[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

[[Page 1433]]

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

[[Page 1434]]

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

[[Page 1435]]

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

[[Page 1436]]

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.