[Public Papers of the Presidents of the United States: William J. Clinton (1998, Book I)]
[March 2, 1998]
[Pages 308-313]
[From the U.S. Government Publishing Office www.gpo.gov]

Remarks to the Mortgage Bankers Association of America
March 2, 1998

    Thank you all so much. Thank you, Marc, and 
Paul Reid and Mike Ferrell and all the officers and staff of the Mortgage 
Bankers Association; to our national Treasurer and members of the National Association of State 
Treasurers. I'm delighted to be here, along with Frank Raines, my OMB Director, who used to spend some time with 
some of you, and Gene Sperling and others on 
our staff.
    I have looked forward to this day for a long time, just to be able 
to thank you for the work that all of you have done in giving America 
the highest homeownership rate in the history of the Republic. It means 
a lot to a lot of people out there in the country, and I appreciate your 
role in this historic achievement. And I thank you very much.
    In my State of the Union Address, I called upon all our people to 
strengthen our country for the new century ahead. Historically, that has 
always meant deepening the meaning of America's freedom, strengthening 
our Union, and drawing our people closer together across all the lines 
that divide us, and clearly, always widening the circle of opportunity.
    Now, we are seeing a remarkable increase in the circle of 
opportunity. In addition to reaching the highest level of homeownership 
in history, millions of Americans have been able to refinance their 
mortgages, which has amounted to billions and billions of dollars in tax 
cuts for families, putting more money in their pockets, freeing up more 
for investment and savings. Access to capital has spread to minorities 
who for years have been locked out of the economy.

[[Page 309]]

And I appreciate what Marc said about going to New York. We do see 
increasing homeownership rates for minorities now, and I hope it will 
continue. Our capital markets are the strongest in the world, and 
clearly, they have played a major role in helping us to do well in this 
new economy.
    Today what I'd like to do is talk to you just for a few minutes 
about why we have to follow a consistent strategy of fiscal discipline 
and investment in our future and our people. The strategy that has 
worked for the last 5 years we must continue into the next century. I 
also want to talk about how all the discussions surrounding the tax 
system and the IRS fit into this: what is the right way to cut taxes; 
what is the right way to reform the IRS; what is the wrong way to do it? 
I especially want to comment on what I believe strongly is a misguided 
scheme recently introduced in the Congress that I believe could take us 
back to policies which have failed us in the past.
    These are good times for our country, with a new economy powered by 
technology, nurtured by the ingenuity of the human mind, enlarged by our 
newfound fiscal discipline at home, and increasing trade among all 
nations. Over the past 5 years our new economy has produced now almost 
15 million new jobs, with the highest percentage of those jobs in the 
private sector of any recovery in memory. Unemployment is the lowest in 
24 years; business investment is growing at 11 percent, the fastest pace 
in 30 years; since 1993, family incomes are up about $2,200.
    Today we have fresh new evidence that the economy continues to grow. 
Personal income rose six-tenths of one percent last month alone. Our 
social problems, from crime to welfare, are bending to our efforts. The 
welfare rolls are the lowest in 27 years; the crime rate the lowest in 
24 years. We now have, literally, a system in which we have opened the 
doors of college education to all people in this country who are willing 
to work for it, with tax credits, with IRA's, with better student loans 
and tax deductibility for the interest on those loans, more Pell grants, 
more work-study positions. We are adding 5 million children from working 
families to the ranks of those with health insurance. Combined with our 
record levels of homeownership, the American dream is clearly within 
reach for more and more American families.
    This did not happen by accident, but no one alone can claim credit 
for it. It was the product of a remarkable concerted endeavor by tens of 
millions of Americans. But it also was supported by the economic 
policies that we have followed with discipline and consistency over the 
last 5 years. We moved beyond the sterile debate between those who said 
Government was the problem and those who said it was the solution to a 
new way, a new Government for the information age that gives our people 
the tools they need to make the most of their own lives, that is 
unashamedly a catalyst for new ideas where the old ones don't work, that 
is a good partner with the private sector.
    We have the smallest Government here in Washington since President 
Kennedy was in office. But it is still more progressive, more active. It 
is smaller, but the Nation is stronger. We put in place a three-part 
economic strategy, rejecting these false choices from the past: first, 
restoring fiscal discipline and conquering the deficits that hobbled 
growth, spiked interest rates, and robbed our economy of capital for 
investment throughout the 1980's; second, investments in our people, in 
science and technology, in education and job training, and health care, 
so that everyone has a chance to reap the rewards of growing prosperity; 
and third, we responded to the global nature of the new economy by 
opening new markets to our goods and services.
    The strategy is clearly working. There is renewed confidence in the 
American economy. Its stability, its strength, its steady growth are the 
envy of the world. More than ever we are also investing in the future. A 
record two-thirds of Americans almost--as Marc said, almost two-thirds--
now live in their own homes, and we must finish the job. I agree with 
you that the most important thing we can do in this session of Congress 
is to support Secretary Cuomo's plan to 
raise the FHA loan limit. We can pass it, and we must.
    Now, last month I submitted to Congress the first balanced budget in 
a generation. If we are fortunate and if we can work together with our 
allies around the world to minimize the impact of the recent 
difficulties in Asia on our own economy, Mr. Raines says that we'll probably have a balanced budget this year. 
Instead of deficits, America can now look forward to about a trillion 
dollars in surpluses over the next 10 years.

[[Page 310]]

    Now, that is a tempting target in an election year in Washington. 
But, first of all, let me remind you they have not materialized yet. And 
we shouldn't count those chickens before they hatch. Secondly, we should 
remember what we did to the long-term strength of America when we 
quadrupled the debt of this country in the 12 years from 1981 through 
1992. And we should not repeat that error again. Finally, we shouldn't 
use the surplus for any new tax cuts or new spending programs until we 
have confronted the challenge of saving Social Security first. I think 
that is very important.
    All of you are generally familiar with the problem. It's projected 
that the Social Security Trust Fund will not cover payments starting in 
the year 2029. That's the year when all the baby boomers will finally be 
in the Social Security system, and at presently projected birth and 
immigration rates and labor force participation rates, it means that 
there will be only about two people working for every person drawing 
Social Security.
    Now, those things could all change to some extent, but no matter 
what, it is clear that the generation of the baby boomers entering the 
Social Security system will be quite larger than the generation just 
following it. Indeed, the generation now in public schools, starting 
last year, is the first generation in American history larger than the 
baby boom generation. I do not know a single person my age or younger--
because I'm the oldest of the baby boomers--I hate that, but it's true--
[laughter]--I don't know a single person who doesn't think about the 
problems we could create for our children if we don't make the changes 
now in the Social Security system we need to. No one wants to burden our 
children and our ability--their ability to raise our grandchildren.
    On the other hand, it is important to remember that it's just since 
1985 that senior citizens have been less poor than the rest of us. That 
is an astonishing achievement for a country that 60 years ago had 70 
percent of its seniors living below the poverty line, many of them in 
abject poverty. Now, if we make small changes today with discipline, we 
can deal with this issue. And I also want to point out something all of 
you know, which is that hardly anybody--even though Social Security 
helps people keep body and soul together--hardly anybody in America can 
retire and maintain his or her standard of living on Social Security 
alone. So we must also do more to help Americans save for their own 
retirement. We've done a lot of work with the 401(k) plans and other 
things; we need to do more.
    So we're going to work in this next year very hard, in what I hope 
will be a completely nonpartisan way, to acquaint the American people 
with the details of the challenge before us, to explore all the 
alternatives, and then to come up with a solution, which I hope the 
Congress will pass early next year to deal with this. You say, well if 
you pass it in 1999, 2029, that's 30 years away. First of all, those of 
you in the audience who are my age or older know that 30 years can pass 
in the flash of an eye. But secondly, I would remind everyone that the 
longer we wait to deal with this, the more severe actions will be 
required to deal with it. If we move now, with modest but disciplined 
changes, we can do a great thing to ensure the financial strength of 
America in the 21st century and to preserve the compact that binds us 
together across the generations. I cannot emphasize how strongly I feel 
about this.
    Now, there are other economic challenges we face as well, and I'll 
just mention two very briefly. One is, how do we extend the benefits of 
enterprise that have brought so much to America in the last few years to 
those who still have not felt the impact of the economic recovery, 
principally in the inner cities and isolated rural areas? We have a 
whole range of proposals in that regard, a lot of them coming out of 
Secretary Cuomo, a lot of them coming out of 
the Vice President's community empowerment 
initiative, but I think it is very important that we recognize that 
these people who are still unemployed or underemployed are the great 
target we have for the rest of us to keep the economy growing with low 
inflation, so we can do what is morally right to try to expand 
opportunity to people who still don't have it and help the overall 
American economy as well.
    The second point I'd like to make is that if we want to continue to 
see this economy grow, we have to have people who are skilled enough and 
well trained enough and well educated enough to take positions in 
tomorrow's economy, not yesterday's economy. There was a study which 
came out a couple of weeks ago, I can't remember the exact number, but 
there was something like nearly 400,000 openings in America today for 
people in information technology related jobs. And when you go to some

[[Page 311]]

of our larger inner-city neighborhoods where the unemployment rate is 
still 10 percent, you say, well, what is wrong with this picture? Well, 
we got one indication of what is wrong with this picture last week when 
we saw that our 12th graders in the International Math and Science 
Survey scored 19th among 21 countries in their performance in math and 
    So the other big economic issue before America is how to make our 
system of elementary and secondary education as good as our system of 
higher education. No one doubts that we have the best system of colleges 
and universities in the world; we should not rest, and we cannot rest, 
until we have the best elementary and secondary education in the world. 
It is a major economic issue for our country.
    Anyway, it's against this background that I think you have to see 
the emerging debate, or, if you will, the continuing debate, on the tax 
system--what taxes should be cut and how? And the IRS, how should we go 
about collecting taxes? This is a hazardous discussion that it's easier 
for me to enter into maybe because I'm not on the ballot anymore--
[laughter]--since there's no such thing as a positive thing anyone ever 
wants to say about this.
    But we need to think about it. This debate can be a very healthy 
thing. We should always be examining, you know, whether there are 
changes in the tax system we could have which would either be fairer or 
which would achieve our common objectives more or which would grow the 
economy faster. And we should always be looking for ways that, through 
either common sense or new technology, we can ease the burden on our 
people of paying taxes--always. The door should never be shut to reform, 
and there will always be more to do no matter what system we adopt. I 
think all of us know that.
    But the point I want to make today is that this debate must occur 
within the context of our commitment to a long-term economic strategy 
that will work for our people. It should occur within a context of our 
commitment to maintain economic confidence in the future. There is a 
right and a wrong way to do reform. And the right way must involve our 
continued commitment to fiscal discipline, to investing in our people, 
and to making the future a predictable and confident one in terms of our 
economic policy.
    Now, within that context, over the last 5 years we've worked hard to 
reform our tax laws. We've honored our responsibilities as parents with 
the $500-per-child tax credit. We've rewarded work by more than doubling 
the earned-income tax credit, which basically is designed to say if 
you're a parent and you work 40 hours a week, your child ought not to be 
in poverty. Over 2 million children have been lifted out of poverty 
because of the changes in the earned-income tax credit.
    We've recognized the importance and the cost of college education 
with the HOPE scholarship tax credit, which is worth $1,500 a year for 
the first 2 years of college, lifetime learning credits for junior and 
senior years and graduate school, the tax deductibility of student loan 
interest payments, and other initiatives.
    We've encouraged homeownership by eliminating capital gains on 
almost all home sales. And we've helped Americans save for their 
retirement, for their education, and health care costs, by expanding 
IRA's. At the same time, billions of dollars in tax loopholes that were 
more wasteful have been closed.
    This year, the balanced budget proposal I presented to Congress 
continues to help working families with new tax cuts to make child care 
more affordable, our economy stronger, and our environment cleaner by 
meeting the challenge of climate change.
    We also had to continue our work to improve the operations of the 
IRS. Like every American and the majority of IRS employees, who are 
trying hard to do their jobs well, I get outraged when I hear about 
abuses in the IRS. But we are making changes, and we must continue to do 
so. I've already signed into law 40 tax simplification measures and a 
new Taxpayer Bill of Rights.
    As of February 20th, less than 2 weeks ago, 10.7 million Americans 
had filed their tax returns electronically for this year; that's a 19 
percent increase over last year. Three-point-eight million Americans 
have filed by telephone; that's a 25 percent increase over last year. 
The average telephone conversation is 10 minutes. I think that's pretty 
good, and I hope more will continue to do that.
    We are having problem resolution days, which have been widely 
publicized by the media, and I thank them for that. In every IRS 
district, at least once a month, where the IRS employees are open--they 
open the offices at night or on the weekends--people come in with their 

[[Page 312]]

problems, and we try to resolve them in a quick and informal way.
    I think all these things are very important. We just approved new 
regulations to protect so-called innocent spouses who are left with tax 
liabilities by their spouses, that they had no role in undertaking. Now, 
there's more to do, but a lot has been done. Among the new reforms 
proposed are new citizen advocacy panels, new systems to file taxes by 
phone or computer to make it even more easy and more widely used, 
stronger taxpayer advocates, phone lines open 24 hours a day, further 
relief for innocent taxpayers.
    Late last year the House passed these reforms almost unanimously. I 
think there were over 400 votes for them and only 3 or 4 against. So 
again let me say, I hope that the Senate will quickly pass this 
legislation and send it to me for my signature. It's a good bill, and it 
will do a lot of good for Americans.
    Now, we need to continue to do these kinds of things, and we need to 
be open to broader reforms of the tax system. But there are some people 
in Congress who have made a proposal that I think would not fit within 
the formula of economic discipline and confidence that I believe we have 
to stay with. Under the guise of reform, they have proposed what, to me, 
is an irresponsible scheme--to eliminate our tax laws without any system 
to replace them.
    Now, at first glance, this might look good. ``Sunset the Tax Code. 
When everybody knows there will be no more Tax Code, that will shake 
everyone up, and then they will come forward with a responsible 
alternative. And trust me, everything will be fine.'' That's the 
message. Once you know that the old code is gone and on a date certain 
it won't be there, well, everyone will surely have to come up with 
something, and it must be something that will be better. ``Don't worry 
about the details.'' That's what this proposal is, and it has a lot of 
appeal. It's like saying you can't go on a diet until the refrigerator 
is empty. But if you think about it, it only works if you know that you 
can fill the refrigerator up again and what will be in there.
    Now, instead of proposing reform, this proposal is really economic 
uncertainty. What we have done is to restore some confidence and 
predictability to the American economy. When you knew that we were going 
to stay on a path of fiscal discipline and the deficit was not going to 
go to $300 billion a year, was not going to go to $370 billion a year--
which was what it was predicted to be for this year when I took office--
instead of $10 billion or zero, which is what it's going to be, this is 
a way of going back to that era--a total economic uncertainty.
    What would it do? Think about your business. It would cripple 
families' and businesses' ability to plan and save for the future while 
the uncertainty existed. It would undermine the fiscal progress of the 
last 5 years. No one concerned about fighting crime would even think 
about saying, ``Well, 3 years from now we're going to throw out the 
criminal code, and we'll figure out what to put in its place.'' No one 
would do that. That is what this proposal is. That is exactly what some 
people in Congress are proposing to do.
    Now, think about what repealing the tax laws with no known 
alternative would mean. It would mean that you would know there would be 
no home mortgage deduction, but you wouldn't know what would be in its 
place. There might be no charitable contribution deduction, but you 
wouldn't know what would be in its place. We would repeal the Roth IRA, 
but you wouldn't know what would be in its place. All that would be 
certain about this proposal is uncertainty. And again I say, as all of 
you in this room well know, uncertainty is the enemy of economic growth.
    We live in a world where there is a lot of change and 
unpredictability and uncertainty by definition in the nature of this new 
economy. But to do well, you have to at least know what the rules are. 
Our economy is growing because consumer confidence and business 
investment are at record highs. Last week the two indexes of consumer 
confidence came out. One was at a 30-year high; the other was at an all-
time high. What people think is going to happen, as all of you know, in 
an economy is just as important as what, in fact, is happening today.
    Almost every business investment has tax consequences. With no 
ability to predict the consequences, businesses might decide to 
postpone, cancel, or pare back on plans to buy new computers, build a 
new factory, hire new workers. How could you plan, construct, or finance 
a new apartment complex or shopping center if you couldn't calculate the 
return on investment, because you couldn't determine the tax 
consequences? Business growth would stall in that kind of uncertainty.

[[Page 313]]

    And economic uncertainty is no friend to families. The scheme to 
abolish the Tax Code could threaten nearly every American family's best 
laid plans for the future. For example, mortgage rates are low now. 
People are refinancing their mortgages all the time. This has been a 
wonderful thing for America. What would happen to family behavior with 
regard to homeownership if people thought the home mortgage deduction 
might disappear? Would students be as serious about going to college if 
they thought the HOPE scholarships and the other tax credits and 
interest deductions wouldn't be there? Would families think twice about 
how much they were going to give to their church or their synagogue or 
their favorite charity if they thought there would be no tax deduction 
for it?
    We were just talking about the Social Security reform and how no 
matter how we reform Social Security, people have to save more for their 
retirement. Will young families who have a hard enough time paying their 
bills really be setting aside money for their retirement if they think 
the tax incentives or pensions or 401(k)'s and IRA's are about to 
evaporate? In other words, I just think it's wrong to shut down the old 
tax system and tell people it's going to be shut down by a date certain 
without saying, at the same time, what is going to be in its place.
    None of us would say that no one on Earth couldn't devise a better 
tax system than we have. There may be better options. But I think before 
we say we're going to get rid of the one we have on a date certain, we 
need to know what we're going to replace it with. And I would implore 
you, if you agree with me, to make that case to your Member of Congress 
without regard to party.
    Again, I don't see this as particularly a partisan issue. I just 
think it sounds great. I will vote for a bill to get rid of this cursed 
Tax Code. Thank you very much. [Laughter] It's almost irresistible, you 
know, but so was the siren's song. We must continue to have 
predictability in the investment climate. We must continue to have 
predictability when it comes to savings. We must continue to have a 
framework, which will keep us doing what we've been doing for the last 5 
    And that means, by the way, it means we have to continue to be open 
to changes in the tax law and in the way the IRS operates, and in all 
these systematic things that we have to continue to modernize. Of 
course, we must. But we mustn't buy a pig in a poke. We have to continue 
to proceed with discipline. Scrapping the home mortgage deductions, 
scrapping other middle class tax cuts without presenting a clear 
alternative is simply reckless for the economy, reckless for businesses, 
reckless for families' budgets. I will not permit it if I can stop it. 
But it shouldn't pass in the first place, and I hope you will help us on 
    Now, again I say, Congress should pass the IRS reforms that are 
before it. It should pass further tax cuts. But we should balance the 
budget, do nothing with the surplus until we have saved Social Security, 
not abolish the Tax Code until we know what we're going to replace it 
    We're going to change around here. This system has proved that we 
are capable of change. No one should stand in the way of constructive 
change, but we should stay with the plan that we know works. You look at 
where we are today in your business compared to where we were 5 years 
ago. Look at where we are today with the people that you work to serve 
compared to where we were 5 years ago. Imagine where you want to be 10 
years from now. Imagine what you want the future to look like for your 
children and your grandchildren, to do those things, which will build 
that future.
    Thank you very much.

Note: The President spoke at 10:40 a.m. in the Columbia Ballroom at the 
Hyatt Regency Hotel. In his remarks, he referred to Marc Smith, 
president, Paul Reid, executive vice president, and Michael Ferrell, 
senior staff vice president/ legislative counsel, Mortgage Bankers 
Association of America; and Mary Ellen Withrow, Treasurer of the United