THE WHITE HOUSE
Office of the Press Secretary (Clarksdale, Mississippi) ________________________________________________________________________ For Immediate Release July 7, 1999
INTERVIEW OF THE PRESIDENT BY RON INSANA OF CNBC Waterfield Cabinet Company Clarksdale, Mississippi July 6, 1999
12:16 P.M. CDT
Q Mr. President, this trip and your New Markets Initiative in some ways have already been compared to Lyndon Johnson's War on Poverty, Bobby Kennedy's swing through Appalachia. How will this program work where some of the other government programs on poverty have failed in the past?
THE PRESIDENT: Well, first of all, I think it's important to recognize that this is different, because we don't say the government can solve all these problems, but we do say the government can no longer ignore them -- and, in fact, we've been working on them for six and a half years, ever since I took office.
This is a classic example, this approach to new markets, of the New Democratic or Third Way philosophy that I articulated back in 1991 and 1992. That is, government's role is to create the conditions for success, give people the tools they need to succeed, and then, in effect, empower people to make the most of it.
But we recognize if you look at -- go back to the War on Poverty -- it did a lot of good in terms of giving children preschool and feeding hungry children and giving them access to health care. But in the end, if you want these communities to be self-sustaining, they have to get private-sector capital with private-sector jobs, and they have to prove that they can compete for it, they can win it, and that people can actually make a profit investing in these places and that it will be profitable to put people to work.
And because I believe that very passionately, especially now -- you know, there was all this big discussion in business circles and the people that watch your program, there was all this big discussion over the last few weeks about would the Fed raise interest rates or not. And it was like the fifth reincarnation of how much can we grow and how low can unemployment get before we have this big explosion of inflation which then we'll have to clamp down, which will then kill the recovery, so everybody's been trying to avoid it.
Well, I think about that all the time. And it seems to me that the way to keep America's economy growing without inflation is to sell more products overseas, and find more consumers and workers at the same time here at home. And there are only -- there are a couple of options. You can bring more people from welfare or from the ranks of the disabled into the work force, or you can go to these areas where you invest in them and you get more consumers and more workers at the same time. And I think this is terribly important.
Q What specific items will be included in the legislation to advance those goals? What kind of tax credits?
THE PRESIDENT: Well, the big ideas in the legislation are a tax credit of up to 25 percent for people who invest in vehicles that will be creating businesses or expanding businesses in high unemployment, underdeveloped areas. In addition to that, once you get into those vehicles, then you would be eligible to borrow $2 for every $1 invested, and have the money borrowed be subject to a government loan guarantee which would mean the interest rates would be much, much lower. So by those two things, you lower the relative risk of investing in these new markets.
But we've seen -- you heard the person from Bank of America say today, we heard the gentleman from a local bank in Kentucky yesterday, or the people from Aetna or these other companies say these are good investments, we can make money here. So if you lower the relative risk of getting in in the first place and, in effect, try to provide for the whole nation what now you can find in the empowerment zones that the Vice President's worked so hard to manage over the last six years, I think we can get a lot more growth here.
Q Now, House Speaker Dennis Hastert sent you a letter over the weekend attacking poverty from a slightly different approach with respect to more tax cut-type incentives. Do you have common ground with him where you can fashion some --
THE PRESIDENT: Well, I want to have a chance to evaluate it. It would seem to me, though, that we would have -- this is something that Democrats and Republicans all agree on. I mean, our approach is a completely private sector approach. We do have, in addition to the big tax cuts I talked about, we have a venture capital approach where we want to try to do a little more to get real venture capital out there. You heard the lady testify today that she went from being an employer to a business owner and she had no equity, so she had to have venture capital to start. So we do that. And we have a little bit of technical assistance to help communities and businesses that don't have any way of getting the information they need.
But apart from that, I think we ought to be able to find common ground. I can't imagine that Republicans wouldn't want to do this. This has got to be good for Republican businesspeople to have a better chance to invest in areas where you can have more growth without inflation.
Q Now, last week, some congressional Democrats, led by Barney Frank, came out and suggested that if the Fed raised interest rates, something you mentioned a minute ago, that it would hurt the poor, people you've been visiting here over the last couple of days. Is that what the Fed's doing, or is the Fed extending a non-inflationary economic environment by tapping on the brakes a little bit?
THE PRESIDENT: Well, I think that, plainly, that's what the Fed is trying to do. And I've made a real practice of trying not to comment on interest rate changes and trying to let Chairman Greenspan and the Fed do their work and I would do mine.
But, again, I say, look -- look at what we've done here. I think if you just look at Chairman Greenspan's own testimony, we've all been somewhat surprised that we could grow as much as we have, have unemployment as low as we've had and have virtually no inflation. And it's a tribute to the productivity of the American businesspeople and the explosion of technology, and it's rifling through every sector of the economy and giving us more high productivity-driven growth without inflation than anyone dreamed.
The trick is if -- to go back to what Barney Frank said -- what he wants is to keep the economy going, to keep the growth going until middle- and lower-middle-income working people can get their wages up to overcome the stagnation of 20 previous years, and until we can get more people caught up in the areas where the recovery hasn't occurred. That's why, it seems to me, the most important thing to do is to have initiatives like this which give you concrete examples of how you can have growth without inflation.
Q Now, Republicans would argue that one other way to extend the recovery here would be to cut taxes even further, and you hinted last week in USA Today that if you got what you wanted on Medicare reform and prescription drug benefit subsidies, that you might go along with an expanded list of tax breaks. Can you elaborate on that? What would you accept in exchange for a Medicare deal?
THE PRESIDENT: Let me make it clear. What I said was that, obviously, we would be working together on all the appropriations issues and expenditure of money, if we did first things first. But I think that it's quite important that the Republicans say how they're going to pay for all these things. You know, they say they want even larger increases for defense than I do, and I've proposed substantial increases. Then they want huge increases in tax cuts. Do they propose to keep us in debt? Do they propose to basically eviscerate the education and health and environment budgets of the country? What is their proposal?
Of course, we will negotiate, but we ought to think about first things first. Let me just say this: I think we proved in '93, when we didn't have a single Republican vote and the Vice President had to break the tie in the Senate, that we were right and they were not right about what would be the best economics for their constituents. That is, when we passed that '93 economic plan, there is no question that it sparked a huge drop in interest rates, a huge increase in investment and an explosion in economic activity. And it had a lot more positive impact on the markets and on business investment and on job creation than a tax cut which perpetuated a deficit would have had.
Now, in 1997, we reached agreement on a bipartisan balanced budget deal which kept that philosophy going. We continued to invest in education and technology and research. We provided tax cuts to families and for college education. We did it in a balanced way, and what's happened? Now, we've got this surplus.
I will say this: The most important thing we can do for the long-term health of the economy is to say to the whole world, we're going to make America debt-free in 15 years. If we did that, what does that mean? Much lower interest rates, higher business investment, lower credit card, lower consumer, low home ownership rates, higher wages.
So will we negotiate? Will there be a negotiation? Of course, there will be. But let's do the first things first. Let's keep American economically strong. We've got six and a half years of evidence now about what works. Why in the world would we take a U-turn and run this deficit back up or just pull out of the education business?
Q Let me ask the question more simply than the way maybe an individual might, which is, if I overpay my taxes every year, I get a refund; if I overpay for 15 years, why can't I get a really big refund and get that money back in the way of a tax cut?
THE PRESIDENT: Well, how do you define "overpay"?
Q Well, if you're running a surplus. I mean, government has more money than it can use.
THE PRESIDENT: That's right. But government has more money than they can use for 15 years after quadrupling the debt in the 12 years of the Reagan-Bush years. I mean, we tried it their way. We tried it their way. We tried all the supply-side economics. Every year -- every year, they came in and said, oh, we're going to get rid of the deficit this year. And every year, it got bigger and bigger and bigger. You go back and look at what they said, my predecessors said was going to happen to the budget and what, in fact, had.
You know, sooner or later, results should account for something. Sooner or later, we should stop having this debate as if there is no history, no evidence, no facts, no results. Now, we've produced an economy with 19 million new jobs, the longest peacetime expansion in history, and if we get out of debt, the average person will get much more than they would from an extra tax cut.
Second, I am for a sizeable tax cut. I have proposed a sizeable tax cut. I also supported the previous tax cuts, the $500 child credit, the college credit, which is $1,500 a year. I supported all these tax cuts. But first things first. If we take this country out of debt for the first time since 1835, then average people are going to have more money in their pockets than if we keep the country in debt and give them a tax cut now because we've got an election in a year and a half.
Q Can I stick in one final question? As we speak right now, the stock market again is at a new all-time high -- the Dow, the Nasdaq, everything's going very well on Wall Street. Do you worry at all about a bubble in the stock market or the economy today?
THE PRESIDENT: Well, I think every person who's thoughtful, who knows that nothing lasts forever, wonders how this will all play out. I think every thoughtful person does. But I think what we should do is to make the most of this and to make no move which would turn it into a bubble prematurely.
But it seems to me again, we can have a tax cut, but if I announced -- just suppose -- think about this -- suppose you had an announcement -- you don't expect this to occur -- where Speaker Hastert and Senator Lott joined Mr. Gephardt and Senator Daschle and me and we said, look, here's our program: here's what we're going to do to save Medicare, here's what we're going to do to save Social Security. We're going to make the country debt-free in 15 years; we've got some more money for education and we've got to take care of defense, and here's a sizeable tax cut. This is our program.
I believe that would lengthen the period of this recovery. I think it would minimize the chances of a bubble. If, by contrast, we went out and said, hot dog, right here before the next election, we're going to give you a $1-trillion tax cut, unfortunately, our deficit will be bigger and we won't get ourselves out of debt. And, unfortunately, we'll have to cut education spending and research. But we just think this is more important, and I know it didn't work the last time, but somehow we think it will work this time -- even though it didn't work. We tried it for 12 years and it never worked. Somehow, we think, poof, magically it will work this time -- I believe that my course of action is better for the American economy than that latter course of action.
Q Mr. President, we appreciate your time. Thanks for joining us.
THE PRESIDENT: Thank you.
END 12:30 P.M. CDT