THE WHITE HOUSE
Office of the Press Secretary
PRESS BRIEFING BY SECRETARY OF THE TREASURY LAWRENCE SUMMERS
The James S. Brady Briefing Room
3:48 P.M. EDT
MR. SIEWERT: Here to brief on the latest numbers on the debt and the surplus are Treasury Secretary Larry Summers and Under Secretary Gary Gensler will be here to take any questions.
SECRETARY SUMMERS: I'm joined by Under Secretary Gensler and Assistant Secretary Sachs. Let me make a short statement.
Now that the tax season has ended, I'm pleased to announce today that we now estimate that this quarter will see the largest quarterly reduction in outstanding marketable debt of the federal government in our nation's history.
Figures released today by our Treasury Department indicate that we expect to pay down $185 billion in marketable debt this quarter, and a projected additional $47 billion in the next quarter.
These favorable results are, in large part, attributable to the strong growth in revenues associated with a robust national economy. The bulk of the revenue strength has appeared in tax payments from individuals and corporations in connection with year 2000 tax liability. In addition, early collections data suggests that payments on 1999 liabilities in April were very strong.
Taken together with the developments earlier this year, this quarter's strong results will bring on current estimates our total reduction of publicly held debt for the fiscal year to $216 billion. Revised estimates for the budget surplus will be contained in the administration's mid-session review.
By the end of this fiscal year, it now appears that we will have reduced the debt held by the public by more than $350 billion, or almost 10 percent, in just three years. Let me add that we plan to maintain our announced strategy with respect to debt buy-backs and the issuance of long-term debt. As always, the Treasury Department will announce funding plans for the quarter this Wednesday, as part of its scheduled quarterly refunding announcement.
Today's figures are projections and, therefore, may change. They do, however, reflect a welcome continuation of the virtuous cycle that Americans have recently enjoyed -- reduced public borrowing, lower interest rates, more rapid economic growth, leading to higher budget surpluses, further reductions in debt, further reductions in interest rates, and still more rapid economic growth. That virtuous circle, coming from fiscal discipline, has been an important source of our nation's economic strength and it is something we are pledged to continue.
I'm happy to respond to your questions.
Q What do you think of the Bush plan for Social Security?
SECRETARY SUMMERS: We haven't had a chance to study that proposal. Let me just say that the President's approach to Social Security shows how it is possible to guarantee benefits past the horizon of the baby boom generation, to the 2050s, by using our surpluses and the contribution that comes from debt reduction towards that objective.
We believe that extending the solvency of the Social Security program, assuring promised benefits for beneficiaries, and maintaining the progressive defined benefit structure of the program are crucial values that we want to achieve in the years ahead. And I believe the President's proposals to use the surplus to extend the solvency of Social Security make an important contribution in that direction.
Q So it doesn't need overhauling?
SECRETARY SUMMERS: I believe Social Security certainly needs to be modernized, Helen, and needs to be supported. But the provision of benefits for our seniors is a central, public responsibility and has to be maintained as a central, public responsibility. I think we would make a serious mistake as a nation if we were to jeopardize the prospect we have of using these budget surpluses to assure the future solvency of Social Security.
Q You previously said you may buy back up to $30 billion of debt this year. Have you also upwardly revised that figure in light of a new --
SECRETARY SUMMERS: No, we have not.
Q What definition of debt did you use to come to this figure? Like, does this include savings bonds?
SECRETARY SUMMERS: Publicly-held debt includes savings bonds; marketable debt does not include savings bonds. And that's why the figures that we first gave are the figures that were contained in the announcement, which point towards the quarter-by-quarter reduction in the marketable debt. Making certain adjustments, principally for savings bonds, one gets to the figure for publicly-held debt that I referenced.
Q How much is that, $5 trillion?
SECRETARY SUMMERS: The outstanding debt is approximately $3.5 trillion.
Q Mr. Secretary, based on what you now know, do you think that it is likely that when you put out the new surplus projections, that they will be significantly improved?
SECRETARY SUMMERS: I don't want to get ahead of the mid-session review announcement, but clearly the figures I have announced reflect the strength of receipts during a key part of the fiscal year. And that will obviously influence the overall budget picture.
Q One other question related to the receipts. How much of these filing tax receipts can be ascribed to capital gains taxes, and how much come from other sources?
SECRETARY SUMMERS: I can't give you that breakdown, but what I can tell you is that the bulk of the revenue strength is associated with withholding taxes on individuals, and with corporate tax payments -- which, as you know, are paid continuously through the year based on profits -- and that a secondary factor is the increased April payments associated with 1999 tax liability.
Q Any thoughts on how this will affect the upcoming auction, or the foreign markets in general?
SECRETARY SUMMERS: We'll make the quarterly refunding announcement in line with the usual schedule on Wednesday. I think what we can take satisfaction in is that as a country we are not just making continued progress in reducing our national debt, but are making progress at an accelerated rate. The $185 billion figure for this quarter of the fiscal year compares with the previous record quarter that is far less, of $114 billion. And so we've seen more than a 50 percent improvement over the previous record.
Q With regard to privacy, both the House Banking Chairman and the Senate Banking Committee Chairman oppose the privacy rules you guys want to get passed. What are your expectations that it actually might be able to get done this year?
SECRETARY SUMMERS: We'll have to see what happens. This debate has moved a long way in the last year, and I expect will continue to move. I think there is overwhelming evidence that questions of privacy are of great concern to the American people. And I think most Americans do not see why their loan officer or stock broker should have access to their life insurance physical and all that it contains about them.
And I expect over time the forces -- the force among those who want to protect privacy, while at the same time providing what's very important -- which is for efficient marketing to consumers -- will gain strength. We'll have to see with respect to the legislative prospects. But I think this is an area where there is a very strong and growing feeling on the part of the public.
Q Why not do what they suggested and wait for the banking law to come into effect more fully, and see where the market takes care of it, itself, and where the problems may actually lay?
SECRETARY SUMMERS: We will gain experience with the passage of time, but I think we have sufficient experience to know now that life insurance physicals should not become quasi-public information in the financial community. We have sufficient information now to know that full detailed personal evaluations based on spending plans should not be the subject of commerce without individuals' consent.
No doubt there is the prospect that as information technology develops, that there will be future privacy issues that will be identified and will have to be considered, and which may require public action. But it seems to me that we are aware of current practices and possibilities that the vast majority of Americans would regard as inappropriate without their consent, and that are now permitted. And it's that which leads us to believe that action is appropriate, and we do not see advantage to delay. And we see risks, both in terms of further intrusions into privacy and in terms of maintaining uncertainty to delay in this area.
Q Do you plan to send the bill this week?
SECRETARY SUMMERS: On Wednesday or Thursday.
Q Mr. Secretary, I was just wondering, in light of all the buy-backs and your well known interest in the yield curve and analyzing it with Chairman Greenspan, what do you consider now the most representative market benchmarks out there? Does the 30 year still tell you very much, or do you look to other indicators to tell you where --
SECRETARY SUMMERS: I think that's a judgment -- we obviously look in a quite detailed and comprehensive way at interest rates of many different kinds throughout the economy as we judge the economic situation, many different rates that are reflected on my screen and market summaries that my colleagues prepare each day and certainly similarly at the Fed.
The question of which rates will obtain what status in the markets is really a question that will work out over time, through the decentralized choices of many private sector participants.
Q Mr. Secretary, are you disappointed that you didn't have as prominent a role in the President's "Home Alone" film as, say, Helen Thomas or the Chairman of the Joint Chiefs of Staff? (Laughter.)
SECRETARY SUMMERS: One always has things to aspire to in life.
Q The $185 billion debt reduction for the second quarter I think is up about $30 billion or so from your estimate three months ago for this pay-down. So is it reasonable to expect the surplus then will be revised up by something in that magnitude?
SECRETARY SUMMERS: I don't want to get into forecasting the results of our mid-session review. As I say, there is clear evidence of increased strength and increased collections, which obviously do enter into the budget surplus, but I don't want to go further than that in predicting the mid-session review.
Q As the debt gets smaller and the surpluses assumably get larger, how does the administration hold the line against those who would call for tax cuts, or those who would want to see increased spending?
SECRETARY SUMMERS: Let me just say -- and Jack Lew is going to be speaking at the Urban Institute tomorrow on the budget situation, and I expect to be speaking at the National Press Club on Wednesday about the long-run fiscal choices that we're facing, and we'll have a chance to elaborate in some detail on my views about the risks associated with excess fiscal stimulus at that time -- but let me just say now that I think the first thing that's important for people to recognize is that debt reduction is tantamount to a tax cut.
Debt reduction is tantamount to a tax cut both because it means lower principle and interest payments, because it reduces the burden of debt from the American people; and it is tantamount to a tax cut because by taking pressure off of credit markets, it reduces interest rates, which reduces a source of cost for American families who have loans outstanding.
And so I think it is important to recognize that debt reduction is, in effect, a kind and a particularly valuable for the economy -- kind of tax cut. An individual who finds their credit card bill reduced has seen an increase in their net worth, and is richer than they were before. And so, too, an American public that sees the burden of their debt reduced has received a very direct economic benefit.
And I might say in that regard that I think we can all take satisfaction as Americans in the fact that in this quarter, in this three-month period, 5 percent of our national debt is going to be paid off.
Q If I could follow up. Politically, how does the President make that argument on the Hill to people who are going to argue, now is the time for tax cuts?
SECRETARY SUMMERS: We can -- and the President's budget shows how -- afford strategically targeted tax cuts for crucial issues in people's lives: child care incentives, incentives for work, savings for retirement, taking care of an aging relative. But the President will continue to argue, as he has in the past, that debt reduction is the most effective form of tax cut -- in raising the incomes, now and in the future, of the American people -- and is the most effective policy for maintaining the economic expansion which, for the first time in a generation, has brought rapid increases in standard of living to the American people.
A central concern of Americans is, as it should be, the strength of our national economy. And a strategy based on debt reduction with appropriate accompanying policies, is in all of our judgment, the strategy that maximizes the prospects for continued prosperity, both now and in the future.
Q Is there any revenue forecast, no matter how rosy, that could lead administration officials to support a broad-based tax cut, or are they simply philosophically opposed to that?
SECRETARY SUMMERS: I'm not going to get into hypothetical questions about hypothetical revenue forecasts. As I say, I'll be speaking on Wednesday about the long-run fiscal choices. But I think the central issue is what's best for the American economy. And the more we are the beneficiaries of a remarkable period, the more important it is to take advantage of the good news to pay down debt, and the more dangerous it is to assume that that good news will persist forever, and to make a large and irreversible commitments based on that good news.
Q There have been recent reports that President Clinton has encouraged the formation of a fund among American companies that did business with the Third Reich at that time. I understand probably Stu Eizenstat is taking the lead on this, but is this something that you have been involved with and, if so, are you speaking of two specific companies and, if so, which ones?
SECRETARY SUMMERS: Stu Eizenstat has the lead, and I've been very much supportive of his efforts, but I haven't had any conversations myself, and I'd refer you to him to address that issue.
THE PRESS: Thank you.
END 4:07 P.M. EDT