THE WHITE HOUSE
Office of the Press Secretary
PRESS BRIEFING
BY TREASURY SECRETARY ROBERT RUBIN,
CHAIRMAN OF THE COUNCIL OF ECONOMIC ADVISORS DR. JOSEPH STIGLITZ, AND DIRECTOR OF THE OFFICE OF MANAGEMENT AND BUDGET, FRANKLIN RAINES
The Briefing Room
11:30 A.M. EST
MS. GLYNN: Good morning, everyone. Today we have three people -- the Secretary of the Treasury, Robert Rubin; Chairman of the Council of Economic Advisors, Joe Stiglitz; and the Director of the Office of Management and Budget, Frank Raines.
DR. STIGLITZ: Well, this is a busy week for economic news. First, let me read a little bit of a statement.
Today's employment release provides further evidence that the economy is on the right track with strong job growth, low unemployment and subdued inflationary pressures. The economy added 210,000 non-farm payroll jobs in October, almost precisely the pace of job creation since January, which has been 209,000. Private sector employment has been even stronger. It increased by a quarter-million, 250,000, while government employment fell by 40,000. Employment has risen by 10.7 million since January, 1993, and 93 percent of the new jobs are in the private sector.
Research by the Council of Economic Advisors shows that most of the net new jobs are good jobs. Over two-thirds of the net job creation has occurred in industry occupation job categories paying above medium wages. The unemployment rate remained at 5.2 percent in October, the 26th month in a row below six percent. On a quarterly basis, the unemployment rate has not been lower since 1974.
The economy is well-balanced with solid underlying fundamentals. We have a vibrant economy, poised for sustained long-run economic growth. Inflation is low, at a 3 percent annual rate; business equipment investment is up sharply, growing at a robust 19 percent annual rate last quarter, and exports continue to grow.
This solid economic performance is no accident. The Clinton administration's economic policies, especially the hard-fought deficit reduction, which reduced the deficit by 63 percent in the last four years to $107 billion, have laid the foundations for rapid job creation, solid economic growth, and higher living standards in the future.
SECRETARY RUBIN: Let me just make a brief reflective comment, if I may. I remember back to January of 1993 and February and March, as we all sat with the President, sometimes three or four times a week and put together the initial economic program. And the judgment he made then was that we needed to face the problems that this economy was at that time beset with, and that by dealing with these tough issues we could get the country back on the right track, and I well remember the political advisors saying this was very difficult, you could defer a lot of this, you could soft-pedal it, and his view was that he was elected to get this economy back on track, that's what he was going to do, and he made the tough decisions; and today we're benefitting from those tough decisions.
As Joe Stiglitz said, the economic conditions really are, by all sorts of different measures, I think there are something like 15 different ways of looking at how the economy is performing that's been developed by the CEA and others, and by all of those, the economy really is doing remarkably well.
The key now is to continue to have these kinds of conditions going forward, that in some fair measures, the debate that is going on in this campaign and to my view, at least, that if we stay on the track that we've been on and do the right things and make the tough decisions, that we can continue to have good economic conditions on balance over time.
I think there's another -- and I'll conclude with this -- I think there is another lesson in this, and that is that over time, good economics and making the tough decisions, the politically tough decisions is also, over time, good politics.
DIRECTOR RAINES: Let me just say a couple of things here, first reiterate what Bob has said, having just come out of the private sector from the financial sector and looking from 1993 to today the changes that have occurred in the economy have been nothing short of remarkable from the standpoint of what anyone's expectation was during that period.
We've handed out to you a copy of the chart that we released earlier, showing the progress against the last projection of the budget deficit during the prior administration and what has been achieved; and the chart obviously speaks for itself in this very substantial reduction from $290 billion in budget deficits to $107 billion in 1996.
That shows up in a number of ways for the average citizen. The ones that I would point to -- let me just base my own background -- if you simply look at how it's showing up in homeownership, and all of you have heard over the years that the relationship of budget deficits to interest rates and driving up interest rates, homeownership has now come back dramatically from lows earlier in this decade to approaching the highest -- I think we've reached the highest homeownership rate in 15 years, and that's a direct result of mortgage rates being the lowest average under any president in 25 years.
And so, for the average citizen, it's not just you build, you own a home, but also the tremendous refinancings that have gone on during this period. Let me just give you one set of numbers I'm not sure that I've shared with you before that illustrates the reason for this. Since 1993, if you add up the difference between these two lines, the projection of what the deficit would be under the Bush last projections and the actual, and not any projection but the actual, the difference in those two lines is $445 billion difference in debt that has not been added to the national debt.
The components of that is about half, slightly more than half is on the outlay side, lower spending than was projected by the prior administration, and about half is additional revenue that has come in during this period. And as some of you may have noted, we previously have identified how even we've underestimated over time how far down this deficit was going to get in this period of time and have been outrun primarily because of the use of conservative estimates in the past in achieving this.
So this is tied together with the points that Joe went through as part of, I think, just on the raw numbers a remarkable story, not just for the administration, but for the American economy. And I think it's being felt across the economy that we are the most competitive economy now in the world, we have the lowest budget deficit of any industrialized nation, and that is a benefit that all sectors -- corporate, individual -- are feeling the impact of that across the nation.
Q Secretary Rubin, you've talked about how, in 1993, the President made very tough decisions that turned out in the long run to be also politically good ones. Yet, Clinton is being criticized now in many quarters for only coming forward with very safe proposals as he's running for election -- very incremental type proposals, whether it's targeted tax credits or things that can be done administratively. And I just wonder how you would respond to that. Entitlement reform is not really being talked about in specific terms, nor --
SECRETARY RUBIN: Oh, I think -- I'll give my reaction. I'd actually turn it around the other way. I think he's done three things. One, he's articulated a vision as to where he wants the country to go -- balancing the budget, investing in education, the environment and the rest and putting in place a middle-class, or middle-income tax cuts.
Secondly, he's come forth with a number of programs that carry that strategy forward, and that's a strategy that's been on since the beginning of '93, so these are further steps carrying forward that strategy. And every single one of them has been fully paid for in a way that we believe the CBO would fully credit. So I think that what we have done -- not, I think -- we have been extremely responsible in carrying forward the strategy he's been on for four years, and doing it in a way that's fully paid for. And with the spectrum of entitlements, what he has said is that first we've got a balanced budget, secondly, we've got to extend the Medicare Trust Fund which, as you know, he's made a proposal to do out to the middle of the next decade and, thirdly, we need to put in place some kind of a bipartisan process that will deal with the long-run problems that nobody has addressed.
Q Can you get to a balanced budget without addressing those entitlements? You've talked about making tough decisions. What are some of those tough decisions that are going to have to be made by the next Congress?
SECRETARY RUBIN: Yes. Well, he's submitted, as you know, submitted a budget, and maybe Frank would like to address this, but submitted a budget to the CBO that balances by 2002 and that they have certified as balancing. Director.
DIRECTOR RAINES: I think the thing to keep in mind is that the President has already -- has on the table and has had on the table significant changes in discretionary spending, as well as entitlements in his proposal last year, and Congress didn't take them up. And if the Congress had taken them up, we would have made more progress this year and we certainly -- our baseline going forward would be better.
So the President, I think, has not been short of proposals in addressing the remaining problem that we face in the budget, and should he be reelected, obviously he would move forward on his promise to balance the budget, and that will require movement on all parts of the budget.
Q How far along are you on the new budget -- next budget?
DIRECTOR RAINES: OMB has been in the process of reviewing submissions from the agencies, and so we're on the normal schedule, at the early stages of that examination. So it's pretty much the way it would be in any other year.
Q Do you have an update on your estimate for '96 growth? It seems to be low now that we've got three-quarters reported. Will you need to revise that as part of your next budget --
DIRECTOR RAINES: You mean economic growth?
Q Right.
DIRECTOR RAINES: Joe?
DR. STIGLITZ: I mean, obviously, the economy is doing stronger than we had put into our last forecast. As part of the budget process, we are in the process of finalizing our new numbers for going forward, and when we do that, we will put in the actual numbers for 1996 as they actually are being realized.
SECRETARY RUBIN: It's interesting that when you look over the four years and how things have turned out compared to our projections, unlike the more typical history of these kinds of things, we have tended to underestimate the good numbers and the good results. We really have been very conservative in our estimates relative to that which has happened.
Q Secretary Rubin, there's been some unrest in Mexico recently and certainly the peso is having a problem. Without asking you to talk about the peso because I know you don't like to talk about currencies -- (laughter) -- could you --
SECRETARY RUBIN: I like to talk about them; we believe in a strong dollar. (Laughter.)
Q Markets rise.
SECRETARY RUBIN: No, markets go both ways, but go ahead. You only listened to half of what I said, but go ahead.
Q Are you expecting any more prepayments by Mexico on the debt, and when does Mexico have to pay the remaining debt? Is there a due date?
SECRETARY RUBIN: Yes, they've paid us three-quarters of our debt back, as you know, ahead of time -- all of that's ahead of time; they owe us another quarter. I don't recollect when that quarter is due, the remaining quarter, the remaining 25 percent; but the 75 percent is ahead of time, and they have a fair bit of time to pay us the other 25 percent.
The peso, as you say, over the last couple of weeks has depreciated somewhat, but on an inflation-adjusted basis, which is how you would have to look at it, obviously, the peso has done quite well, and Mexico has stayed with the program that we and they had agreed to back in February of '95.
Q Do you expect any more prepayments from Mexico?
SECRETARY RUBIN: I don't know the answer to that. They've made a judgment as they've gone along each time what worked best for them and what was consistent with their various obligation to ourselves and the IMF, and that's the framework within which they have to make decisions; but I do not know the answer to that.
Q Can I follow up on the Mexico? Are you concerned at all, Mr. Secretary, that Mexico is backing away from some of its commitments that it had made to the IMF on things like privatization in the energy industry and pension systems? Is there anything --
SECRETARY RUBIN: No. I think, in fact -- I think they're almost a model case for undertaking very difficult and stringent conditions or conditionality and then adhering to them. I think they deserve enormous credit for the political courage that they had in doing what they've done -- on the petrochemicals, if that's what you're talking about.
Q Yes, that's what -- so is there -- you're pretty confident that their recovery is going to continue?
SECRETARY RUBIN: Well, private sector forecasts, as you know -- we never make forecasts about other countries' economies, but the private sector is forecasting continuation of growth and, recognizing that there are a lot of issues and problems that need to be dealt with in Mexico, that on balance, the view in the private sector is that, on balance, they are likely to continue to have a recovery and continued growth.
Q Is this your last bit of good news before the election? And does the budget --
SECRETARY RUBIN: The election is November 5th, isn't it? (Laughter.)
Q Do you submit a budget even if the President loses?
DIRECTOR RAINES: I hadn't thought about that hypothetical possibility. Whoever is the President in January submits a budget.
Q In February?
DIRECTOR RAINES: In February. And just as -- when this administration came in, there was a Bush budget, and the President then in a very short time revised that so there would be one, so the process would go on in any event.
But we are -- in terms of additional good news, I was just trying to think what could there be -- (laughter) -- the list that you've got sort of exhausts the possibilities. I'm trying to think what else could get --
Q I wanted to know if we were going to see you again before Tuesday.
DIRECTOR RAINES: If we could think if something else good that we haven't -- that hasn't been reported, we sure would tell you. But the list is so extensive now, it's hard to think of it.
Q Throughout the Clinton administration, the unemployment rate has fallen pretty steadily. My question to you is, do you think the unemployment rate can dip below five percent, and should it dip below five percent in light of concerns about NARU and whatnot?
DR. STIGLITZ: Well, as you know, there's a lot of uncertainty about what exactly the value of the NARU is. Consistently, we've been more optimistic. When we took office, people were talking about the NARU being 6.2 percent to 6 percent. In fact, as it's turned out, we've been able to have unemployment rates that are far lower than that without inflation increasing; in fact, inflation has come down.
I think there remains a considerable degree of uncertainty about what the exact, precise value of the NARU, but I feel confident that we will be able to maintain the kinds of low unemployment rates that we've had, in the mid-fives, without any threat of inflationary pressures.
Q Dr. Stiglitz, several days ago on this same subject, Labor Secretary Reich said he wouldn't be surprised if the unemployment rate dipped below five percent in the fourth quarter. Would you agree with that assessment or forecast?
DR. STIGLITZ: We don't try to make quarter-to-quarter, let alone month-to-month predictions of the unemployment rate. Economies, unemployment rate, does vary from month to month. We've had enormously solid employment growth, and the unemployment rate is affected both by job creation and by decisions about labor force participation.
So, the general -- let me just make a general comment. I think people are looking forward to a strong quarter based on the optimism about where the economy is going. The slowdown in the moderation of economic growth that happened in the third quarter when growth was at 2.2 percent, which is 3 percent over the whole year, was based on a slowdown of consumption expenditure. But if you look at the factors underlying that, underlying the consumer position, there is strong consumer confidence, a high level of optimism, real incomes are up, real disposable income -- that is to say taking into account inflation -- and taxes was up 4.9 percent in the third quarter, and the ratio of net worth to income is the highest it has been in decades. And all of these sort of portend a very strong consumer demand in the fourth quarter.
Q So could it be lower than 5.2 percent? Do you think it will go down below that?
SECRETARY RUBIN: I think Joe has answered. But can you imagine -- to give you a sense of what has happened in the last week -- could you imagine four years ago when unemployment was 7.3 percent ever having this kind of a conversation? It shows you really how much things have changed economically that we are now discussing, you know, we are in the low five's and can you get lower.
DR. STIGLITZ: Just one more observation, if you look across the states, there are states -- Nebraska has an unemployment rate now of 2.6 percent. And so the economy is able in certain parts to have enormously low unemployment rates and function well.
Q Perhaps you can educate me just a little bit. The report that I looked at on today's figures included mention of the fact that weekly earnings dropped. Why would that be good news for anybody?
DR. STIGLITZ: Well, this is not the best series for looking at earnings. Actually, it was zero. It wasn't a drop. It was unchanged.
The more relevant numbers were the kinds of numbers that came out yesterday and the day before. Personal income, real income, for September, adjusted for inflation, was up four-tenths of a percent last month. And real disposable income for the quarter -- this is the figure I mentioned a minute ago -- real disposable income, which takes in account inflation and taxes, was up 4.9 percent. So the evidence is that the economy -- real incomes of individuals are rising and rising significantly.
MS. GLYNN: Last question.
Q Why is it the people seem to be so worried? We keep getting these poll results and things of people saying that they're worried about what's going to happen, they're worried about their economics.
DR. STIGLITZ: There are a variety of polls and there are different ways of doing polls. The best long-term series that has looked at where people's sentiments are these studies of consumer confidence, which are put together or asking them or done in a consistent way for a long time. Consumer confidence in the last few months has been as high as it has been in years, and that's one of the factors, in fact, that I mentioned earlier that I think that the economy is likely to have a strong growth going forward into next quarter and into 1997.
Q Mr. Secretary, are you going to stay on in the next administration if President Clinton is reelected?
SECRETARY RUBIN: Well, let's get through the election, Helen, and --
Q Or are you going back to Wall Street?
SECRETARY RUBIN: No, I'm not going back to Wall Street. (Laughter.) Let's wait until we get through the election. The President has to make his decisions and we all need to then deal with our own lives. But, clearly, what we need to do now is just carry on the work of the government, which is what we are doing.
Q What is your inclination?
SECRETARY RUBIN: My inclination is to wait until after the election. (Laughter.)
MS. GLYNN: Okay, last question.
MR. RUBIN: Let's let Frank --
Q If the political --
DR. STIGLITZ: Yes --
SECRETARY RUBIN: Frank had a great line, let Frank --
DIRECTOR RAINES: No, no, no.
Q -- humor out here.
SECRETARY RUBIN: Frank.
DIRECTOR RAINES: Who is going to do the set up now? (Laughter.) No, we wouldn't practice lines before we came out here. That would be the wrong thing to do. (Laughter.) But I would say (laughter) the most important economic decision-maker, decision will happen on Tuesday and not what happens after that when the President makes his subordinate appointments.
Q How political can you get? (Laughter.)
SECRETARY RUBIN: That's why we let Frank make the comment. (Laughter.)
DIRECTOR RAINES: That's right.
Q Speaking of Tuesday, if the political composition ends up being fairly similar in Congress, what would the prospects of a major balanced budget package be? I mean what would keep it from just being another repeat of last year and the year before?
DIRECTOR RAINES: Well, I think the major reason for optimism about reaching agreement on a balanced budget is that, if nothing else, I believe this election will show that the American people will reject budget battles and closing the government as a political issue that they -- I think that message has been received loud and clear. And so whoever comes back in January I think will come back with a clear message that budget battles is not what the people are looking for. Budget solutions is what they are looking for.
And so whatever the makeup of Congress is, I think, there is no doubt that message will have gotten through. And I think that will fundamentally change the nature of the discussion because if the discussion is about, can we achieve agreement on a balanced budget, the answer is, absolutely yes. The elements for such an agreement were in place a year ago. The only thing that was missing was a willingness to in fact reach that agreement, and because of a political calculus that it was better to have the fight than to have the agreement.
I think this election, if nothing else, has shown that it is very hazardous to have fights and not real agreements. And so my expectation is that all of the elected officials coming back will be looking forward to the opportunity to prove that they can reach the agreement and put the budget battles behind them
Q Even if it includes a House Speaker Gingrich?
DIRECTOR RAINES: I believe he has been an astute observer of this election and has seen that has been going on, district by district, and what the issues have been. And the one piece of evidence I would point to is that -- I won't take credit for it since this all happened since I got here -- but as you saw in the omnibus appropriations bill -- entirely different spirit about, can we reach agreement. And in a period of three days, we resolved a debate that had been going on all year. Why? Because people said, we're more interested in agreement than we are in a fight.
That message has now been carried through this election campaign. And my expectation is, again, no matter how it comes out in the election, that will be the message that the elected officials will want to have, that they can reach agreement on these important issues, particularly now that the American people know that you can cut the budget deficit, that God did not say it had to be $300 billion, that it can be done if you actually take steps. That is going to be a very big impetus for reaching progress in the next year.
MS. GLYNN: Thank you.
END 11:50 A.M. EST