historic achievement that offers us the opportunity to create a more prosperous and stable Western Hemisphere. The United States has taken the lead in the Uruguay Round of GATT. Bringing the Uruguay Round to a successful conclusion remains essential to advancing U.S. and global economic prosperity.
- Regulatory Reform. The Federal, State, and local governments regulate too much, and often in inflexible, inefficient, costly, and unnecessary ways. While some government regulation is necessary, it should be limited to only those areas where serious market failures require attention and should provide maximum flexibility for the private sector to comply with the regulations. My Regulatory Moratorium, for example, saved American businesses and consumers over $20 billion a year.
In addition to these general areas of economic policy, I have made important proposals that would provide choice-based education reform; a more balanced approach to tort, malpractice, and civil justice reform; job training and insurance reform; market-based health care reform to control costs and provide access for the uninsured; and regulatory reform of the banking system. I would especially like to note my innovative proposals to spread hope and opportunity to the least advantaged in our society. Proposals such as enterprise zones and home ownership form the basis of my program to provide millions of disadvantaged Americans with the opportunity to live free of crime and drugs, in safe neighborhoods, and with productive employment. These citizens need and deserve the opportunity to have a stake in their communities and in society.
Americans should take great satisfaction in the fact that totalitarian, centrally planned economies all over the world are moving toward pluralistic democratic capitalism. The pace differs and the road will not be easy. But our advice, encouragement, and assistance has been essential. America has illuminated the advantages of freedom and market economies. Not so long ago it was fashionable to argue that all the world's economies were converging toward some form of socialism; the Communist regimes would ease some restrictions and allow market forces to play a role in their economies, and the democratic capitalist regimes would continue their headlong rush toward ever-larger bureaucratic welfare states. But history has rendered its judgment. The world's economies have opted decisively for various forms of democratic capitalism, not socialism or central planning. Our form of economic organization—a dynamic market economy based on individual initiative, entrepreneurship, personal freedom, and respect for private property—has made America the largest and most productive economy in the world, providing our citizens with the highest standard of living of any industrialized country. Our economic success continues to inspire market-oriented reforms in regions as diverse as the former Soviet Union, Eastern Europe, Latin America, and China.
America's future can and should be bright. We have the strongest, largest, most successful economy in the world, with the highest standard of living. But we cannot take continued economic growth for granted. The reform proposals I have put forward during my Administration, if enacted, would greatly enhance long-term economic growth, providing the foundation for higher living standards, a better legacy of prosperity for our children, improved social and economic mobility for the disadvantaged, more resources to pay for nontraditional goods and services such as a healthier environment, and for maintaining America's economic and geopolitical leadership into the twenty-first century.
THE WHITE HOUSE
JANUARY 13, 1993