THE WHITE HOUSE
Office of the Press Secretary
REMARKS BY THE VICE PRESIDENT, SECRETARY OF TREASURY BOB RUBIN, NATIONAL ECONOMIC DIRECTOR COUNCIL GENE SPERLING, COUNCIL OF ECONOMIC ADVISORS CHAIR JANET YELLIN, AND OMB DIRECTOR FRANK RAINES
The Briefing Room
2:10 P.M. EDT
THE VICE PRESIDENT: Thank you very much. I'm going to lead off with some opening remarks and announcement of some new figures. And then I'm going to turn it over to Secretary Bob Rubin. He, in turn, will hand it off to Frank Raines, the Director of Office of Management and Budget. Then you'll hear from Gene Sperling, who heads, of course, the National Economic Council. And then Janet Yellin will be our clean-up hitter, Chairman of the Council of Economic Advisors.
Four years ago, Bill Clinton and I inherited an economy that was sluggish, weak and drained of hope. We had been experiencing what some economists called a triple-dip recession. Every time private businesses felt there was some new strength in the economy and had the urge to expand or hire new employees, they went out to borrow money and ran head-long into the very heavy government borrowing necessitated by the record high deficits. And that pushed interest rates up. And then the recovery sputtered out and the economy slipped back into recession.
Unemployment was very high all across the nation. The private sector was hardly generating any new jobs at all. Wages were flat for most Americans in real terms and were dropping for many. And, of course, as I mentioned, the federal budget deficit had climbed to record levels -- $290 billion per year, the highest in American history -- and was headed even higher. The projections for the years to come were just unbelievably high.
Well, the President-elect at that time and I met with the economic team in Little Rock and went through the process of analyzing exactly what was wrong and exactly what the right solutions were. The plan that we came up with wasn't very popular. It broke with the past, it upset the status quo, it shred the orthodoxies of the Industrial Age and substituted the new realities of the Information Age.
Our plan combined three ingredients never before tried in collaboration: number one, really reducing the deficit -- not just talking about it, but really reducing it steadily; second, investing in our people; and, third, aggressively opening new markets for American goods.
Well, today, we've received further evidence that this new strategy has been a rousing success. This morning, the Commerce Department reported that in the first three months of 1997, the American economy grew at a rate of 5.8 percent, without generating inflationary pressures.
This is really extraordinary. The fastest rate of growth since 1987. This 5.8 percent growth rate is even higher than our economists originally calculated. And it comes on the heels of the news earlier this week that consumer confidence has just risen to a 28-year high.
The good news just won't quit. The American economy has now generated 12.1 million new jobs in the last four years. record numbers of new businesses, more new small businesses created in each of the last four years than in any other year in the history of America. incomes now climbing at every wage level, the gap between rich and poor closing up after widening for so many years. low inflation and, as you can see, an unemployment rate that has fallen all the way down to 4.9 percent.
These facts and figures tell a story of an historic success in turning around the American economy and moving it in the right direction. This unemployment rate is the lowest it has been in 24 years. So the evidence is in. The American economy is now the healthiest it has been in a generation. America today has a Tiger Woods economy, breaking new records every week and showing strong potential for the future. I knew you would like that phrase. (Laughter.) We had a little debate about that one. (Laughter.)
Today's numbers are also further proof that the economic strategy President Clinton and I put into effect four years ago is working extremely well. That's also why we can't turn back. We must continue on this steady, prosperous course, by reducing the deficit, investing in education, the environment, and technology, and by seizing the benefits of open, free, and fair reciprocal trade.
We've already reduced the budget deficit by 77 percent. As a portion of the economy, America now has the lowest deficit of any industrial nation in the entire world. Now we're going to finish that job. Our bipartisan balanced budget plan will bring the deficit to zero by the year 2002, and eliminate the deficit altogether, all the while, continuing to increase investments in our priority areas.
Our plan balances the budget while continuing investments in those areas that continue to fuel economic growth. Our budget includes the largest federal investment in education in a generation. It invests in environmental protection and it invests n science and technology to preserve America's innovative edge.
Last week Congress left for its Memorial Day holiday before completing action on the budget. On behalf of the President, I want to call on Congress to keep growth alive and pass our balanced budget plan when members return to Washington. We have an historic opportunity to keep America's new prosperity on track. Now is not the time to even consider abandoning an economic strategy that has plainly worked wonders for the American people.
Now I want to turn it over to the Secretary of Treasury. And we have some other charts for you, too, so stay tuned. (Laughter.)
SECRETARY RUBIN: Thank you, Mr. Vice President. You get a very similar perspective when you look at this economy from abroad. In the last two months I've been at meetings with finance ministers from the G-7, from the 18 nations of the APEC organization. And the refrain is the same in all of these organizations: five, six, seven years ago, we were viewed as yesterday's economy; today, we are once again viewed, without question, as the world's outstanding economy and the world's economic leader. Moreover, when you speak to the finance ministers at these meetings, while they will say that there are many factors that contribute to our economic success, it is virtually a universal view in these organizations, amongst these people, that the key and indispensable factor was the deficit reduction program of 1993.
And my own view is that, without question, when the economic history of this era is written, that '93 deficit reduction program and the follow-through each year will be viewed of historic importance in terms of reestablishing fiscal discipline in this country.
As the Vice President mentioned, federal debt quadrupled in the four years of 1988 to 1992, and I remember very well when I was last in the private sector there was enormous skepticism about whether our political system would ever deal effectively with the deficit. And, in fact, President Clinton, the Vice President came and implemented the plan the Vice President discussed, and the results -- the ones that you all know -- the deficit down something over 70 percent now.
I think the key going forward is to continue with exactly the same strategy we've been on for the last four and a half years. The logical conclusion of the return to fiscal responsibility is to go to a balanced budget, and then, within that context, to invest in the areas like education that are critical to future productivity and to continue with our program of opening markets.
And with that, let me introduce the Director of the Office of Management and Budget, Frank Raines.
MR. RAINES: Well, as the Vice President clearly stated, reducing the deficits has been a key component to the President's economic strategy. It was one of the first things he took to when he took office, and when he took office, we faced an enormous deficit, hitting a record of $290 billion. The deficit was clearly out of control. But the President worked with Congress to enact his 1993 economic program of lower deficits and more investment.
I wasn't here in 1993, but I did a little research and discovered that at that time, everyone, both supporters and opponents, argued that this plan would have a dramatic effect on the economy. And as you will recall, the opponent said that it wouldn't work, that the deficits would rise rather than fall, that the economy would fall into recession, and that jobs would be lost.
Well, the results are in and the Vice President gave you the results on the economics and others will elaborate on that. But let me simply say a word about the falling deficit. It fell from $290 billion dollars in 1992 to $107 billion last year, and to an estimated $67 billion this year -- a 77-percent drop in just five years.
And the results are even more impressive when you look over the course of 1993 to 2002, a period that covers the budget agreement recently reached. Over that period we will have reduced the accumulated budget deficit by $2.8 trillion. What that means is, but for the program the President instituted in 1993, where for the first time we actually brought deficits down as opposed to simply keeping them from taking off, but brought deficits down heading to zero -- but for that program, the outstanding federal debt in 2002 would be about 40 percent higher than it will be with his program.
And that was achieved in two ways. On the spending side, we will have reduced spending by $1.7 trillion over that 10-year period; and have reduced spending from 21.8 percent of GDP down to 19.1 percent. On the revenue side, we'll have brought in $1.1 trillion more revenue than if the President's program had not been enacted, so that revenue would rise from 17.8 percent to 19.1 percent of GDP.
The lower spending and greater revenue is a result both of policy changes and of the strong economy that was spurred by those policy changes. One goes hand in hand with the other. Also, this program, together including the bipartisan agreement, is an important down payment on dealing with the long-term demographic deficit that we still face. And that's why it's so important that we finish the job and enact the balanced budget agreement that the President has reached with Congress, and we all look forward to working with Congress to get that job done.
Now, let me introduce Gene Sperling, who is the Director of the National Economic Council.
MR. SPERLING: That was a much more bland introduction than Frank was promising outside. (Laughter.) And I thank him for saving those jokes for internal matters. Obviously, back in 1992 -- (laughter) -- in 1992, we had faced the fears of very, very slow job growth. There was only 1.4 million private sector jobs created during that period and, in fact, if you look from about January '91 until January '93, the number of jobs in the economy had just gone from 108.8 million to 109.5, only about 700,000 of growth in a two-year period.
Since then, it has gone to 121.6, which is a 12.1 million job growth over a period of time that's just a little over four years. In fact, President Clinton was the first President to have 11 million jobs -- over 11 million jobs created in a single presidential term, even if you account for the size of the economy and population, you still had average annual job growth of 2.5, which compared to .05 under President Bush and 2.0 under President Reagan -- so under any measure the job growth that we've had over the last four years surpasses by a significant amount the job growth during the Reagan administration.
It is also interesting to note how much this has taken place in the private sector. Of this growth, 11.2 million of the 12.1 million -- 93 percent of the job creation -- was in the private sector, which is historic in its percentage. It's also worth going back to '92 as to what we thought -- people thought about the future of certain industries. Manufacturing had lost 667,000 -- excuse me, construction had lost 667,000 jobs during the Bush administration. It had gone down from 5.2 million to 4.5 million. We've gone from losing 667,000 jobs to creating over 1 million -- 1.05 for a million construction jobs.
Two, as somebody being from Michigan, I don't think people ever thought automotive jobs are going to be on the way back up. There had been 35,000 auto-related jobs lost in the Bush administration. They have gone up exactly 100,000 under President Clinton -- 100,000 job growth in the auto industry, from 848,000 to 948,000. And manufacturing jobs, which had been on a constant downward slide, a full 1.3 million lost between 1989 and 1992, are up 193,000 under the Clinton administration.
The same can be seen in repeated other industries. So I think that the goal that we had had -- hopefully bringing down the deficit and investing in people -- we would lay a foundation for the private sector to have solid job growth, of which we hoped would be 8 million over four years. It's obviously been significantly better than that.
I think one of the most remarkable things about this period, though, has been the consistency of economic indicators, and while we're just going through a couple of charts here, I encourage you to look through your pack at particularly the last couple of pages, which go through from business investment to homeownership to the stock market doubling to inflation -- that this really has been a rather historic period across the board. And there's no better person to go in more detail in that than my colleague, and Chairman of the Council of Economic Advisors, Janet Yellin.
DR. YELLIN: Thanks. Well, as the Vice President noted in his opening remarks, this morning's announcement that real GDP in the first quarter of this year grew at an upward, revised 5.8 percent rate. It really confirms that our economy is enjoying a period of remarkably strong economic growth.
Just as in the advanced estimate, first quarter growth was accounted for by large increases in consumption, in exports, in business investment and also inventory building. Now, the first quarter was very special. We don't see growth rates at a 5.8 percent annual rate very often. In fact, we haven't seen growth this strong for over a decade.
Now, growth rates do fluctuate from quarter to quarter, so it's important to step back and, I think, to look at the economy over a longer horizon. Over the last four quarters, the economy has grown 4.1 percent. And over yet a longer horizon, the last four years, our economy has grown at a 2.9 percent annual rate. I think it's particularly heartening to note that it's been private, and not public demand that's been the engine of the expansion. The private component of demand has been growing about 3.5 percent annually. And investment spending has been particularly strong -- that's grown at an 8 percent annual rate over the last four years.
And I'd simply emphasize that the reduction in the federal deficit has made that possible. It's fostered this investment by releasing the private savings that are needed to fuel that investment boom. I think that by expanding industrial capacity, this investment is relieving potential bottlenecks to economic growth as we go forward. And, most important, we can look forward to the productivity pay-off of all of that investment for many years and decades to come, as our children enter workplaces that are well equipped to enable them to be most productive on the job.
As I read it, all the available evidence suggests that our economy is now on a sustainable trajectory for continued job creation and solid growth and output. The main symptom of economic overheating, if it were occurring, would be rising inflation, and we simply have not seen that. Today's report showed that the price index for gross domestic purchases increased at only a 2.2 percent annual rate in the first quarter. And that's nearly the slowest increase since the 1960s.
Over the last 12 months, the rate of CPI inflation has declined to 2.5 percent. That's down from the pace in the preceding 12 months, and it's down even more from the pace in the 12 months before that. And in addition to low inflation, unemployment is 4.9 percent, a 24-year low. I will confess to you that I never really expected to again see in my own lifetime an unemployment rate beginning with a 4 as the first digit.
The combined readings on inflation and unemployment, the so-called "Misery Index," is now at the lowest level since the late 1960s. So I conclude by saying that with a falling deficit, low and stable inflation, lean inventories and strong growth, this expansion remains on a very solid footing.
Q Secretary Rubin, where is personal income now? Is it up, down, flat or --
SECRETARY RUBIN: Why doesn't Janet Yellin respond to that? You're not talking about my personal income -- (laughter.)
DR. YELLIN: I don't have a statistic right at hand, but personal income has been growing -- personal income, personal disposable income has been growing strongly over the last year, in line with GDP growth.
Q Do you expect it to continue that way, or do you expect it to level out at some point, or even drop?
DR. YELLIN: I certainly have no reason to believe that it will either level out or drop. I think we'll have continued economic growth -- maybe not up to the pace in the first quarter which was really exceptional, but we should expect solid growth and growth in personal income going forward.
Q Ms. Yellin, do you have any concerns about consumer spending? Because consumer spending was very strong in the first quarter and it's ebbed fairly substantially in the second quarter. And most economists think that's going to bring the growth rate down to 2 percent, which isn't bad, but I'm just wondering if that's the engine of growth --
DR. YELLIN: My expectation is that consumption spending will moderate as we go forward to a somewhat lower paced than we saw in the first quarter. The first quarter, as I mentioned earlier, was really very exceptional. I wouldn't forecast growth, continued growth at anything as high as a 5.8 percent rate, but certainly I expect to see strong consumption growth and investment growth should continue to be a driving force of this expansion.
Q Secretary Rubin, how would you react to the people that are saying now, yeah, there is inflation in the economy, it's in the stock market?
SECRETARY RUBIN: I don't know what that means. I mean, if people are saying the stock market is --
Q -- prices are being driven up excessively by --
SECRETARY RUBIN: Well, actually, not all -- stock prices are up, as you correctly say. Without commenting on levels of the stock market, which I never choose to do, my own view is that over long periods of time markets tend to reflect fundamentals, and fundamentals have been very good. Now, whether the market -- then you have to ask the question, what is the valuation of the market relative to fundamentals and your outlook for fundamentals, and that's a question every investor has to answer for themselves. But I don't think -- at least in my view, I don't see how that relates to the question of price inflation, particularly.
Q -- excess liquidity factor, I mean extra money in the economy, ending up there.
SECRETARY RUBIN: Well, Janet can answer better than I. It may be that the strong stock market, having given people a larger net worth may have had some effect on consumption patterns. That's a possibility. Why don't you come up here, Janet.
DR. YELLIN: Well, again, like Secretary Rubin, I don't like to comment on the appropriateness of stock prices. But I would point out that in this morning's GDP release, corporate profits were up $30 billion in annual rate, corporate profits are now up to 9.1 percent, which is the highest in many, many years as a fraction of GDP, and that may be one reason that participants in the stock market feel good about the prospects.
SECRETARY RUBIN: Could I just make one more comment? I think if your question is, does the stock market level greater concerned about inflation more generally?
Q Well, no. As I understand the comment -- it wasn't my phrase, it was somebody else's -- that if you look at sort of asset inflation or where there may be excess liquidity as the money supply and the economy, you're looking at it in the market.
SECRETARY RUBIN: Well, if that's a question or comment on the market, I'd stick with where I was before without commenting on it.
Q Can I ask you how you're doing on your tax proposals to go to the Hill, if they're about ready? If so, could you share some of that news?
SECRETARY RUBIN: Well, we have a framework, as you know, in the budget agreement. I think it's a very good framework. We have tax cuts that are affordable -- the $85 billion and the $250 billion is the nets. We have an explicit commitment not to have explosions of tax cuts in outer years, which the President feels very, very, very strongly about. We have commitment to the roughly $35 billion of tax cuts in the education area to implement the President's education program.
Beyond that, we have begun meeting with members, and they've been away for this one-week recess, but we've begun meeting with members, we've begun meeting with the staffs, and we're working on the various components of the tax bill.
We have a tax -- we have, of course, a full tax program that we submitted with our budget, and we're now working with the committees to reach -- well, to work toward a tax program that's good for the American people in the context of what I think is a very good framework.
Q Are we going to see any surprises in this proposal?
SECRETARY RUBIN: In which proposal -- in ours? Well, why don't we wait as we go along. The President will be discussing this in part tomorrow in his radio address, so you'll see some comments from him on what he thinks this tax program ought to look like.
Q Can we ask specifically about the education tax credits and the discussions about that?
SECRETARY RUBIN: Your question is, can you ask about it? (Laughter.) Under the First Amendment, I think the answer to that question, Clay, is yes.
Q Republicans, as you know, are looking at options that would devote perhaps a large share of the $35 billion that's been set aside for education in the budget deal for some kind of either education savings accounts or expanding of individual retirement accounts so that they could be used to help people save for education, and that's a principle that the administration itself has embraced from time to time.
I wonder if you could comment a little bit about the level to which that would be acceptable to the President and why education savings accounts or helping people to set money aside for prepaid state tuition programs through approaches that are favored by the Republicans are less desirable than the HOPE Scholarship credit that the President has asked for.
SECRETARY RUBIN: Clay, I think as we have begun our work with the committees and more with the staffs than the members because of the recess, the view that we have taken and have been discussing is the view in the context of the budget agreement, which is a commitment, basically to roughly $35 billion to implement, as I said a moment ago, to implement the President's tax program.
That tax program was based on the notion that families that have people involved in post-secondary school education are very often the most hard-pressed people in our economy and that they should receive the benefit of a tax cut. And that's a principle the President feels very strongly about. It's encompassed in the budget agreement and that's what we're working to accomplish.
I think I would disagree a little bit with your comment on -- there are all sorts of opinions as to what people want to have in this. But I think there is a widespread recognition of a commitment to the President's program, and that's what we're working to implement.
In terms of Kids Save or these other kinds of programs, I think that they have -- I think there are some very interesting ideas there. But I think if we're going to have those programs they need to be outside of that roughly $35 billion component, which is in the budget agreement designated for the President's education program.
Q The White House view is that those types of proposals should not come out of a $35 billion which should be set aside explicitly for the credit and the deduction as advocated by the President?
SECRETARY RUBIN: As stipulated in the budget agreement, that is correct.
Q Would the President veto a package which had --
SECRETARY RUBIN: Clay, I think you're way -- that question lies well into the future. Right now the process is one of working together to get a tax bill that's good for the American people, that the committees, the Congress and the President are happy with.
Q Secretary Rubin, excuse me, are you satisfied with the way exports are behaving and how do you see the availability of getting fast track from Congress in the near future?
SECRETARY RUBIN: Well, exports have been a driving force in the economy over the last four and a half years, as you know. Well, I think many factors are responsible for that. I don't think there's any question that part of it, clearly, has been the greatly improved competitiveness of the American industry; partly have been the lower costs of capital in this country, which I think in large measure -- deficit reduction program in '93 -- and part of it, the market opening that we've accomplished through NAFTA, through GATT, through the many trade agreements that we have.
In terms of fast track, look, I think fast track is very, very important. We live in a global economy and there are going to be all kinds of trade agreements -- sectoral, regional, bilateral. We're either going to be part of this or we're going to be the outside looking in. That's the only question. And fast track is very important to enable our country to be part of this, rather than to be on the outside looking in.
Q Mr. Secretary, in terms of the markets that so much of this good economic news counts on -- Europe seems to be struggling right now in terms of its efforts toward the Euro-dollar. I mean, you've got Germany, you've got the French election -- and certainly that has a major impact on what products are sold from the United States.
SECRETARY RUBIN: Well, are you talking about the question of the EMU now?
SECRETARY RUBIN: Well, you know, there's a very strong feeling in Europe, amongst people who -- the finance ministers and the political leaders that the EMU is good for the long-term economic health and strength of Europe. And obviously we have a very strong stake in having a strong Europe. My impression is that there is a very strong commitment on the part of both political leaders and finance ministers to accomplish this.
Obviously, their challenge is they're going to have to meet, as evidenced in the news the last couple of days, or the last two or three days -- but I think that what is good for Europe is basically good for us. And if it is their view that an EMU is good for them, and therefore, in my view at least, also good for us, I think they will continue on the track to trying to put that in place on time.
Q You expect the Germans to be able to work out their differences?
SECRETARY RUBIN: I don't have a view on that. I really don't.
Q Mr. Secretary, you said that the President is looking for a tax package that's good for American people.
SECRETARY RUBIN: Yes.
Q Is it a litmus test for him when he decides whether or not to sign it that the net distributional effect will be that it benefits the middle class?
SECRETARY RUBIN: Clearly, whatever tax package we have should predominantly benefit the middle class, if that's your question, middle income people.
Q And do you feel some assurance based on the conversation you had and the --
SECRETARY RUBIN: Well, just do the arithmetic for a moment. If you have $135 billion gross tax package in the first five years, if $35 billion is the President's tax package, he had a $47-billion child tax credit proposal; S-2, the original Senate bill had $109 billion as they then scored it. I don't know whether child tax credit is ultimately going to come out, but clearly it's going to be -- I shouldn't say "clearly" -- one would certainly guess it would be something more than $47 billion and going to have to be substantially less than $109 billion. Pick any number you want, pick 60 billion, just to use a number. That means $95 billion of the $135 billion is going to be both -- the President's education program plus the child tax credit and that money -- the benefits of that will go predominately to middle income people.
Q -- capital gains and the estate tax relief is not going to skew it on the other end?
SECRETARY RUBIN: Well, in terms of the federal expenditure on tax cuts, far of the greater part of it is going to go to financing tax cuts that benefit predominantly middle income people.
Q Mr. Secretary, what are the prospects the deficit will come in under the $67 billion projection?
SECRETARY RUBIN: Let me ask Frank Raines if he'd like to comment on that.
MR. RAINES: Well, as you know, we've had a remarkable record over the last four years of over-estimating the deficit by an average of $50 billion a year. If you use that standard, the current estimates in the sub-$70 billion is about our $50 billion margin of error, and so I think that this is a pretty good number.
We will have to be monitoring spending over the next few months to see, but I think the major impact that we're likely to see from this level is likely to be on the spending side, so if spending continues to decline you could see some changes. But we don't expect dramatic change from the number that we're at now.
Q Mr. Raines, do you have a view on why you're getting so much more money than expected, where it's coming from?
MR. RAINES: Yes, I briefly alluded to that. We are getting it from two sources -- one, the impact of the 1993 agreement, the policy changes that were there are producing about half of the additional revenue; the other half is coming from an economy that's performing far better than anyone expected back in 1993, or for that matter, as recently as February. So it's coming from two things: policy changes related to taxes and from the growth in the economy.
Q In a more specific way, is it capital gains that because of what's happened in the stock market even without a cut, is it corporate profits -- I mean, how does it divide up, or do you know that yet?
MR. RAINES: Well, we don't know yet. We've done a little work there and had some indications, but we can't speak authoritatively. But let me just give you a personal view from the little bit I've seen. And that is that not only are corporations have higher earnings than any period since the 1960s and since they're taxed at a higher rate, that produces additional revenue, but also as companies have moved to paying employees from executives down to factory workers in lump sum amounts or through stock in stock options, we're getting more money in on tax day than we generally would where it's been withheld at a lower rate than the rate that will apply, and so we've got large payments in, so it's happening both on the corporate side as well as the individual income side.
But this is what you would expect in the economy where the nation is doing better; there's more income and the tax code is going to produce more revenue for the government.
Q Let me go back to economic numbers again. The Vice President said that the results are in with the results of the economy since the Clinton administration came into office. You said yourself that the GDP number for the first quarter probably won't be repeated throughout the remainder of the year.
Other analysts I've talked to today agree with that position, so with GDP moderating for the rest of the year, more analysts saying that the stock market is due for a correction, both of these things could affect the other economic indicators, so are the results really in, that the state of the economy --
DR. YELLIN: Well, it's always hard to know exactly what the future holds in store, but while I've said that a 5.8 percent real GDP growth rate is unlikely to be sustained over years, the long-term record has been excellent. We have an economy where unemployment has come down remarkably, inflation has remained low and even fallen as I pointed out, investment is very strong; we've had an investment boom and there's every reason to believe that that's going to continue. So as I look forward and I think about what are the factors that can bring an economic expansion to an end, I don't see any of the likely factors. They might be such things as rising inflation, which we don't see; inventory overhangs, which we certainly don't see; any of the normal factors that could lead to an end of an expansion.
MR. RAINES: You might want to mention how this compares to our assumptions in the going forward --
DR. YELLIN: -- I mean, relative to the assumptions that we have made in putting together the budget, we're seeing essentially the economy really out-perform almost everything that we assumed in putting together the budget. To meet our real growth forecast this year, in fact, we would meet it even if there were no further economic growth over the next three quarters.
Q Dr. Yellin, has the GDP growth rate over the last couple of years materially or the long-term sustainable growth rate of the economy materially increased from where it might have been a couple of years ago, and if so, why?
DR. YELLIN: I think we haven't seen yet decisive evidence of a pick-up in the growth rate of potential output. But I at the same time would say that all of the policies that have been put in place starting with the reduction in the deficit, which has led to this enormous investment boom, as well as all of the investments that this administration is making in education, in technology, in children's health, that these are the fundamentals that we need to see an improvement in that long-term growth rate of the economy, and there is definitely going to be a payoff there; we have to be a little bit patient to see it. When you think about things like Head Start, which are very important to that, well, it takes until a Head Start child enters the labor force in order to see the product that you've produced in the numbers we look at. But we're putting in place all of the growth promoting strategies that are necessary to get a pickup in that pace of potential output growth.
Q Might we miss it when it shows up? I mean, how do we know when we have changed the potential output?
DR. YELLIN: I believe we will see it in the statistics that we normally monitor. There are some problems there, but I think we'll see it.
THE PRESS: Thank you.
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