    [Public Papers of the Presidents of the United States: WILLIAM J. CLINTON (1999, Book II)]
    [July 6, 1999]
    [Pages 1160-1166]
    [From the U.S. Government Publishing Office www.gpo.gov]

    [[Page 1160]]

    Interview With Ron Brownstein of the Los
    Angeles Times Aboard Air Force One
    July 6, 1999

    2000 Election

        Mr. Brownstein. I enjoyed being out there today after spending so
    much time in the last few weeks with the Vice President and the
    Governor. And we have so much 2000 going on already, it seems a little
    odd, you know, in some ways. I mean, you've got--you and the Congress
    both have 16, 17, 18 months left, and you know, it's almost like we're
    in a fall. It just seems somehow premature to me. I don't know.
        The President. It is, but I think part of it is the--that's--I think
    we're doing what we should do, which is to keep plugging at the policy
    stuff, because in fairness to all the candidates, the States, in their
    rush to maintain maximum influence, have continued to move these dates
    up. So I don't really see that they had any choice. And when they're out
    there doing it, you've got to cover them. But I think----
        Mr. Brownstein. Is it harder to get things done in Washington?
        The President. I wouldn't--that depends on how--the attitude of
    Congress, I think that--in both parties. Not necessarily. I think in
    some ways, it may play to the desire of every person in public life,
    including the Members of the House and the Senate in both parties,
    always to be relevant and to say, hey, I'm here, too. So in a funny way,
    it could increase our ability to act, both this year and next year. And
    as I tell the Republicans all the time--and the Democrats--if we solve
    everything, if we reached an agreement on Social Security, Medicare, if
    we committed to pay the debt off in 15 years, which is something that I
    think is a huge, still, sleeper opportunity for the American economy,
    think of all the things that would still be there for them to disagree
    about.

    Working With Congress

        Mr. Brownstein. Do you think you can reach an agreement? What do the
    prospects feel like to you now--agreement on entitlement and taxes?
        The President. Prospects feel, to me, better than conventional
    wisdom would hold they are. What I have to be able to do is to convince
    both parties that doing the right thing is usually the best politics--
    the people have hired us to work, and they expect us to work--and that
    there will still be this huge array of things over which they have
    genuine disagreements. We have big disagreements that are important on
    education, so that no matter what we do on education, a lot of the
    disagreements will remain, and a lot of the opportunities will remain,
    you know, for fertile debate.
        We have these massive disagreements, on guns, that are huge, where
    there seems to be no reasonable prospect that the divide can be bridged.
    But to go back to what I'm doing now, it would seem to me that this is,
    from my point of view, with the whole New Democrat philosophy I try to
    articulate, the embodiment of everything I believe. But it also is
    consistent with what entrepreneurial Republicans believe, because this
    is not a Government program in any conventional sense, and it is
    designed to spawn private sector growth.

    New Markets Initiative

        Mr. Brownstein. What is the principal thing you're hoping to
    accomplish on this tour? Is it to push forward the legislation, or is it
    something else?
        The President. I think the principal thing I'm hoping to accomplish,
    which I think will help to push forward the legislation, is to convince
    the critical mass of the economic and political decisionmakers in this
    country that there is both an opportunity and an obligation in the
    underdeveloped parts of this.
        You'd be amazed. When I talk to businesspeople, I say, look, forget
    about the moral obligation and the people that deserve a chance in life,
    although surprisingly, a lot of these business executives feel that.
    They feel that they've benefited in their own personal holdings, their
    businesses have. The stock market more than triples; the economy's got
    the most peacetime expansion in history. If we get fortunate, it'll be
    the longest expansion in history, including wartime expansions, if we
    keep it going, you know, if we're lucky and prudent.

    [[Page 1161]]

    So I've been very touched that a lot of them feel the moral pull of
    this.
        But what I say to them is that when I started thinking about this
    economy, seriously, probably 12 years ago now, and thinking about what
    it would take to make America work again, and then I tried to put the
    ideas together a decade ago, in 1989 and '90 and then in '91, I gave
    those speeches at Georgetown. Most conventional economists believe, even
    my own economists--Laura Tyson, who did
    a fabulous job for me--I remember sitting around the table at Little
    Rock in December of '92 and having her say, ``Mr. President, most
    economists, including most Democrats, believe that if you get the
    unemployment rate much below 6 percent for very long''--do you remember
    that, Gene? We were at the Governor's
    mansion----
        National Economic Council Director Gene Sperling. I remember Bob and I brought in Laura and Larry so that
    we could all tell you at once, and this was when we were in the----
        The President. If you create more than 8 million jobs in your first
    term, and we get this unemployment rate much below 6 percent, we'll have
    inflation. The Fed will have to really raise interest rates; it'll break
    the back of the recovery. And I argued to the contrary because of two
    things. I thought if we had open markets and maximized the impact of
    technology, that it would tend to dramatically increase productivity and
    hold down prices, and of course, you know, that's what's happened.
        And all over the country today, if you look at the most
    sophisticated labor unions, you don't see a bunch of strikes here,
    because we're having good times. People are saying, we remember the bad
    times; we know we're in the global economy; we want wage increases; but
    we want them to be consistent with the profitability and the
    productivity of the firm we're in. It's very interesting.
        There's a whole--and I think part of this is reinforced by the fact
    that all the worker pension funds are in the market, and you know, there
    are a lot of reasons for all this. But I think that what's happened is
    we're now down to unemployment below 4.5 percent, with no substantial
    inflation. We've had some oil spikes and other spikes, but basically
    things are rocking along here.
        But now we've reached a point where people are saying, ``Well, at
    this level of labor force participation, is there a way to continue to
    grow the economy without sending inflation up so much that the Fed will
    have to raise interest rates, and we'll break it?'' So as a pure
    economic perspective--and I have argued repeatedly that there are only
    three options here--you either have to find new markets abroad, which I
    strongly favor, and I'm still working on trying to get our party
    together on a trade position; that's option one.
        Option two is to take discrete but dispersed populations that are
    out of the labor force and bring them in. That's still people on
    welfare, but the welfare rolls have been cut in half, so the ones left
    are the hardest to place and the disabled. And we're going to do that;
    presumably, we are going to have a big bipartisan agreement on that, to
    let them keep their Medicaid health insurance when they come in.
        I don't think you went to New Hampshire with me when I did the forum
    on this, but there's this former Olympic skier in New Hampshire who is
    now confined to a wheelchair, and I think he's quadriplegic. Anyway--but
    he's seriously injured. He's got $40,000 in Medicaid bills. But he's got
    a job and makes $30,000 a year. You and I as taxpayers, we're going to
    pay the Medicaid bills regardless, so we're better off with him making
    $30,000, and it's a better society with people like that working. So you
    can do that.
        Mr. Brownstein. That's the second way?
        The President. Yes, that's the second way. But the third way is, by
    far, the biggest way, and that is to go into these areas where the whole
    economic base eroded sometime over the last 30 years--principally, the
    inner-city areas and the rural areas and the Native American
    reservations where we're going now, where arguably, there never was any
    really indigenous independent economic base--and try to actually do what
    is necessary to put in place a private sector. It cannot be done with
    Government spending alone, because there are a lot of things that
    governments can do, you know, the Head Start, the health care, the
    education, all that stuff, the infrastructure. But you have to get some
    free enterprise in there. There are not enough Government jobs to do
    that.
        On the other hand, with Government neglect, it'll never happen. So
    we started this back in '93 with the economic plan, with the empowerment
    zones, doubling the earned-income tax credit, doing those things within
    the enterprise communities, both giving people tax incentives

    [[Page 1162]]

    to go into those areas and then tax credits to hire people. And then we
    had the community development banks, which have had, like all such
    things, mixed records of success, but on balance have done well.
        Then we began to vigorously push the Community Reinvestment Act,
    which has probably had the biggest aggregate impact but that tends to be
    more widely dispersed. So how we got to this new markets proposal and--
    --
        Mr. Brownstein. Can I ask right there, how does this--I mean, I was
    going to ask you about, building on that record, the things that you
    have already done, what do you see this adding to what you have already
    done? What is the specific increment you're trying to bring here?
        The President. I think it does two things. Number one, it is
    available nationwide and not just where the empowerment zones or the
    community development banks are or where there has to be a particularly
    committed community banker who loves the community investment act. It's
    nationwide available. That's the first thing. That's a big deal. If you
    look at the one in New York we've got, it goes into Harlem, in the
    Bronx. There are probably a million people in New York City alone living
    in neighborhoods with unemployment rates above 10 percent, untouched by
    the empowerment zone. I don't know, maybe there's more. But at least a
    million.
        Mr. Brownstein. It broadens your reach.
        The President. Nationwide; and we don't have to keep going back to
    Congress over and over and over again saying, ``Give us 10 more
    empowerment zones''; and then everybody's got different spending
    priorities, or Republicans say, ``We like tax cuts; we don't like the
    spending you do, and you don't have to do any of that.'' You put it out
    there, and you say, ``Here it is, nationwide.''
        Secondly, what it is, is particularly a heavy emphasis on venture
    capital, because you get up to a 25 percent tax cut for investing in
    vehicles that make direct investments to put up the venture capital. And
    then you also lower the relative risk of bank loans by saying that for
    every dollar you put up in venture capital, you're eligible for $2 in
    borrowing, Government guaranteed, which cuts the interest rate way down.
        And keep in mind, all this stuff would be available within the
    empowerment zones, too, so everywhere, you're lowering the relative risk
    of investment enough to make it more appealing. But the reason I said
    that, the most important thing, was to impact the economic and political
    links to the opportunity here is. I mean, that's why we've taken a lot
    of these businesspeople, and we're having all these announcements about
    what we're doing with the--you know, right now--is that it is very
    important that people see these opportunities as they are and also see
    the problems. But at least see that there really is opportunity.
        Now, if you believe, as I do, that there are a lot of people in
    business and in politics who think as well as we're doing now, we have a
    moral obligation to try to finally get some sustaining free enterprise
    into these areas, and you show that it's good business, and then you
    lower the relative risks, you've really done something. But the first
    thing you have to do is to make sure that there is enough accurate
    knowledge and communication out there to make the market work.
        Any economist will tell you that all markets work based on--still
    work through human beings based on adequate knowledge. And I would argue
    that there is far less than perfect knowledge within the American
    investor community about the opportunities in these developing areas.
        Mr. Brownstein. It sounds like what you're trying to do this week is
    almost a trade mission within your own country.
        The President. I'm taking a trade mission to America this week.
    Which is why, you see, my one sure-fire applause line in all these
    speeches is we're going to give American business investors the same
    incentive to invest here they have in developing economies overseas.
    It's like a trade mission.

    Community Reinvestment Act

        Mr. Brownstein. You mentioned community investment act having the
    broadest impact--financial services bill going to conference. You have
    threatened to veto over the CRA provisions.
        The President. Don't we have good CRA provisions now----
        Mr. Brownstein. In the House.
        The President.----in the House?
        Mr. Brownstein. The Senate provisions you said you would veto?
        The President. We're going to work hard for those House provisions.
    I don't see how--look, I know sort of ideologically where Phil
    Gramm

    [[Page 1163]]

    is, but you cannot look at the fact that we have the strongest economy
    in a generation, maybe ever. During the same period of time, when--this
    was a 22-year-old law, and over 95 percent of all the money loaned under
    it has been loaned in the time that we've been here with this
    administration.
        You cannot make a factual argument that the CRA is so burdensome to
    bankers that it's somehow bad for America. It's been good for America,
    and it's been good for banks. So I feel very strongly about it.
        Mr. Brownstein. I feel ground approaching, so I'm going to try to
    talk about a couple of other issues with you.
        The President. So we're trying to get three things done. Number one,
    we want to highlight what we've been doing the last 6\1/2\ years and
    what the positive impacts are. Number two, we want to promote the new
    markets initiative because it's nationwide, and it's a heavier emphasis
    on venture capital and on direct investment, equity investment. And
    number three, we want to increase the awareness of the opportunities
    there in these areas because I think we have to build a different
    economic infrastructure in these areas. If we do that, the next time
    there is a recession, they won't be totally wiped out; they'll go down
    like the rest of the country, and then when we get out of the recession
    the next time, they'll come up like the rest of the country. But if they
    have no resources, they get hurt terribly in the recessions, because
    they have a lot of marginal employees, and then when we come out, they
    don't come out.
        Basically, I think people have not thought through here that the
    economic infrastructure in most of these places literally disappeared
    somewhere over the last 30 years and hasn't been replaced for anything.
        Now, it turns out to be in the self-interest of the investor in the
    corporate community to replace it. And these people are out there dying
    to work. Yes, there are all kinds of obstacles, special obstacles in
    every one of these places: transportation in Appalachia, the level of
    education, the skills, you've got to do more on-the-job training. There
    are all kinds of problems. But the opportunity there is significant, and
    if we have sufficient tax incentives and if the Government does our part
    in spending for education and training, too, we will, I think, at least
    make the relative risk of investment equal to what it would be in most
    other places.

    Budget Agenda

        Mr. Brownstein. Let me not jump around, but I would like to try to
    touch on a couple of other things and then come back to one other thing
    on the investment side. You mentioned before, you were a little more
    optimistic than conventional wisdom about the prospect, and there does
    seem to be a little change in the wind as the surplus numbers have
    gotten better.
        Let me ask you first, do you think a broad-based deal would have to
    include a broad-based tax reduction beyond what you've proposed, and are
    there some that are more acceptable to you than others?
        The President. I think what's most important to me, because I think
    this will clarify the choices to the Republicans as well as to our
    people, what's most important to me is to try to do the first things
    first. That is, I would like to lock in a commitment which would assure
    that even if we couldn't reach agreement on the next steps, we'd run
    Social Security out to 2053 and pay the debt off, the publicly held debt
    off in 15 years.
        Then I would like to move to Medicare, where I really do believe we
    can make an agreement now. We know that. They will have to admit, those
    that don't agree with my prescription drug proposal, that I've done it
    in a fiscally responsible way that will not explode in the out-years.
    Then we can look at what we've got. I don't think they--if you look at
    what they say they are going to do, they say they're willing to go to
    basically a kind of a lockbox like I have, a real savings on Social
    Security, not something you can go back and raid.
        If you do that and if you take the tax proposal they've got on the
    books now and then just fund my defense numbers--not theirs, my defense
    increases--we're already in the hole again running a deficit with a 30
    percent cut in discretionary spending. That is, I don't think that all
    these numbers have been added up, and I think that if we really sit down
    and don't get--you know, I haven't attacked the money. I haven't gone
    out on a budget tirade or anything like that.
        What I want to do is to really show them what I think the choices
    are and then discuss it with them and debate with them. But I think
    there can be an omnibus agreement, and I've already said I think there
    ought to be a tax cut. We can afford to give some of this money

    [[Page 1164]]

    back to the American people. My own view is, the most responsible way to
    give it back is in the USA accounts, because it gives hundreds of
    dollars a year from now on to working families in ways that will enable
    them to save for their own retirement.

    Tax Cuts

        Mr. Brownstein. Do you like the idea of raising the 15 percent
    bracket as a possible tax cut?
        The President. You mean lowering the 15 percent?
        Mr. Brownstein. Lowering the 15 percent--raising the income level
    that is taxed at 15 percent.
        The President. We've got to look at all--the important thing to me
    is, if you do that, then you have to give up the retirement savings. And
    so I'll say again, let's do first things first. Let's figure it out. The
    way to do this is, before you decide what kind of tax cuts you want, is
    to figure out how much money have you really got for it, and then you
    can talk about what the best way to do it is.

    Budget Caps

        Mr. Brownstein. And how much have you really got--Bob Greenstein's
    group put out a study last week, which the Post immediately picked up an
    editorial, arguing that this big surplus number is premised on
    maintaining the caps on discretionary spending, which----
        The President. Which are too tight.
        Mr. Brownstein.----which are too tight. Do you think the caps should
    be lifted, and are we assuming, or are we spending the surplus that is
    exaggerated?
        The President. If you look at what I did, if you look at my
    proposal, coming after the midsession review, we propose lifting the
    cap--I don't like the term ``lifting the caps,'' because that implies
    that we would again--that's like a tax investment. To me, lifting the
    caps is like doing a tax increase. That's like taking something that's
    doing a good thing that may have a bad result unless it is part of an
    overall plan.
        Mr. Brownstein. As part of an overall plan, it might make sense.
        The President. And in fact, what I proposed--look what I proposed in
    the midsession review. I said, ``Okay, let's have a hard Social Security
    lockbox, take Social Security off budget, get rid of that, do it in a
    way that pays the debt off in 2015, and takes all the interest savings
    from the declining debt and puts it into Social Security. Two, here's my
    Medicare fix, and it will pay for taking Medicare out to 2027, plus
    almost all the prescription drug benefits, and you need a little bit of
    a surplus to pay for 2027 prescription drug benefits, plus reform.
    Here's my defense number. Here's what my tax cut costs. And here's what
    you have left to pay for education and children, because you don't want
    the budget to get too far out of balance between the old and the young
    for education, for children, for medical research, for the environment,
    and other essential Government services.''
        So I've proposed, in effect, and things that the Republicans like,
    transportation, all that kind of stuff. I've proposed some increased
    spending over a decade, a substantial tax cut, and a fix for Social
    Security and Medicare. If they want a larger tax cut within that, and
    they are still committed, then they're committed to a legitimate Social
    Security fix, that is not something where you can wind up, raid it again
    to pay for your tax cut.
        Then I think that we ought to be able to sit down and say, let's put
    all these pieces out here and move them. But you can move the pieces
    around, but the final puzzle has to look more or less the same. In other
    words, I don't think a lot of them--this is ironic, you know; it's
    almost like the parties have switched places on this--I'm not sure a lot
    of them believe it's as important as I do to try to make the country
    debt-free by 2015.
        See, I think, to me, that's a bigger tax cut than we could ever
    give. It's a bigger tax cut; if you're talking about disposable income
    in the hands of the taxpayers, it would be worth more then even their
    tax cut. See, if we adopt their tax--let's just say we adopted their tax
    cut. I am convinced, as a practical matter, you would wind up with
    substantial deficits, higher interest rates, less savings, and higher
    out-of-pocket costs for everything from business loans to home mortgages
    to college loans to consumer loans to car payments.
        And if that's true--and I think that experience, by the way--I
    think, you know, I've got some experience on our side, on my side of the
    argument now. I mean, look how much the average middle class person has
    saved since 1993. What tax debts do we get? Well, if you're under
    $30,000 a year and you've got a family, you've got some benefit from the
    earned-income

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    tax credit. If you have someone in college or you're going to college,
    you've got a big tax cut there. If you have a child, you've got the $500
    tax cut there
        But 100 percent of the people that have any indebtedness--and keep
    in mind, we've got two-thirds of the folks now who own homes now, and
    almost all of them have mortgages----
        Mr. Brownstein. The interest----
        The President. A hundred percent of them have got--they've got
    mortgage savings, credit card savings, car payment savings, and anybody
    that's got any kind of debt has saved money because we have chosen to
    get down to balancing the budget and then moving into the surpluses.
    Now, if our country were debt free, consider the potential advantages
    for the average citizen or even the low income worker.
        Assuming we still had sufficient funds to pay our obligations to the
    poor and to fulfill the basic Government functions, you would have
    higher business investment, less inflation, more money for real wage
    increases, and lower credit costs for all consumer items. Furthermore,
    if there were another global financial crisis, and we tried to change
    the rules to minimize this happening again and what would happen in
    Asia,. But no one can be absolutely sure because there's still a lot of
    leveraged money out there in the global economy.
        The next time that happened, the United States would not be
    competing for money in a very difficult environment. That would mean
    that our trading partners could get funds more readily at lower interest
    rates and it would cushion the shock of any downturn. That would also be
    good for our export-dependent industries. We've had--gosh, our
    agricultural sector and our airplane, our commercial airplane sector
    have really been hit hard by this financial crisis in Asia. So it would
    be better for us in that way, and it would be better for our trading
    partners.
        I believe that in a global economy, an economy that's as globalized
    as this one, the richest countries--the richest countries are better off
    almost imagining themselves as States do now in the American system, and
    the more they can be debt free, the better off they're going to be.

    Recovery of the Nation and Gore Candidacy

        Mr. Brownstein. Can I ask--I'll be thrown out of the ``Society of
    Political Reporters'' if I don't ask your sense of--great economy, Dow
    up, crime down, welfare down; yet, right track, sense of satisfaction
    with the direction the country is following. The Vice President, even
    though it's the year before, is trailing substantially. What do you
    think's going on? Is there a desire for change at the end of your two
    terms, tail end?
        The President. I think there's a constant desire for change. But I
    think what you'll see by next year is that the Vice President will be the candidate of change. People will have
    to decide whether they want the change going on. The rhetoric of
    compassionate conservatism--half those speeches sound like I gave them
    in '92.
        So I think we have to--when we get down to the specifics and people
    get to focus on the nature of the change, I think that the Vice
    President will do fine. So I feel good
    about that. And by the way, I think the right track numbers are coming
    back up.
        I think--I don't want to get into polling and political commentary,
    but the combination of the conflict in Kosovo and the extraordinary
    shock to the country's psyche that Littleton proposed were the main
    things that changed the right track/wrong track----
        Mr. Brownstein. Are you comfortable with the position the Vice
    President is in at this point?
        The President. Yes. I think--and in historical terms, if you look at
    parallel elections, you go back and check, where was Nixon, where was
    Bush, where were these people, I think as long as he's out there articulating the vision and saying what he'll
    do if he gets elected and as long as he feels good about it, I think
    he's doing fine. I think it's good.

    ``Compassionate Conservatism''

        Mr. Brownstein. I don't suppose I can talk with you in the limo? Can
    I ask you one last question? The other thing that's been going on, in
    addition to--I'm interested in your thought about what ``compassionate
    conservatism'' means to you. As you say, some of those speeches sound
    like--they talked about opportunity, community, responsibility at
    various points. Is it an homage to what you're doing, or do you see it
    as something that is fundamentally different than the New Democrat
    agenda?
        The President. Both. Yes, that is, I think that based on what I've
    seen, it captures the rhetoric, and it's very flattering in a way, you
    know? Because it replicates the rhetoric. But I think--and it, on some
    issues, seems to have discarded

    [[Page 1166]]

    some of the harsher aspects of the Republican revolution of the last 5
    years, immigration, for example.
        But on other issues, it's either blurring, like, where are they,
    really, on affirmative action and choice--not really clear--and on some
    places, you know, downright hostile to the position that I believe is
    sort of the Third Way position, including on civil liberties, like the
    hate crimes legislation or on consumer protections like the Patients'
    Bill of Rights or, most profoundly, on these gun issues.
        So the question is, are the architects of the revolution in 1995,
    the contract on America, the heirs of Newt Gingrich who are still
    basically in control of the Congress, all of whom were early--almost all
    of whom, almost 100 percent--early endorsers of Mr. Bush, is this an umbrella under which they can be protected from
    the rainstorm of public opinion until they get to where they can do what
    they want, or is it something different? I think the record is decidedly
    mixed on that.

    Childhood Poverty

        Mr. Brownstein. I was going to ask you about Bradley criticizing you
    on child poverty, not doing enough to reduce childhood poverty. That was
    the----
        The President. I don't think anybody's done enough to reduce
    childhood poverty. You have to keep going. But if you look at the
    minimum wage, doubling the earned-income tax credit, and what we've
    done--we've immunized 90 percent of the kids for the first time in
    history, and we've got the lowest minority unemployment rate ever
    recorded and the lowest Hispanic unemployment rate ever recorded--I
    think we've made more headway than anyone imagined we could when we
    started.
        But it's a very difficult problem.

    Note: The interview began at approximately 8 p.m. en route from East St.
    Louis, IL, to Rapid City, SD. In his remarks, the President referred to
    Gov. George W. Bush of Texas. The transcript was released by the Office
    of the Press Secretary on July 8. A tape was not available for
    verification of the content of this interview.