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Office of the Press Secretary

For Immediate Release September 29, 1997

The Briefing Room

11:15 A.M. EDT

MS. YELLEN: As the President mentioned, the Commerce Department is releasing its annual report, has released it this morning on income and poverty statistics for 1996. Today's report suggests that American living standards continue to rise, and that's good news. At this same time, however, the report suggests that there are still challenges facing our economy.

The typical American family's income increased from 1995 to 1996; poverty declined slightly. Blacks experienced relatively large increases in income and earnings, and the black poverty rate is at its lowest level recorded.

These economic gains in 1996 build on the progress begun in 1993. In the two decades prior to 1993, median income was stagnant, and income inequality was increasing. From 1993 to 1996, median income has increased substantially and income inequality has stabilized. But, clearly, there are still some challenges our nation faces. Although the child poverty rate fell this year, it is still too high and we still have too many children without health insurance, so it is clear that we need to continue to focus on improving the economic well-being of children in the United States.

I'd like to now quickly review some of the key details in today's report, first beginning with some facts about income gains. Median family income increased by nearly $500 between 1995 and 1996, after adjusting for inflation. That builds on an even larger increase of $750 between 1994 and 1995.

In 1996, the median family had nearly $2,200 more income in real terms than in 1993. And the gains are particularly striking for blacks, who have experienced increases in median household income of nearly $2,300 since 1993. Per capita income increased by $400 between 1995 and 1996, again after adjusting for inflation. And per capita income grew twice as rapidly for blacks and Hispanics, about five percent for both groups.

Income inequality has been roughly flat since 1993, and that arrests a trend for the previous 20 years in which it had been rising. Blacks' median earnings as a fraction of whites' median earnings for male, full-time, year-round workers rose from 76 percent in 1995 to 80 percent in 1996. That gap in earnings between black and white workers was at its lowest level in the last 30 years.

With respect to the poverty rate, overall poverty rates declined slightly from 1995 to 1996, and the poverty rate in 1996 is now 1.4 percentage points lower than it was in 1993. In 1996, the black poverty rate hit a new low. The black poverty rate has declined by nearly five percentage points since 1993, and it is now at the lowest level since the Census developed its poverty measure using the current population survey.

In 1996, the child poverty rate fell, but it still remains high, and it is notable that 15 percent of all children still don't have health insurance. So let me conclude by saying that our economy continues to move ahead at a healthy pace. Jobs are being created; unemployment is low; growth is solid and inflation is in check. And today's numbers clearly illustrates the benefits that accrue from that healthy economy.

But there are challenges that remain. We need to reduce childhood poverty and make sure that children are insured. We have made a start. Included in this year's balanced budget deal, of course, was $24 billion to cover up to 5 million additional uninsured children. So as we continue to build on gains in family income, certainly more needs to be done to protect our most vulnerable populations.

Let me stop there.

MR. SPERLING: Let me just walk through a couple of these and then we'll be happy to take questions. Obviously, when we came into office we had just had a four-year period where median family income had fallen $1,795. So when you look at the switch from a drop of $1,795, going to a $2,200 or $2,169 increase over the last three years since the economic plan passed, you do have a very significant change.

We've also tried to focus on how what we've done in the balanced budget actually does even more for people's take-home pay or after-tax income for a middle income family with two kids, they would have $1,000 in addition to this, based on the tax cut even if -- child tax credit even if they did not use the education tax cut.

As the President mentioned, the interest rates, which averaged 8.2 percent, 30-year rates, in the previous four years before we took office, and now have averaged in the sixes, and are now at a very low rate -- near 6.4 percent -- is having very significant mortgage savings for many families.

So the overall story is certainly a positive one. We certainly have a long way to go to make up for two decades of stagnation that preceded us, but this is significant progress.

Just want to stress a couple of other points. If there had been one statistic that had probably been the most disturbing in the past had been that Hispanic family income had not been up over the last couple of years. This year, Hispanic income was up $1,371, 5.8 percent, which is a very strong increase, a really dramatic one-year increase, and now ensures that every group has seen the real income go up since the passage of the '93 plan.

The other thing that should be gratifying to us is that if you look at the different quintiles, the bottom 20 percent to the top 20 percent, since 1993 each of those quintiles, each income group has seen their income increase. And I think that the chart that we may have showed at the end, that shows that for the bottom 20 percent, the increase has been the greatest -- 6.8 percent.

So it is the case that all groups have been joining in the prosperity. On this year, the statistics -- for this one year, statistics are somewhat mixed, while over the last three years it is a very positive number. This year, if you look at pre-tax income, the bottom 20 percent was down slightly. If you look at after-tax income, which takes into account the earned income tax credit increases the President had, you see that even the bottom 20 percent had a 3.3 percent after-tax increase. So in terms of their take-home income, all quintiles benefited, and the lowest 20 percent has seen the fastest rate of growth since 1993.

As Janet mentioned, child poverty, which is certainly a major concern, was at 22.7 percent in 1993. It was at 20.8 percent last year. Now it is at 20.5 percent. Again, all of these are very positive movements in the right direction. The levels are still -- should be disturbing to all Americans. It should be disturbing and hurtful to all Americans that one out of five American children live in poverty. And it should be especially disturbing to all of us that African American child poverty is almost double that rate. Again, though, the important thing is that all these are moving in the right direction, but it is also important to recognize that there is still further to go, significantly further to go.

When you look at the poverty rate, they do not include the earned income tax credit. However, the Census shows an alternative definition so that if you wanted to know what was the degree -- what impact would the earned income tax credit have made, or our increases in the earned income tax credit have made, if that was counted in the poverty numbers, table C-4 does show those alternative definitions. And what it shows was that in 1993, the earned income tax credit at that time lifted 2.1 million families -- 2.1 million people out of poverty.

In 1996, with the significant increases in the earned income tax credit, that number is up to nearly 4.3 million. So you've had 2.2 million more taxpayers not in poverty because of the earned income tax credit increases. And I think that for us and for the President, I think it very much affirms the importance of the battles that we have had over the last several years not only in increasing the earned income tax credit, but also in repeated battles to protect those increases. In the battles to protect Medicaid as a guarantee, food stamps as a guarantee, the increase in the minimum wage, and as the President mentioned, the important $24 billion for children's health care are all part of our effort going forward to deal with the high levels that still exist, even with the significant improvements we've had.

One final point I would make is on health care. You would note that people between the age of 25 and 44 actually saw their health insurance rates improve slightly. The reason why overall number of -- people's health insurance rate got worse is at the youngest and oldest levels and with nearly two-thirds of it being children. And so I think that this number confirms very much the appropriate attention that the President and the Congress addressed in the $24 billion children's health care initiative.

And with that, Janet and I would be happy to take any questions.

Q Many liberals argue that economic inequality is continuing to grow. Can you explain your methodology, what you're comparing to say that it's leveled off?

MR. SPERLING: I'll let -- there's a coefficient measure that's used. I think that you see that it will have gone up. Over the last few years it's gone down a little, up a little bit, but kind of in the range that the Census would call flat because of their statistical significance tests.

So as you note, the President addressed that in the portion of his speech where he was saying there was more to do. It is certainly an improvement having inequality flattened as opposed to sharply increasing, but that's not good enough for us and it shouldn't be good enough for other Americans. Our goal should be to see inequality measures improve.

But I think that for most Americans, they would deeply care about the fact that everybody is benefiting, and the chart that shows that at all quintiles, the median family at all quintiles or median household at all quintiles have seen growth since 1993 certainly shows all groups are benefiting and inequality has flattened out. And for those who say that we should do more to improving it, we say we agree.

Q Speaking of family income, what did the President think about the congressional testimony about IRS excesses and abuses against taxpayers? And does he support this bipartisan proposal that's floating around in Congress to take the -- what is it -- shift responsibility for watching over the IRS from the Treasury to a new board of directors?

MR. SPERLING: First of all, nobody who can watch the IRS hearings cannot be extremely disturbed by the accounts that were told. The IRS have said so; clearly, every American looking at that would be appalled by some of the abuses. And Treasury has been active in trying to improve things and streamline and making it easier for people to file. The IRS, as you know, announced very specific measures that they were going to do.

So I don't think there is any disagreement that the examples used were appalling and that we need to take further steps, that there have been reforms in the right direction, but that much more needs to be done at the IRS.

In terms of the management, the Treasury Department has a very sound new management proposal that does rely on an advisory board that includes top experts. But in terms of the proposal that would turn over management of the IRS to a part-time, outside private board, we think that is extremely misguided. It has been criticized by past Republican IRS commissioners, by the Brookings Institution. It is a recipe for conflicts of interest, and the notion that the right way to deal with these problems with the IRS is to decrease accountability and have part-time managers who would be themselves involved in a range of financial transactions would be a serious step backwards.

So I think that the Treasury Department has important reforms in place, a new board, and we'll be supporting that. And we will vigorously oppose the efforts to turn over the IRS management to part-time outside private people who, again, we think would lead to a recipe for conflicts of interest, a less accountability and less trust.

Q But, Gene, just to follow up on that, do you think the examples that were presented at the hearing were representative of the IRS, or do you think that they were isolated?

MR. SPERLING: Well, I think in any big organization, there are gong to be disturbing cases that will happen. I think that -- but for any of us who are in any kind of position of responsibility, that shouldn't be an excuse for trying to take action to reduce those.

On the other hand, people should not forget that the overall majority of people who work at the IRS are honest, hard-working Americans who themselves pay taxes and themselves found the examples there disturbing. IRS agents have been the targets of violent attack over recent time. So I think that, from our point of view, the important thing is that there are serious problems and we should address them. Of course, that should not take away from the fact that there's been many positive reforms and that there are many -- that the overall majority of people who work there are fine civil servants.

Q -- on the size of the reorganization, but there were quotas, for example. That isn't just some guy out there --

MR. SPERLING: I'm sorry if anything I've said would be interpreted that way. I said we believe that there are problems and that we should be addressing them, and if there are -- if there is pressures to target poor people who cannot defend themselves, that is appalling and that should be rooted out of the system. If there -- those type of enforcement quotas almost in any organization we've seen in the past tend to lead to pressure that leads to abuse. But I think that the people in the IRS have recognized that and said that they require serious efforts and are taking those efforts.

I felt the question was, did I feel that represented everything there, and I think that it's responsible for all of us as we're talking about this and reporting on this to not create a situation where we start creating a caricature of many fine people who work in any organization where there can be serious problems. Again, I said that's not an excuse for not taking action, and we have a very strong reform agenda for that.

Q Can the President do anything by --

Q Do you think that reform is enough to take care of the public concerns about what they heard last week? I mean, they fired a couple of people and they're putting in some of these reforms -- that should satisfy people's complaints of the IRS?

MR. SPERLING: I think people will look and see -- they'll look for results. I think the test will be whether there is good reform and positive results that root out these abuses. So I think people are going to look and see whether they see significant effort and significant improvement.

Q What are you expecting out of the -- meeting tomorrow given the healthy state of the U.S. economy? (Laughter.)

MR. SPERLING: Oh, good question. You know we can't say much on that. I'm not even a former FED member, so what would I -- (Laughter.)

Q Can the President do anything about -- by executive order, to do anything about IRS? And why did all this stuff come out in three days on the Hill? I mean, it's obviously been going on for so long.

MR. SPERLING: Well, long before this, the Treasury Department has had an IRS management reform proposal, so this was not the motivation for our reforms. Secretary Rubin and Deputy Secretary Summers have been working on this; they have brought in a new IRS Commissioner who they think is outstanding. So we have been at work -- as you know, they have done significant reforms that have made it easier for people to file. We have a new initiative to reduce error rates in the earned income tax credit that is in the budget right now. So to the extent of whether there should have been additional oversight hearings in the past, that's a question for the members of Congress.

Q Gene, getting back to the Census Income and Poverty report real quick. First of all, what's the typical income -- not income, the typical, I guess, family -- what you're saying -- typical family?

MR. SPERLING: The typical family -- when we said it rose to 490, it was rising for a family for $42,300.

Q No, I just need the typical family, I'm sorry -- the typical family, what does that consist of?

MS. YELLEN: Oh, what is the typical family? It's the median income of families, all families.

Q When I say typical family, father, mother, how many children -- that's what I'm talking about.

MS. YELLEN: These statistics are based on income over all families, and it's the median of all families. It includes all kinds of families.

Q So you don't have a breakdown of the family type?

MS. YELLEN: I mean, there are breakdowns of different kinds of families, the numbers of each type, but this statistic when we say that's gone up, median family income simply takes all families and looks at the median. So it's not for --

Q Okay. And the second part of this question -- with the gains that you're reporting, wouldn't the proposed multi-box check-off for the proposal for the Census disenfranchise minority numbers and, in essence, make another whole race of minorities if that were to happen and this would kind of disenfranchise your numbers?

MR. TOIV: She's talking about Sally Katzen's work, OMB's work.

MR. SPERLING: Oh, I understand. I would let Sally Katzen answer that. I'm sorry. Barry, maybe you can --

MR. TOIV: Yes, we can hook her up.

Q How confident are you that these figures, these gains aren't just going to disappear in the next recession? I mean, we've made up ground, we lost it -- median family income fell nearly $2,000 from '88 to '92. Now, in the last three or four years, we've basically made up those gains that were lost the last time around. Is there any sense of permanence to this, or do you -- are you going to lose -- do you have any sense of what a recession would do to these figures?

MR. SPERLING: Well, I mean, I think the important thing is that the fundamentals in the economy continue to be exceptionally sound -- you know, 4.9 percent unemployment, inflation is low, productive investment has been in double digits. If you look at the blue chip, the 50 people in the blue chip, not a single one of them projects recession next year -- not a single one. Not a single one even projects unemployment over six percent.

So I think that we feel that there have been some important structural improvements in the sense of the deficit. If you look at our deficit projection now as opposed to 1993, you're talking about having a projected less debt of $2 trillion over a period of seven to 10 years. That has a significant impact on the strength of the economy and you can see it in the fact that even though growth is stronger now, unemployment is lower, long-term interest rates are almost two points lower than they were during the previous administration, even with the weak economy.

Q You discussed that none of us should be satisfied with the rates of poverty of children and particularly black children. What is the administration working on to have less than just a gradual effect on these number? Are there any plans to make more dramatic improvement in those areas that you say are still -- we should all consider hurtful?

MR. SPERLING: I think that we certainly -- it had tremendous effect on what we fought for at the end of the budget. If anybody here will remember, the last two items for us that held up the balanced budget agreement was getting the full $24 billion for children and, as you recall, making sure that the child tax credit went to lower-income workers. So when we were fighting for the balanced budget, we certainly had in mind the fact that we were going to make sure that every income group was benefiting from the plan or we wouldn't have gone along with the agreement.

Right now, we are going through, obviously, our next budget process and we will go through what our new initiatives are and I think there were most certainly be efforts in the area of children to do more in this account. But a lot of it is making sure the things we've set work. You have $24 billion for children's health care; we want to make sure that's implemented and works. We have to fight, unfortunately, hard every year just to protect the earned income tax credit increases we have. We have a goal of getting to a million kids in Head Start by the year 2002. We've had over a 40-percent increase in Head Start funding since we've been in office. We spend over $1 billion more on WIC.

So this is something that we fight for every year. When we do our budget every single year, we have things in there for children, even in a deficit reduction context, that we are fighting hard for. And right now we're fighting very hard for America Reads and for our testing initiative, which we also think are very important to the overall benefit of children and their education.

Q But, Gene, are you saying that things which are not included in these statistics -- are they going to make dramatic improvements in the child poverty rate? Things that are in the budget that you said aren't reflected in these numbers -- are they going to have a dramatic effect?

MR. SPERLING: First of all, as you said, it has gone down from 22.7 to 20.5, so there has been improvement. That does not count the earned income tax credit, so that would make it lower. Obviously, some of the important things are keeping the strength of the economy, getting important investments for children, making sure that welfare reform is implemented in a way that it works and gets people into the work force and parents into the work force so they're supporting -- making more money and supporting their income, and all the things that we are doing in terms of fiscal responsibility, open trade, and investment that we think are important, to a strong economy. A strong economy and a tight labor force helps wage raises and helps families move out of poverty and certainly pulls on the marginal worker -- when the unemployment rate is tight, it pulls on the marginal worker into the work force and helps raise those incomes.

And just, finally, I'd say, we just had the second half of the minimum wage increase take place on September 1st, which now, if you look from the two years before, would help a minimum wage worker by $1,800 from the 25 increase to the 515 increase.

MS. YELLEN: I certainly agree with everything that's on Gene's list. I think those are the things that we can have a positive influence on that will work to reverse what has been a very disturbing long-term trend. But to expect miracles overnight in that kind of number I think would probably be unrealistic. But we're certainly doing a lot, and everything that we can to move that number in the right direction.

MR. SPERLING: Obviously, many of these issues will be discussed in the White House Conference on Child Care that will be coming up, and certainly will -- something we'll all be listening to and may very well inform some of the budget decisions that we will make in next year's budget.

Q According to one newspaper, present growth of top 20 is higher than the second and middle and -- That's income differences between the top and upper class has been more big. Are there any problems in the United States?

MS. YELLEN: I'm sorry, I didn't --

Q Sorry. Present growth of top 20 is higher than second, middle and -- class. That's different incomes, differences between top and upper class as being more big?

MS. YELLEN: There is in the numbers that Gene passed out, there is a slight difference, a slightly higher income growth since 1993 for the top. It doesn't -- I don't think it's particularly large. I think what's striking about the graph that Gene pointed out is the enormous gains for the bottom quintile when viewed over that entire period.

Q Thank you.

MR. SPERLING: Thank you.

END 11:43 A.M. EDT