[Public Papers of the Presidents of the United States: WILLIAM J. CLINTON (1999, Book II)]
[July 6, 1999]
[Pages 1144-1147]
[From the U.S. Government Publishing Office www.gpo.gov]
[[Page 1144]]
Interview With Ron Insana of CNBC's ``Business
Center'' in Clarksdale, Mississippi
July 6, 1999
New Markets Initiative
Mr. Insana. Mr. President, this trip and your new markets initiative
in some ways have already been compared to Lyndon Johnson's War on
Poverty, Bobby Kennedy's swing through Appalachia. How will this program
work where some of the other Government programs on poverty have failed
in the past?
The President. Well, first of all, I think it's important to
recognize that this is different because we don't say the Government can
solve all these problems, but we do say the Government can no longer
ignore them. And, in fact, we've been working on them for 6\1/2\ years,
ever since I took office.
This is a classic example, this approach to new markets, of the New
Democratic or Third Way philosophy that I articulated back in 1991 and
1992. That is, Government's role is to create the conditions for
success, give people the tools they need to succeed, and then in effect,
empower people to make the most of it.
But we recognize, if you look at--go back to the War on Poverty, it
did a lot of good in terms of giving children preschool and feeding
hungry children and giving them access to health care. But in the end,
if you want these communities to be self-sustaining, they have to get
private-sector capital with private-sector jobs, and they have to prove
that they can compete for it, they can win it, and that people can
actually make a profit investing in these places and that it will be
profitable to put people to work.
And because I believe that very passionately, especially now--you
know, there was all this big discussion in business circles and the
people that watch your program, there was all this big discussion over
the last few weeks about would the Fed raise interest rates or not. And
it was like the fifth reincarnation of how much can we grow and how low
can unemployment get before we have this big explosion of inflation
which then we'll have to clamp down, which will then kill the recovery,
so everybody's been trying to avoid it.
Well, I think about that all the time. And it seems to me that the
way to keep America's economy growing without inflation is to sell more
products overseas and find more consumers and workers at the same time
here at home. And there are only--there are a couple of options. You can
bring more people from welfare or from the ranks of the disabled into
the work force, or you can go to these areas where you invest in them
and you get more consumers and more workers at the same time. And I
think this is terribly important.
Mr. Insana. What specific items will be included in the legislation
to advance those goals? What kind of tax credits?
The President. Well, the big ideas in the legislation are a tax
credit of up to 25 percent for people who invest in vehicles that will
be creating businesses or expanding businesses in high-unemployment,
underdeveloped areas. In addition to that, once you get into those
vehicles, then you would be eligible to borrow $2 for every $1 invested
and have the money borrowed be subject to a Government loan guarantee,
which would mean the interest rates would be much, much lower. So by
those two things, you lower the relative risk of investing in these new
markets.
But we've seen--you heard the person from Bank of America say today, we heard the gentleman from a local
bank in Kentucky yesterday or the
people from Aetna or these other companies say, ``These are good
investments; we can make money here.'' So if you lower the relative risk
of getting in, in the first place, and in effect, try to provide for the
whole Nation what now you can find in the empowerment zones that the
Vice President's worked so hard to manage
over the last 6 years, I think we can get a lot more growth here.
Republican Proposal for Economic Recovery
Mr. Insana. Now, House Speaker Dennis Hastert sent you a letter over
the weekend attacking poverty from a slightly different approach with
respect to more tax-cut-type incentives. Do you have common ground with
him where you can fashion some----
The President. Well, I want to have a chance to evaluate it. It
would seem to me, though,
[[Page 1145]]
that we would have--this is something that Democrats and Republicans all
agree on. I mean, our approach is a completely private-sector approach.
We do have, in addition to the big tax cuts I talked about, we have a
venture capital approach where we want to try to do a little more to get
real venture capital out there. You heard the lady testify today that
she went from being an employer to a business owner, and she had no
equity, so she had to have venture capital to start. So we do that. And
we have a little bit of technical assistance to help communities and
businesses that don't have any way of getting the information they need.
But apart from that, I think we ought to be able to find common
ground. I can't imagine that Republicans wouldn't want to do this. This
has got to be good for Republican businesspeople, to have a better
chance to invest in areas where you can have more growth without
inflation.
Interest Rates
Mr. Insana. Now, last week some congressional Democrats, led by
Barney Frank, came out and suggested that, if the Fed raised interest
rates, something you mentioned a minute ago, that it would hurt the
poor, people you've been visiting here over the last couple of days. Is
that what the Fed's doing, or is the Fed extending a noninflationary
economic environment by tapping on the brakes a little bit?
The President. Well, I think that plainly that's what the Fed is
trying to do. And I've made a real practice of trying not to comment on
interest rate changes and trying to let Chairman Greenspan and the Fed do their work, and I would do mine.
But again I say, look at what we've done here. I think if you just
look at Chairman Greenspan's own testimony,
we've all been somewhat surprised that we could grow as much as we have,
have unemployment as low as we've had, and have virtually no inflation.
And it's a tribute to the productivity of the American businesspeople
and the explosion of technology, and it's rifling through every sector
of the economy and giving us more high productivity-driven growth
without inflation than anyone dreamed.
The trick is if--to go back to what Barney Frank said--what he wants is to keep the economy going, to
keep the growth going until middle and lower middle income working
people can get their wages up to overcome the stagnation of the 20
previous years and until we can get more people caught up in the areas
where the recovery hasn't occurred. That's why, it seems to me, the most
important thing to do is to have initiatives like this which give you
concrete examples of how you can have growth without inflation.
Tax Cuts
Mr. Insana. Now, Republicans would argue that one other way to
extend the recovery here would be to cut taxes even further. And you
hinted last week in USA Today that, if you got what you wanted on
Medicare reform and prescription drug benefit subsidies, that you might
go along with an expanded list of tax breaks. Can you elaborate on that?
What would you accept in exchange for a Medicare deal?
The President. Let me make it clear. What I said was that,
obviously, we would be working together on all the appropriations issues
and expenditure of money if we did first things first. But I think that
it's quite important that the Republicans say how they're going to pay
for all these things. You know, they say they want even larger increases
for defense than I do, and I've proposed substantial increases. Then
they want huge increases in tax cuts. Do they propose to keep us in
debt? Do they propose to basically eviscerate the education and health
and environment budgets of the country? What is their proposal?
Of course, we will negotiate, but we ought to think about first
things first. Let me just say this: I think we proved in '93, when we
didn't have a single Republican vote and the Vice President had to break the tie in the Senate, that we were
right and they were not right about what would be the best economics for
their constituents. That is, when we passed that '93 economic plan,
there is no question that it sparked a huge drop in interest rates, a
huge increase in investment, and an explosion in economic activity. And
it had a lot more positive impact on the markets and on business
investment and on job creation than a tax cut, which perpetuated a
deficit, would have had.
Now, in 1997, we reached agreement on a bipartisan balanced budget
deal which kept that philosophy going. We continued to invest in
[[Page 1146]]
education and technology and research. We provided tax cuts to families
and for college education. We did it in a balanced way, and what's
happened? Now we've got this surplus.
I will say this: The most important thing we can do for the long-
term health of the economy is to say to the whole world, we're going to
make America debt-free in 15 years. If we did that, what does that mean?
Much lower interest rates, higher business investment, lower credit
card, lower consumer, low homeownership rates, higher wages.
So will we negotiate? Will there be a negotiation? Of course there
will be. But let's do the first things first. Let's keep America
economically strong. We've got 6\1/2\ years of evidence now about what
works. Why in the world would we take a U-turn and run this deficit back
up or just pull out of the education business?
Mr. Insana. Let me ask the question more simply than the way maybe
an individual might, which is, if I overpay my taxes every year, I get a
refund; if I overpay for 15 years, why can't I get a really big refund
and get that money back in the way of a tax cut?
The President. Well, how do you define overpay?
Mr. Insana. Well, if you're running a surplus, I mean, Government
has more money than it can use.
The President. That's right. But Government has more money than they
can use for 15 years after quadrupling the debt in the 12 years of the
Reagan-Bush years. I mean, we tried it their way. We tried it their way.
We tried all the supply-side economics. Every year--every year--they
came in and said, ``Oh, we're going to get rid of the deficit this
year.'' And every year, it got bigger and bigger and bigger. You go back
and look at what they said, my predecessors said was going to happen to
the budget and what, in fact, had.
You know, sooner or later, results should account for something.
Sooner or later, we should stop having this debate as if there is no
history, no evidence, no facts, no results. Now, we've produced an
economy with 19 million new jobs, the longest peacetime expansion in
history, and if we get out of debt, the average person will get much
more than they would from an extra tax cut.
Second, I am for a sizable tax cut. I have proposed a sizable tax
cut. I also supported the previous tax cuts, the $500 child credit, the
college credit which is $1,500 a year. I supported all these tax cuts.
But first things first. If we take this country out of debt for the
first time since 1835, then average people are going to have more money
in their pockets than if we keep the country in debt and give them a tax
cut now because we've got an election in a year and a half.
Stock Market and the National Economy
Mr. Insana. Can I stick in one final question? As we speak right
now, the stock market again is at a new all-time high; the Dow, the
NASDAQ, everything's going very well on Wall Street. Do you worry at all
about a bubble in the stock market or the economy today?
The President. Well, I think every person who's thoughtful, who
knows that nothing lasts forever, wonders how this will all play out. I
think every thoughtful person does. But I think what we should do is to
make the most of this and to make no move which would turn it into a
bubble prematurely.
But it seems to me again, we can have a tax cut, but if I
announced--just suppose, think about this--suppose you had an
announcement--you don't expect this to occur--where Speaker
Hastert and Senator Lott joined Mr. Gephardt and
Senator Daschle and me, and we said,
``Look, here's our program. Here's what we're going to do to save
Medicare; here's what we're going to do to save Social Security. We're
going to make the country debt-free in 15 years. We've got some more
money for education, and we've got to take care of defense, and here's a
sizable tax cut. This is our program.'' I believe that would lengthen
the period of this recovery. I think it would minimize the chances of a
bubble.
If, by contrast, we went out and said, ``Hot dog! Right here before
the next election, we're going to give you a $1 trillion tax cut.
Unfortunately, our deficit will be bigger, and we won't get ourselves
out of debt. And unfortunately, we'll have to cut education spending and
research. But we just think this is more important, and I know it didn't
work the last time, but somehow we think it will work this time--even
though it didn't work. We tried it for 12 years, and it never worked.
Somehow, we think, poof, magically it will work this time''--I believe
that my course of action is better for the American economy than that
latter course of action.
[[Page 1147]]
Mr. Insana. Mr. President, we appreciate your time. Thanks for
joining us.
The President. Thank you.
Note: The interview was recorded at 12:16 p.m. on July 6 at the loading
area of the Waterfield Cabinet Co. for broadcast later that evening. In
his remarks, the President referred to Catherine P. Bessant, Community
Development Banking Group president, Bank of America; and Alvin T. (Kit)
Stolen III, president and chief executive officer, Bank One Kentucky/
Lexington Market. The transcript was released by the Office of the Press
Secretary on July 7. A tape was not available for verification of the
content of this interview.