[Public Papers of the Presidents of the United States: George H. W. Bush (1991, Book I)]
[February 6, 1991]
[Pages 117-127]
[From the U.S. Government Publishing Office www.gpo.gov]



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Remarks and a Question-and-Answer Session at a Meeting of the Economic 
Club in New York, New York
February 6, 1991

    The President. Thank you so very much. And Dick, thank you, sir, for
inviting me to this most prestigious organization. May I pay my respects 
to Secretary Brady who is with us, came up with us from Washington, and 
in my view is doing an outstanding job for our country. And I'm just 
delighted he's here.
    And I want to thank one other, Ray Price, an old friend who I 
understand does a lot of heavy lifting for this organization--a lot of 
the organization. And each one of you, all of you--and I want to thank 
you not for standing up to greet me, for heaven sakes, but for standing 
up for all those fighting against aggression tonight in the Persian 
Gulf, and especially all the coalition forces, but especially the 
fighting men and women of the United States of America.
    Looking around at this dais and at the audience, I wonder who's home 
minding the GNP. [Laughter] This is a classy, star-studded audience, and 
we are very pleased, again, once again, let me say, to be here.
    This year, as Dick said, marks a defining hour--a moment of truth--
for this generation, for this country, and I'd also add for the United 
Nations. We were patient and we were cautious. But when the moment of 
truth came, America and the world did what was moral, what was just, and 
what was right.
    We said the occupation of Kuwait would not stand. And 3 weeks ago 
tonight, at just about this time, we announced that the liberation of 
Kuwait had begun. Three weeks ago tonight, allied forces moved to end a 
conflict that we did not seek and that we did not begin. But ladies and 
gentlemen, it is one that we and our allies will finish. And I can tell 
you firmly that tonight we are on course and we are on schedule. Mission 
by mission, hour by hour, Iraq's capacity to wage war is being 
systematically destroyed by American and coalition forces.
    The road to real peace will be difficult--long and tough, I'd say. 
But we will prevail. And when we do, we will have before us an historic 
opportunity. From the confluence of the Tigris and the Euphrates, where 
civilization began, civilized behavior can begin anew. We can build a 
better world and a better new world order.
    Tonight the world is united by shared commitments, shared interests, 
shared hopes. Our efforts will determine the kind of legacy that we 
bequeath our children, the kind of world they will live in. And so, let 
us rededicate ourselves to the ideals in which our troops so resolutely 
believe. Because in the final analysis, America and her partners will be 
measured not by how we wage war but how we make peace.
    I said in my State of the Union Address that ``we are the nation 
that can shape the future.'' And shaping the future is a job that begins 
at home. And so I want to talk to you tonight about the economy. Long-
term economic growth is central to the quality of life for America's 
families, quality of decency for America's communities, and to the 
quality of leadership America can bring in its special role as the 
world's leading diplomatic, cultural, and economic power.
    Just over 8 years ago, when we came out of a recession, the longest 
peacetime expansion in American history began. Working together, we 
created millions of new jobs, cut both interest rates and inflation in 
half--a triumph driven by the energies of the most dynamic and diverse 
economy on Earth.
    Against this background, the events of 1990 served to remind us that 
even a fundamentally healthy economy faces the risk of temporary 
disturbances, short-term setbacks. For example, when Iraq invaded Kuwait 
in August 1990, it was a shock to the world's conscience. Business and 
consumer confidence fell. We all remember the rise, the dramatic rise, 
in oil prices. Inflation worries rose, and interest rates reflected an 
extra risk premium. Taken together, this produced a very real blow to an 
economy that had already slowed down.
    But make no mistake: The current reces-

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sion does not signal any decline in the fundamental, long-term health or 
basic vitality of our economy. America is a can-do nation. And America 
is home to the largest, most productive economy on Earth. Our 
administration's economic policies are designed to strengthen the 
foundation for a solid recovery and guarantee the highest possible rate 
of sustained economic growth. I described the three pillars of that 
foundation in the State of the Union Address: encouraging economic 
growth, investing in the future, and giving power and opportunity to the 
individual.
    Encouraging economic growth means reducing Federal borrowing by 
cutting the growth of Federal spending. That's why we sent Congress a 
budget proposal that holds spending growth below the rate of inflation--
the lowest increase in spending in 5 years. And that's why the budget 
law was armed with real teeth--pay-as-you-go provisions and enforceable 
spending caps--aimed at cutting the growth of debt by nearly half a 
trillion dollars over 5 years. True, the deficit is high, unacceptably 
high. The S&L costs, the war, the economic decline haven't helped a bit. 
But thanks to the budgetary reforms that began last fall, the deficit 
will be virtually eliminated by 1995.
    To ensure economic growth, this administration will also redouble 
its efforts to weed out counterproductive government regulations. 
[Applause] I thought there might be some enthusiasm for that one because 
I really believe that the market must be allowed to work without 
unnecessary Federal intervention.
    We must also fuel economic growth by providing incentives to promote 
private savings and job-creating investment. Our budget includes tax-
free family savings accounts, penalty-free IRA withdrawals for first-
time home buyers, and a reduced tax for long-term capital gains. And 
that will help bring down the cost of capital, which will help American 
businesses compete at home and abroad.
    We must also renew our investments in America's future. And that 
means investing in the education and safety of our children, investing 
in the infrastructure of our transportation system, investing in reforms 
for the financial services system, investing in high technology and in 
space.
    The budget proposal that we sent up there to Capitol Hill has been 
well-received. I'm not saying we don't have any critics--[laughter]--but 
when you look back over your shoulders, I think it's fair to say this 
one has been well-received. It includes a record $76 billion for 
research and development, one of the most important investments we can 
make in the long-term economic and military strength of our nation. It 
also recognizes that government must help translate the results of basic 
research into the generic technologies that strengthen our industries 
and improve our lives. This isn't an investment in machines; it's an 
investment in people--in the scientists, the engineers, and the 
educators who will produce the advances of the 21st century. And 
together with the Nation's Governors, we've launched a comprehensive 
effort at reform and restructuring, aimed at producing an educational 
renaissance.
    We've still got a long way to go. But we won't sell our kids short. 
As one observer said of the troops manning Patriot missiles in the Gulf: 
``In one day, they wiped out the idea that young Americans are not smart 
enough for the 21st century.''
    Investing in the future--it also means modernizing our financial 
system, which is exactly what our able Secretary of the Treasury 
unveiled yesterday with our banking reform proposals. These reforms will 
continue to protect every insured depositor in America. But they will 
also address the reality of the modern financial marketplace by creating 
a U.S. financial system that protects taxpayers, serves consumers, and 
strengthens our economy. We don't want to be back again in a couple of 
years to do this all over again. That's why halfway solutions won't do. 
We have to do the whole job, and we have to do it now.
    The challenges ahead are great. But by any historical standard, the 
current downturn is expected to be mild and brief. And today in America, 
the bottom line is this: While our economy may be beset by difficulty, 
it should not be beset by doubt.
    A healthy sense of confidence is backed by the facts. Inflation has 
been kept under control. Interest rates are beginning to de-

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cline further. The trade deficit declined for the third year in a row. 
Inventories have been kept down, reducing the need for many production 
cuts to work off excess inventory. Because our major trading partners 
are seeing relatively strong growth and the price of U.S. exports on 
world markets remains low, the pace of U.S. exports will continue to set 
record highs. In spite of many prewar predictions that a Gulf war would 
send oil up to $80 a barrel--and I think we can all remember those 
speculative days--oil prices have fallen substantially since their peaks 
in October, especially since the start of Operation Desert Storm. I 
believe that by standing up to aggression in the Gulf we are 
guaranteeing the future security and the stability of that entire area, 
an area that is so vital to global economic prosperity.
    Later this month, the administration will release our National 
Energy Strategy. The strategy will propose Federal, State, and private 
sector initiatives to increase energy efficiency and conservation. It 
recognizes the need for creating a clean, safe environment. And it also 
recognizes that we must find more domestic oil and gas, and use more 
alternative sources of energy.
    Our strategy is designed to reduce our vulnerability to foreign oil 
supply disruptions. Now, some will argue that reducing our energy 
vulnerability is not enough and that we should embark upon more drastic 
measures designed to achieve total energy independence. That's down the 
road, because the reality is we are a long way from total energy 
independence and we must avoid unwise and extreme measures that would 
seriously hurt American consumers, American jobs, American industries.
    Yes, we've got to begin reducing our energy vulnerability now. Our 
new strategy will do that because it is prudent, it is balanced, and it 
is comprehensive.
    And finally, don't forget another underlying strength of our 
economy: the flexibility of America's free market system. To preserve 
this flexibility, we must keep our markets open and hold government 
restrictions to a minimum. This, frankly, is not easy. I will continue 
to oppose protectionism. I will continue to fight for a level playing 
field, so that international trade is free and fair.
    And that is what we are doing in this Uruguay round of trade 
negotiations--trying to lower the barrier to the free flow of goods and 
services around the world. And that is also what we seek in the 
negotiations that we will launch this year with Mexico and Canada to 
create a North American free trade area. And our Enterprise for the 
Americas Initiatives--and again I salute Secretary Brady for his key 
role in all of this--is intended to extend the benefits of flexibility 
throughout the Western Hemisphere.
    To build a new, peaceful world order we must secure the democratic 
triumphs of the past year. I'm thinking especially of the Revolution of 
'89. The new democracies in Central and Eastern Europe inspire us all 
with their commitment to free societies and free market economies. But 
look, they face daunting obstacles from the Communist past as well as 
severe new problems brought on by lost markets and brought on by higher 
oil prices.
    Our administration is committed to help, and we're committed to 
lead. Despite the burden we are bearing in the Gulf, I've asked Congress 
for $470 million in new assistance for Central and Eastern Europe--a 
substantial increase over last year's request.
    Four decades ago, the Marshall plan helped build a West European 
zone of prosperity and security that greatly benefited the United 
States. Together with our Western European partners, we can now extend 
this success to create a Europe whole and free--an entire continent of 
prosperity and stability that fulfills the vision of that Marshall Plan.
    With their great human potential and commitment to market economic 
reform, Central and Eastern European countries offer real opportunities 
for U.S. trade and investment. And I urge American business to seize 
these opportunities, as many are doing.
    I see Jack Welch over here. Well, G.E. weighed in with $150-million 
joint venture with Tungsram in Hungary. Drew Lewis, who is not here with 
us tonight--but his Union Pacific stepped up to the plate with an 
impressive effort to modernize Poland's railroads. And Bell Atlantic and 
U.S. West

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have begun a $80-million telecommunications venture in Czechoslovakia.
    History is moving decisively in favor of freedom, thanks in large 
part to American ideals and perseverance--the touchstones of the modern 
world which the emerging democracies are now striving for: free markets, 
free speech, free elections. America has lived by these tenets for over 
200 years. And they've given us both our power and our purpose.
    And that is why America and our allies are going to prevail in the 
Gulf. And that is why America and our partners are going to prosper in 
the years to come. You see, I firmly believe that our best days are 
before us. And I can assure you, America, and the world that we will 
continue to fight for principle, we will continue to do the hard work 
for freedom.
    Thank you all very much. I'll be glad to take your questions. And 
may God bless the troops in the Gulf and the United States of America.

Free Trade

    Q.  Mr. President, every year there are 80 million new more mouths 
to feed in this world. You and your Presidency have been sensitive to 
their needs--not only to help feed them, as we can, but more importantly 
to help them economically to be able to feed themselves. Recently you 
sent Carla Hills to the GATT negotiations, and she has done a superb job 
of moving the world's food trade to the top of the agenda at GATT in an 
effort to try to get more market-oriented agricultural trade which would 
help enormously during the next decades in getting food produced where 
it should be produced and into the mouths of hungry people.
    Now, while we try for free trade, just about every country we 
compete with is using managed trade in a democratic, socialist 
mercantile system replete with export subsidies--like Japan and the EEC. 
In view of the fact that they seem to be rejecting our desire that they 
move toward freer trade, do you think GATT will ever be able to solve 
the problems of that kind, or will we have to go to a managed industrial 
policy like most of the Western world in order to compete?
    The President. Well, Dwayne, I don't want to give up on the GATT 
round. I go from optimistic to sometimes pessimistic. I still believe 
that we have an opportunity to get a successful conclusion of the GATT 
round. Whether it will be done by the time our fast-track authority runs 
out, I'm not sure.
    But I believe that we can get the kind of conclusion that will avoid 
making the situation that you've described even worse. Because I don't 
want to see us resort to the kind of government-mandated targeting and 
the government controls that go with the kind of economies that you have 
described. So, I am still hopeful that we can get the successful 
conclusion. The major hang-up on the GATT round involves agriculture. 
And we have had a great deal of difficulty getting some of our friends 
in Europe, and to some degree the Japanese, fully on board in terms of 
agriculture.
    Carla Hills is tough as nails, and she will continue to work hard to 
get this done. But I think we ought to--before we start going down the 
road of managed economies and targeted products like some of the others 
that we compete with do, I think we ought to go all-out to see that we 
can successfully resolve that round.
    At the same time--I was talking to David at dinner and to Rand--we 
are working hard on this new North American free trade zone. And I 
believe that, even if GATT gets hung up for a while, we should keep 
pushing hard for a free trade zone with these three countries--Canada, 
Mexico, and the United States. And that would lead, I think, 
inextricably to a hemisphere that is free and fair.
    So, I want to keep pushing on that. I worry about the problems that 
you throw out there, but I'm not prepared to give up yet on GATT. And we 
are weighing in heavily with the EC, with France, with Germany, and with 
Japan so we can reach a successful conclusion.

Japan and Germany

    Q. Mr. President, wars are often historic moments in the 
relationship among nations. In this war, our two largest economic 
partners, Germany and Japan, appear to have

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become our two most reluctant and troubling political partners. Will 
this adversely affect our economic relationships with these two 
countries or, on a brighter note, do you think that the war will make 
Germany and Japan realize the need for closer political and economic 
cooperation with the United States?
    The President. In the first place, I believe that it is not fully 
realized that Japan has pledged $9 billion to Desert Storm in addition 
to the billion they spent before we were in the war, and Germany has now 
pledged $5 billion. Those are very generous contributions in my view--or 
appropriate contributions, in my view. And I am grateful to Prime 
Minister Toshiki Kaifu and to Chancellor Helmut Kohl for doing this.
    So, the concept of burden-sharing that has concerned the American 
people on the costs of the war is in far better control than I think 
we've made clear. In other words, I feel comfortable where it is. Now, I 
think we have to recognize that Japan and Germany have constraints, 
constitutional constraints placed on them as a result of World War II.
    I think if you look around the world and you take a look at the 
Pacific countries, particularly the countries out there, the ASEAN 
countries, there still is some concern about a totally rearmed Japan. 
And that's a sentiment that is shared by many members of the Japanese 
Diet. So, we should not be saying to them, you've got to do more in the 
way of tanks and planes and military force.
    So, I'm hoping that the world will see that they are pitching in and 
will continue to pitch in as these costs mount, because clearly we are 
doing a lot of work that benefits the people in both those countries. 
They are both dependent on foreign sources for oil--both of them heavily 
dependent on oil from that part of the world. But I think they 
understand that.
    In terms of the long run, it is my hope that because we have taken 
this lead role in the coalition--because we have put together what I 
think history will show is an historic, albeit diverse, coalition--that 
the people of Germany and the people of Japan as well as others around 
the world will see a United States that has a vastly restored 
credibility, and that that will help us, I think, as we talk to them 
about other kinds of problems.
    So, I don't see anything out of this that should diminish our 
interest in continuing strong economic relations with them. Having said 
that, I'd go back to Dwayne's question. Both--particularly Japan has got 
to give us access, and Germany in agriculture as part of the EC has got 
to give us access to markets. But perhaps our credibility will be such 
because we've bitten off this really tough--decided to bite off this 
tough assignment and complete it, that we will have some--I wouldn't say 
leverage on them but persuasiveness that will lead to a more harmonious 
trading relationships.

Soviet Union

    Q. Mr. President, every European nation now has a comprehensive 
trade treaty with the Soviet Union including investment guarantees. 
Western Europe this year will do eight times as much business with the 
Soviet Union as we do, and in manufactured products almost 30 times as 
much.
    Now, looking ahead, and with special reference to the problems you 
see involved in the negative attitudes of Congress, how do you see the 
possibility of U.S. business and industry catching up with the long lead 
that the Europeans have in trade with Russia?
    The President. Well, right now, Dwayne, as you well know, why, we 
have some big problems. And you've seen the EC pull back within the last 
few days on some of their trade breaks for the Soviet Union. You see the 
pressure mounting in our Congress for me to pull back on most-favored-
nation and on the moderate steps that we took to include the Soviets or 
to encourage the Soviets to join some of the international financial 
organizations. And that stems from the fact that there is this visible 
repression against the Baltic States.
    A little history: We have never recognized the incorporation of the 
Baltic States into the Soviet Union. And so we have enormous problems 
when we see force used against those three Republics. And it is a big 
problem. And it concerns me deeply, it 
concerns the American people deeply. And there are certain constraints 
on what we

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can do in moving forward until we get satisfied that this was an anomaly 
and not a new way of life.
    Mr. Gorbachev faces enormous problems inside the Soviet Union. 
You've heard suggestions that--maybe you heard the press conference 
yesterday--the tone of some of the questions: ``Well, you ought to start 
dealing with other leaders.'' He's the President of the Soviet Union. He 
has done wonderful things in terms of reunification of Germany, in terms 
of getting out--of freeing up the Eastern European countries. But he's 
faced with big problems.
    And these are internal affairs of the Soviet Union that I've got to 
be a little careful discussing. But for the United States standpoint, 
we've got to see that no more force will be used against these Baltic 
States and that there can be peaceful resolution to these questions. 
Otherwise, not only will our trade relations be set back, as they are 
now being set back in some European countries, but the rest of our 
overall relationship could undergo a problem. I don't want that. They 
have been steadfast in support of our objectives in the Gulf. And that 
is very, very important. They have lightened up on their sending 
military equipment into this hemisphere, a problem we have always had. 
We're having cooperative work with them in terms of freedom in Angola. 
So, it is to our interest to work closely with the Soviets for many 
things.
    But when we see a repression in the Baltics, it is very hard to have 
business as usual, say nothing about trying to catch up. So I'm very 
hopeful that the representations that were made to us when Mr. 
Bessmertnykh was here will prove to be do-able by President Gorbachev, 
and I am hopeful that we can find a way to move this productive 
relationship forward. But I am not in a position at this juncture to say 
exactly what we can do more positive while we have this big problem of--
the human rights problem and the problem of this military crackdown in 
the Baltics. It puts us in a very difficult position, and I think the 
Soviet leaders know this. I've talked frankly to them about this, and I 
believe they know it. So, let's hope that these things can go forward 
with a peaceful resolution to the question of the Balts.

Banking Reform

    Q. Since it's the Economics Club, we have an economics question. In 
reaction to the S&L crisis and in response to new and tougher guidelines 
from banking regulators, many banks have now become ultraconservative--
some to the point of making no loans at all.
    We all know that sound bank lending is central to stimulating the 
economy and getting us out of the recession. Do you think the regulators 
have gone too far, and do you think the new legislation that we've just 
heard about will stimulate and encourage bank lending in the United 
States?
    The President. To answer the easy part, I think the--less 
controversial part--[laughter]--the new Brady proposal--it will be 
called the Bush proposal if it's successful--[laughter]--should indeed 
renew confidence. Regulatory reform is long overdue. I headed a task 
force when I was Vice President that I thought came up with some very 
sound recommendations for regulatory reform.
    Now Secretary Brady has come up with some recommendations that I 
think are even better. They're more simplified. The Fed manages one set 
of organizations and the new organization under Treasury another. And I 
should think this would renew confidence. I think the interest rates 
coming down should instill confidence. And, yes, I do believe that some 
of the regulators--I'm not sure I can answer it specifically on 
regulations per se--but I think some of the regulators in the past got 
overzealous, and I think that scared some of the banks.
    Just to be fair about it, I think some of the banks made some bad 
loans. [Laughter] And so what I think we're seeing is, in an effort in 
this reform legislation and hopefully as the economy starts coming out, 
a banking system that is fundamentally sound, a banking system that 
deserves the confidence of the American people--and I think these 
reforms will help on that--a banking system that will be able to get 
into other forms of business, as some of our com- petitors abroad do. 
And that, I think, should usher in a whole new era of prosperity 
involving fundamental loaning by these

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banks.

Low-Income Housing

    Q. Mr. President, I was talking with an old friend of yours, Tip 
O'Neill, the other day. [Laughter] And he seems to be now one of your 
greatest friends and advocates and supporters of your--particularly of 
your management of American foreign policy in your Presidency. But he 
asked me to ask you--[laughter]--housing is fundamental to our economy. 
The rate of housing and construction is less now than it was in 1982. 
And he feels it ought to be at least 20 percent higher. What do you have 
in mind, if anything, to correct this situation?
    The President. First, let me profess my love for Tip O'Neill. 
[Laughter] And I really, sincerely mean it, as I think many people--I 
know Barbara knows, and I really feel strongly about it--the guy has not 
been well lately, nor has Millie, his wife, who we love dearly. So, I 
will take this opportunity through C-SPAN or whoever to pay my genuine 
respects and affection to him. He knows this. And I think you've phrased 
it very well--we do have a different approach on how housing should be 
done in this country. I think when Tip goes back, he was talking about 
government-paid-for, government-owned housing.
    Our approach is something else. We believe that the best way to do 
it is to have tenant management, encourage ownership, voucher systems. 
We have a program called HOPE, which relates fundamentally to home 
ownership as opposed to Federal ownership. We have put much more money 
in the budget for this. We happen to believe that enterprise zones going 
into low-income areas would do an awful lot to bring business there and 
thus enable people to buy more homes.
    So, I hope that the program that we've put forward, the HOPE 
program, will have the support of many of Tip's former colleagues. I 
have a feeling it will. We'd made a good step on it last year in the 
Congress and got good support from both sides of the aisle. But if Tip 
is referring to the government-owned-bricks-and-mortar approach, we 
think that that has been tried, and we think in many instances it has 
failed. We think it has built misery into the system. You've seen 
programs in St. Louis that at one time looked good, and then they had to 
tear them down in their entirety.
    So, I would like to encourage support for this new approach which 
empowers the people and I think will lead to far more housing.

New World Order

    Q. Mr. President, you have talked several times about basing the 
future on a new world order. Can you give us a definition of the new 
world order? And if it depends on the collaboration between the Soviet 
Union and the United States, how do events in the Soviet Union affect 
this concept?
    The President. Well, it doesn't depend entirely on it, but it would 
be greatly enhanced by a Soviet Union that goes down the line with its 
commitment to market reform, to private ownership of land, to a free 
economic system, to a system that resists and does not use force to 
assure order amongst the Republics, that goes farther down the road with 
elections and all the openness that I give President Gorbachev credit 
for. And as well as the openness in terms of glasnost and the reforms in 
terms of perestroika--we're going to continue to support those concepts. 
But it was this, it was the farsighted vision of Mr. Gorbachev that 
enabled us to work together in the United Nations.
    Now, my vision of a new world order foresees a United Nations with a 
revitalized peacekeeping function. I think most that follow the United 
Nations see the economic and social side of the United Nations as having 
performed well since it was founded. Most people that follow it find 
that the peacekeeping function for the most part has not been effective. 
And one of the reasons it hasn't is because of the veto in the hands of 
the five permanent members of the Security Council, one of them being 
the Soviet Union.
    When I was Ambassador 20 years ago in the U.N., we hardly ever voted 
with the Soviet Union. Now we're with them on many, many things. So, the 
new world order I think foresees a revitalized peacekeeping function of 
the United Nations. But I cannot and I will not predict a Soviet

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Union going back, turning its back on reform--perestroika--turning its 
back on glasnost--openness. I don't believe, no matter what the ferment 
in the Soviet Union today, that they're ever going to go back to that. 
And I don't think anyone there wants to go back to that.
    And so it would envision, though, a much more cooperation between 
the United States and the Soviet Union. And on matters of the Gulf, in 
international matters, not bilateral, it envisions a greatly enhanced 
peacekeeping function of the United Nations itself.
    One of the reasons we have so much support for this is that we went 
to the United Nations 12 times. There are 12 resolutions that speak to 
the Gulf, and that has mobilized world opinion. And so when we are 
successful in fulfilling all 12 of those resolutions, I think there's 
going to be new credibility for that peacekeeping function, new 
credibility for the United States. But we should have and should strive 
to have Soviet cooperation all along the way. And that's why I'm not 
going to back off on my efforts to try to improve relations with the 
Soviet Union.
    Then we've left China out of the equation, and we ought not to do 
that. They've been through a difficult time. I took on some shots for 
trying to keep relations from China. I was offended as anybody else was 
by the human rights abuses at Tiananmen Square and spoke out on it. But 
I think it is in the interest of the United States to have continued 
relations with China. And I think it is vital to this new world order 
that that veto-holding member of the Security Council go along and be 
with us on these matters of trying to bring peace to troubled corners of 
the world.

Soviet Union

    Q. Mr. President, this is a followup question having to do with 
Soviet trade. The Jackson-Vanik amendment, the Jackson-Vanik bill, has 
been in effect since 1972; really, in effect, says that we cannot have 
normal trade with the Soviet Union until they have permitted free 
emigration from their country.
    There's no question but what the Jackson-Vanik legislation has 
played a role in Gorbachev's decision to free emigration. So in that 
sense, it has been a success. Now the emigration rate from Israel is 
about 600,000 a year, which is 10 times more than we asked for. And most 
of the religious organizations that I know are saying they're very happy 
with it and very well satisfied. And as a matter of fact, Prime Minister 
Shamir of Israel has said publicly that he thinks it's totally 
satisfactory.
    There doesn't seem to be much possibility that they're going to get 
around to codifying that, but it's the custom in Russia for 100 years 
that emigration is an administrative decision. I'm wondering, 
recognizing the problems in Congress, do you think there's a 
possibility, in view of the fact that they have fulfilled that 
commitment, that Congress will authorize business with the Soviet Union 
on the same basis that we trade with other countries somewhere along the 
line here?
    The President. The provisions of--what they have agreed to do is 
pass legislation that will, I think as you put it, codify this. They 
have not been able to do that. I think they've got some internal 
problems inside the Soviet Union on this. Under our law, they have to be 
passed before we can have the kinds of trade agreements and other things 
with them that we would like to have.
    I think you make a very good point on the fact of emigration. The 
Israelis are pleased. The Israelis have started up--taken a step through 
consular relations for diplomatic relations, and they're very happy with 
the exodus, and so am I, as one who have been very much concerned about 
the exodus of Soviet Jews to Israel and to other places.
    I don't want to overstate the problems of the present. I can tell 
you it would be extraordinarily difficult to pass anything of this 
nature in terms of waivers given the current situation inside the Soviet 
Union. It is very difficult to do. You see all kinds of legislation 
getting talked about and some perhaps already being offered that would 
indeed move the relationship backwards, not towards understanding of 
this nature. So it is my fervent hope that problems that I've outlined 
earlier in the Baltics can be

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resolved peacefully, and demonstrably so, so that we can get on with 
finding ways to improve our trade relations.

Defense Spending

    Q. Mr. President, with the end of the cold war, many Americans 
believe we might be able to reduce our spending on national defense, 
creating a so-called peace dividend. Has the Gulf war and the problems 
inside the Soviet Union delayed or eliminated the chance for a peace 
dividend, or do you see it long-term?
    The President. No, we've actually--well, let me get to dividend in a 
minute. But in terms of--I always had a different concept of dividend--
[laughter]--you have a profit, you pay a dividend. If you don't, why, 
you don't. We're operating at 300-and-some-jillion-dollar deficit--
[laughter]--so we're not in exactly a dividend-paying mode, but the fact 
of the matter is that we have reduced defense spending.
    It is substantially reduced with almost every other account going up 
in this budget. When you take a look at what we put out there yesterday, 
you'll see that defense spending is down. I think it's robust enough to 
have the kind of rapid deployment force that's going to be required in 
the future.
    You heard Cheney yesterday doing a superb job testifying about why 
we're having to lay up some of the battleships that are proving 
themselves today off Kuwait. He said he had to make the tough choices, 
and we've done that. But we are not going to do it to the degree some of 
the antidefense Members of Congress want, where they want to go in and 
slash 30 percent out of the muscle of defense.
    And I think if there ever is a reason not to do it, you just have to 
look halfway across the world today. So we're not going to stand for 
that. And I think that we are going to try to find ways to further 
reduce defense spending, but not at the risk of weakening our 
fundamental defense. And I think that some of the criticized high-
technology weapons are paying off.
    I am annoyed at the propaganda coming out of Baghdad about targeting 
civilians. This has been fantastically accurate. And that's because a 
lot of money went into high-technology weaponry--these laser-guided 
bombs and a lot of other things, Stealth technology--many of these 
technologies ridiculed in the past now coming into their own and saving 
lives, not only American lives, coalition lives but the lives of Iraqis.
    And so, we are going to have to have a high-tech, a highly mobile 
force. And it ain't going to come cheap. It's not going to come cheap, 
not going to be achieved by slashing the muscle of our defense. And I 
will keep it strong. And I think yesterday's budget, which is at a 
reduced number from what we had before, is going to provide us that kind 
of force. But anything less I won't stand for.

Block Grants

    Q. Mr. President, our Governor Edgar was grinning from ear to ear, 
very, very pleased about the Governors' meeting the other day where it 
was explained to him your new plan to transfer a good many functions to 
the States. I wonder if you would mind telling us the philosophy behind 
this new emphasis on State activity.
    The President. Actually, one, it's a concept that could have the 
label ``block grant.'' The Governors heretofore have been suspicious of 
block grants because they never got the funds with it. They got the 
mandates; they had strings attached. And this is a block grant where we 
have proposed by name the elimination of programs. And we then say the 
money saved--$15 billion is the figure we're using--will be distributed 
to the States to use as they see fit.
    And the philosophy behind it is very, very true. I have been 
President only 2 years. But I believe that the best problem-solving is 
done as close to the people as possible, at the State level or at the 
local level. And so this concept is to give these Governors the 
opportunity in these various fields, and the money with it, to solve the 
problems. It will cause innovation, it will cause a lot of 
experimentation, but it will be done without some centralized mandate 
from a committee chairman or committee action in Washington.
    So, the concept isn't spectacularly new,

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but it has never been tried where you actually get it fully funded and 
give the Governors that flexibility. Now, some of the mayors are upset 
because they say, ``Hey, don't give it to Governors, give it to us.'' We 
can't give it to everybody, so we'll give it to the Governors and let 
them use their legislatures to distribute it.
    But it was well-received by liberals, conservatives, Republicans, 
and Democrats at the gubernatorial level. Now our fight is to take some 
of these entrenched committee interests in the Congress and have them 
look at it with the same farsighted view. [Laughter]

Economic Stimulants

    Q. Mr. President, the war in the Gulf has shown your decisive 
leadership. Every American is proud of American technology and American 
servicemen and the success we're having there. But at home, one of the 
unfortunate things that's happened is businesses have postponed 
expenditures, consumers are postponing spending, travel is down--a lot 
of things have been put on hold. What would you tell us all, and what 
can you and business do to regain this momentum?
    The President. Well, I think I tried to address some of that in the 
remarks I made earlier, because I believe we should have more 
confidence. We are in a recession; there's no question about that. But I 
think it will be shallow. I believe that the financial reforms we're 
talking will help. I believe the lowering of interest rates will help. I 
believe that the budget that, in spite of the magnitude of the deficit, 
with the restrained growth in the spending that is held to less than the 
rate of inflation, would help marginally--because the deficit works the 
other way.
    Some people are talking about stimulating--the old Keynesian 
approach of pump-priming, stimulating the economy. We've got a major--if 
government spending is what stimulus is, we've got the stimulus that 
comes from an unacceptable deficit. So, I will resist all these programs 
that are going to be offered up of make-work job programs or special 
housing programs or special added spending programs. They will not bring 
this economy out. I believe it's going to be shallow for the reasons I 
gave--inventory and interest rates and a lot of other reasons.
    So, I think what's needed is a boost of confidence. You mentioned 
travel--I understand that some people are afraid to travel because of 
security. I remember the charge going up, well, maybe we shouldn't have 
the Super Bowl because of security. We've got good security, and we've 
got good intelligence. And I think the American people should have 
confidence in travel and tourism. And I think people should come here 
with a renewed sense of confidence and travel.
    So, some of it is psychological; some of it is something the 
government can do something about, and I hope some of the programs that 
I've mentioned here tonight will do that. But I'm certainly not 
discouraged about the economic future in this country or our ability to 
get back on the growth path for the reasons I said in the speech itself.
    Mr. Voell. We'll have two more very short questions. Dwayne, have 
you got a short one?

Postal Rate Increase

    Q. All right, I was just told that we're at the end. But I have a 
short one. [Laughter] But, Mr. President, it's my duty to deliver you 
just a bit of bad news, I'm sorry to say. It's about that 29-cent stamp. 
[Laughter] I hear that the ladies would like to have it made 30 cents 
because the problem that the post office has with the pennies is 
enormous, and there's a rumor going around the Middle West that maybe 
this was a conspiracy of the copper people to increase the consumption 
of copper. [Laughter]
    The President. No comment. Next question. Thank you very much. I'll 
look into it. [Laughter] It's better than saying, ``I'll study that 
one.'' [Laughter]

Economic Forecast

    Q. Mr. President, the final question. The outlook right now is not 
as great as it should be for the economy. What's your prediction for the 
rest of your term--this term and your next term?
    The President. No, I predict that in a

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couple of quarters we'll come out of this and that we'll have a robust 
economy. It will grow--the estimates that we used in our budget figures 
are somewhere in the middle of the blue chip estimates. They're not 
overly optimistic. They were less than the CBO, the Congressional Budget 
Office; normally, administration's are on the rosier side than the CBO. 
So I think we've got a real opportunity before half the year's over to 
start seeing a recovery and see us come back on a growth pattern and see 
us resume our economic vigor. And then I think that will begin to be 
felt as these interest rates, hopefully, come down in the housing 
market.
    I think the transportation program that I didn't talk about tonight 
will have a stimulatory effect in the construction industry. I think the 
fact that oil prices are lower than where many of the pessimistic 
predictors would have them is another reason that this will not be as 
severe a recession--or put it this way--will be a shorter recession if 
prices stay in this range than have been predicted.
    So, basically, I'm optimistic. I think we've had too much pessimism. 
I can understand why, and if I were an auto worker laid off I guess I'd 
have every reason in the world to have doubts. But I think the 
fundamentals are still there. I do not think that this war is going to 
add an unacceptable burden to it. When you heard the testimony as to the 
cost that will inure to us after the others come in with their support--
I believe that that's another reason that the economy will recover fast. 
I can tell you I don't believe--I will say this without any fear of 
contradiction whatsoever: This is not and will not be another Vietnam. 
This is not going to be a long, drawn-out, difficult situation with an 
ill-defined ending. I'm absolutely confident of that.
    And I can't tell you what and when and how, but I can tell you I 
have never been more certain of anything in my life. We're going to win 
it, and we're going--and I think to some degree--and this is your 
business, not mine, but the market seems to be saying there is reason to 
be far less pessimistic--or turn it around--more optimistic than many 
had felt in the late fall or even when we first got in there and the oil 
prices were spiking up around $38-$40 a barrel.
    So, the fundamentals are good. Some industries are hurting. Some 
regions in the country clearly are doing better than others. But 
basically we're a strong nation. We're a productive nation. We can out-
trade anybody if we can get the playing field level, and so that means 
renewed efforts on GATT or on our free trade areas.
    And I'll end up this way: I'm very optimistic about the United 
States of America. Thank you all very, very much.

                    Note: The President spoke at 8 p.m. in the Grand 
                        Ballroom at the New York Hilton Hotel. In his 
                        remarks, he referred to Richard A. Voell and Ray 
                        Price, chairman and president of the Economic 
                        Club of New York; Secretary of the Treasury 
                        Nicholas F. Brady; Dwayne O. Andreas, chairman 
                        and chief executive officer of Archer Daniels 
                        Midland Corp.; Carla A. Hills, U.S. Trade 
                        Representative; David Rockefeller, chairman of 
                        the Rockefeller Group; Rand V. Araskog, chairman 
                        and chief executive officer of ITT Corp.; Prime 
                        Minister Toshiki Kaifu of Japan; Chancellor 
                        Helmut Kohl of Germany; President Mikhail 
                        Gorbachev and Foreign Minister Aleksandr 
                        Bessmertnykh of the Soviet Union; Thomas P. 
                        O'Neill, Jr., former Speaker of the House of 
                        Representatives, and his wife, Millie; Prime 
                        Minister Yitzhak Shamir of Israel; Secretary of 
                        Defense Dick Cheney; and Gov. Jim Edgar of 
                        Illinois.