    [Public Papers of the Presidents of the United States: WILLIAM J. CLINTON (1999, Book II)]
    [August 11, 1999]
    [Pages 1432-1436]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Interview With Susie Gharib of the ``Nightly
    Business Report''
    August 11, 1999

    Wages and Inflation

        Ms. Gharib. It looks like wages are really starting to pick up now,
    and this is benefiting even people on the bottom rung of the economic
    ladder. But this is something that's worrying Wall Street because you
    saw the reaction to the employment report that the worry is that as
    wages rise, that this could create inflation. Do you think that wages
    are rising so fast that you could create an inflation problem?
        The President. I don't think there's any evidence of that now for a
    couple of reasons. One is, you know, we had about 20 years when, in
    effect, there was no real rise in wages for people in the middle and the
    lower income groups, and they have had a good rise. It's been going on
    for about 3 years now. But we have seen enough experience, at least so
    far, that we don't see the signs of inflation.
        I also believe the fact that we have open markets and, therefore,
    lots of competition and a lot of productivity increases fueled by
    technology should give us some encouragement there. It's something
    obviously we have to be vigilant about. But based on the present
    evidence, I think people are--they're earning their pay increases, and
    they've worked hard for them, and so far, I don't think there is
    evidence of inflation.

    Stock Market

        Ms. Gharib. Mr. President, on Wall Street, they say that the
    direction of the stock market is a good predictor of where the economy
    is headed 6 to 9 months into the future. We've seen some rallies
    recently, but still stocks are down 10 percent or more from their recent
    highs. Do you think that the stock market is telling us that rough times
    are ahead?
        The President. Not necessarily. No, I don't, because, keep in mind,
    the stock market was 3,200 when I took office. It was 6,500 in 1996,
    late in '96. So it's still perking along pretty well. And I think it's
    unrealistic to think that it's going to more than triple every 5 years.
    You're just not going to have that every 5 years. But I think that the
    most important thing I can say is that from my point of view, is that,
    as Secretary Rubin used to say, ``Markets go up. Markets go down.''
        What the Government should focus on is keeping the fundamentals
    right. And it seems to me that if we can keep paying down the debt,
    practice fiscal responsibility, keep pushing to open markets, and keep
    making the kind of long-term investments that we know are good for the
    American economy, then the people in the private sector will take care
    of the rest.
        I think you really get in trouble trying to predict what's going to
    happen in the global economy where already we've defied all the
    predictions. You know, when I became President, the consensus was that
    if we had two or more quarters of unemployment below 6 percent, we'd
    have inflation. And we know that the rules are being rewritten.
        Now, that doesn't mean that the laws of economics have been
    repealed; it must mean that our ability to predict is not as great as it
    would have been in a more stable time. So I'm basically quite optimistic
    about the American economy as long as we keep the fundamentals right.

    Monetary Policy

        Ms. Gharib. You mentioned Robert Rubin, and there are some people
    who believe that since Robert Rubin left his post as Treasury Secretary,
    that the administration has modified its policy on the dollar. Can you
    clarify this for us? And we have seen the dollar under pressure
    recently. Do you no longer support a strong dollar policy?
        The President. No, we haven't modified our policy. I think that what
    you've seen with the

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    dollar is partly a function of an expected recovery in Asia, and I think
    that on balance, that's good. And the European economy may be growing a
    little more; on balance, that's good. And so I think that that is a
    predictable thing.
        Plus, you know, to try to help our friends in Asia and Russia get
    through this crisis--and the Chinese particularly have had--even they've
    had a little bit of problems--we've run quite a large trade deficit here
    because we haven't wanted to close our markets since they were in
    trouble. Those things happen--that tends to weaken the currency too,
    after a certain amount of time.
        So I haven't been particularly alarmed by it, but neither am I for a
    weak dollar. I think the United States has to be for a strong dollar.
    And again, I say the way for us to do that is to not abandon our
    budgetary discipline and our long-term policies on expanded trade and
    investments and technology.

    Tax Cuts and Federal Spending

        Ms. Gharib. Mr. President, let's talk a little bit about taxes. You
    have been quite adamant, and so has your administration, that any kind
    of tax cut above $300 billion is no deal. And yet now we're hearing that
    you may be open to discussion and some negotiation on this. Are you
    signaling that you're more flexible?
        The President. No. What I'm flexible about is what is in the tax
    cut. It's interesting--if you look at my tax bill of $250 billion and
    the Republicans with $800 billion, we have almost exactly the same
    benefits for middle class people, they're just differently configured.
    But the size of the middle class tax cut in both packages is about the
    same.
        What I have said--I don't even think they ought to adopt my tax cut
    first. I would be opposed if they said--if they call me tomorrow, and
    they said, ``You know, we slept on it last night, and we decided you
    were right, and we like not only the size of your tax cut, but what's in
    it, and we'd like to send it to you next week.'' I would say don't do
    that, for the following reason: I think it is wrong, on principle, to
    pass a tax cut before you figure out what your obligations are.
        And Senator Breaux and Mr. Thomas had this Medicare condition. I thought there were
    some good things in it; there were some things I didn't agree with. So I
    gave Congress a Medicare plan that would lengthen the life of the Trust
    Fund and pay for a modest prescription drug benefit. I also gave them a
    budget which would, over time, not only save the Social Security surplus
    taxes for Social Security but would lengthen the life of the Trust Fund.
    And I gave them a budget which said, here's what I would spend for
    defense, for education, for other things, and here's what I would spend
    for a tax cut.
        What I think they ought to do is give me a Medicare proposal. Then
    let's get together and work out what we're going to do with that. Then
    let's figure out what we have to spend. Already this Congress, even
    under the Republican leadership, has decided to spend more for veterans,
    for agriculture, and for defense. And they say they want to spend more
    for education. But their tax cut makes it clear, specifically in the tax
    bill, that they had to cut all these things drastically that they're
    voting to spend more money on.
        So my position is, send me a Medicare proposal; let's figure out
    what we have to spend on other things and what we've got to do to pay
    the debt down, and let's give the rest back to the taxpayers. And I will
    be very flexible about how we do it.
        Ms. Gharib. All right. Let's talk about where you might be flexible.
    We had Pete Domenici, chairman of the Budget Committee, on our program
    recently, and he was saying that when you look at the whole surplus,
    only a quarter of it would be devoted to these tax cut proposals, things
    like an income tax cut, estate tax cut, cut in the marriage penalty tax.
    And even your Vice President, Mr. Gore, was on our program recently--he
    said he would support a cut in the marriage penalty tax. Is there
    anything here among these tax cuts that you might support?
        The President. Sure. But the question is--let me just say, in all
    respect to Senator Domenici, they say it
    that way because it sounds so reasonable, but that's not quite right,
    and here's why. The Republicans have agreed with me--and I applaud them
    for this--they've agreed that we should take that portion of the
    surplus--projected surplus--it's not here yet--that portion of projected
    surplus attributable to Social Security taxes and not spend it. Okay?
    That leaves a third left.
        When you take their tax cut, plus the extra interest payments we
    have to make--because when you cut taxes, you don't pay the debt

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    off as fast--it takes up everything that's left, which means that they
    have no money to spend whatever on defense, on education, on lengthening
    the life of the Medicare Trust Fund, and yet they're voting to do these
    things.
        So they either want to get into the Social Security surplus, at
    which case we're not going to pay the debt down and we're going to make
    a big mistake, I think, or they're pursuing the course which will
    require drastic cuts in the very things they say they're trying to
    increase. So, on any specific, I'm happy to talk to them. I think it
    would be great to get rid of the marriage penalty. There are a lot of
    things that they proposed that--in the Senate bill, in the original
    Senate bill, had a lot of great policy in it. We can't afford to do that
    and take care of the American economy.

    Federal Reserve Board Chairman

        Ms. Gharib. Sir, we're running out of time, so I want to ask you a
    few more quick questions, okay? Mr. President, I wouldn't be a good
    business reporter unless I asked you a question about Alan Greenspan.
    The last time this came up you said you don't even know if Mr. Greenspan
    would be interested in another term as Chairman of the Federal Reserve.
    Now, I'm sure you have a lot of contact with Mr. Greenspan, and your
    Treasury Secretary meets with him from time to time. Do you now know if
    Mr. Greenspan would be interested?
        The President. Well, I saw him just today, actually, when we gave
    President Ford the Medal of Freedom, but I
    didn't have a chance to talk to him about it. You know, I think he's
    done a great job. I did reappoint him once. And I think that we've had
    an appropriate relationship. I don't comment on the Fed's actions, but I
    think we've both pursued complementary policies, and I think he's done a
    good job. But I think it is not useful for me to feed speculation one
    way or the other until I've at least had a chance to talk to him. I have
    no earthly idea what his intentions are, and we haven't had a chance to
    talk.
        Ms. Gharib. Well, obviously, you've put some focus on the Federal
    Reserve recently, you recently named Carol Parry to fill one of the
    boards--he's on the Fed. You've named Roger Ferguson to fill the Vice
    Chair post. And you've told us that you will deal with the whole Fed
    Chairman job in a timely manner. Are we getting close to that time?
        The President. Well, his time--term runs out at some point, and at
    some point it will be appropriate for the two of us to talk. But I think
    until the two of us talk, it would be just foolish for me to say
    anything. It would only cause--whatever I say might be rendered moot by
    the conversation we have. So I just don't think I should.
        But I think the important thing is for the American people to know
    that I support the direction he's taken, and I think he's done a good
    job. And I've tried not to meddle, and I'm not supposed to.
        Since you brought him up, though, I think I ought to mention that
    he, along with others, have pointed out that if we don't pay the debt
    down and we still have a tax cut that's too big, it will increase the
    chances of inflation, which will increase the likelihood of interest
    rate increases. And all the benefits the American people could get in a
    tax cut, including upper income people, could be taken away by higher
    interest rates, which not only take more money out of people's pockets
    directly but will slow economic growth.
        So I think that that's another thing that ought to be hammered home
    about this tax cut. Why should we do something on the one hand if we're
    going to lose the benefit of it from higher interest rates and lower
    growth?

    New Markets Initiative

        Ms. Gharib. I don't want to tackle with you on that, but I do want
    to talk to you more about economic growth. I'd like to talk to you about
    your new markets initiatives. The economy has had this wonderful run and
    it's been growing for so long, and it's even benefited a lot of the
    people who are living in economically distressed areas.
        The President. It has.
        Ms. Gharib. Is the goal of your new markets plan to speed up this
    process?
        The President. Well, to speed it up where it's underway and to kick
    it off where it's not. We still have, believe it or not, we still have
    got a lot of counties in this country where the unemployment rate is
    over 10 percent, and a lot more where the unemployment rate is over 7.5
    percent. So what I try to do, first of all, is to vigorously support the
    Community Investment Act, setting up more community financial
    institutions, expanding enterprise zones, which

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    the Vice President has run for us so well
    over the last 6 years.
        But what I want to do now is try to mobilize the business community
    and set up a legal framework that would give an incentive in every area
    of the country which has not felt the prosperity to grow more quickly.
    So I've sent this legislation up last week which would essentially give
    business people the same incentives to invest in developing communities
    in America that they get to invest in developing communities in Central
    America or the Caribbean or Africa or Asia. I don't want to take those
    away; I just want to have the same incentives in America in the
    Mississippi Delta, in Appalachia, in the Indian reservations, the inner
    cities.
        And we have this terrific interest in the business community now, I
    think partly because they feel they're prosperous and they can do it and
    they ought to do it. But I want to emphasize, this is not a social
    program. This is a conviction of mine that there is profit to be made in
    these areas where unemployment is too high and underemployment is too
    high and there is too little investment.
        Ms. Gharib. But I'm sure you've heard this before, where people will
    say, ``Look, we've tried this before. We've tried tax credits. It's
    difficult.''
        The President. But it's never been tried. First of all, it's never
    been tried in the comprehensive way we're doing it, where we're going to
    work with these communities and help them. Secondly, it has never been
    tried when the economy was this prosperous and when everybody is asking
    the very question that we've been talking about--all the business
    community, you ask them--we started with the stock market, how long can
    the stock market stay; is inflation--if we have inflation, will that
    bring the stock market down? Everybody is worried--we've already got the
    longest peacetime expansion in history; how much longer can it go on
    without inflation?
        Now, my argument is that every American ought to be interested in
    this new markets initiative because one sure way to grow the economy
    without inflation is to invest in a place where you have both more
    businesses and more consumers--more business, more employees, more
    consumers. There is no inflationary impact to that growth. And it's
    right there at our feet.
        And every American who believes in free trade ought to believe in
    the new markets initiative because it's closer to home with the same
    direct benefits and no inflation. And so there is--if I can use a little
    jargon, there is a macroeconomic benefit as well as the human benefit of
    doing this. I think we've got the best chance in my lifetime to get this
    done, the best chance since the early sixties. We lost control of the
    economy in the late sixties. We had inflation with guns and butter, and
    we've never had a chance since then to do this. We've got it now.
        Ms. Gharib. I'm getting notices that my time is up. But would you
    give me permission to ask you one last question?
        The President. Sure.
        Ms. Gharib. I think it's a good question, and I think you'd like to
    answer it.
        The President. Sure.

    Future of the National Economy

        Ms. Gharib. Mr. President, your term is drawing to a close, and you
    have presided over one of the most fruitful economic times in this
    century, but let's fast-forward to the next generation, Chelsea's
    generation. What do we have to do to guarantee in the future this kind
    of prosperity and more?
        The President. We have to make the most of this prosperity if we
    want to guarantee the next generation. We can't guarantee our children
    anything. We can't perceive the challenges they'll face. Their lives
    will have its own rhythm. But we do know this--what do we know about our
    kids' generation? We know they're going to have to deal with the aging
    of the baby boomers. We're going to get old, and there are more of us
    than any other generation before to reach this age.
        We know they're going to live in a world that is increasingly more
    competitive, where financial markets are global and interest rates are
    set in that environment. We know that the children who are in the
    schools now are the most diverse group in history, and they are the
    first generation larger than the baby boom, and they will grow up in an
    era where education is more important than ever before.
        We know those three things. Therefore, what should we do? We should
    make sure that our kids don't have to pay for us in our retirement by
    taking care of Social Security and Medicare now, so that when we're 75
    and 80 years old, our children won't have to take care of us, and they
    can take care of our grandchildren.
        Second, we should make America debt-free for the first time since
    1835, so we keep interest

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    rates down and more money can be borrowed by people in their private
    lives and business and personal lives. And when our trading partners get
    in trouble, like Asia has in the last 2 years, they can get the money
    they need at lower cost because we won't be taking it out of the system.
        And the third thing we ought to do is give every kid in this country
    a world-class education. Now, if we can do those three things, we can
    maximize the chances that our children's generation will have greater
    prosperity than we do.

    Note: The interview was videotaped at 5:04 p.m. in the Roosevelt Room at
    the White House for later broadcast. This interview was released by the
    Office of the Press Secretary on August 12. A tape was not available for
    verification of the content of this interview.