Public Papers of the Presidents of the United States: WILLIAM J. CLINTON (2000, Book I) - Remarks at the First Session of the White House Conference on the New Economy

[Public Papers of the Presidents of the United States: WILLIAM J. CLINTON (2000, Book I)]
[April 5, 2000]
[Pages 625-629]
[From the U.S. Government Publishing Office www.gpo.gov]

[[Page 625]]

Remarks at the First Session of the White House Conference on the New
Economy
April 5, 2000

The President. Thank you, and good morning. I want to welcome all
of you here for this conference. Let's get right to work.
We meet in the midst of the longest economic expansion in our
history and an economic transformation as profound as that that led us
into the industrial revolution. From small businesses to factory floors
to villages half a world away, the information revolution is changing
the way people work, learn, live, relate to each other in the rest of
the world. It has also clearly changed the role of Government and how it
operates.
This conference is designed to focus on the big issues of the new
economy: How do we keep this expansion going? How do we extend its
benefits to those still left behind in its shadows? What could go wrong,
and how do we avoid it? That's what I hope this conference will be
about.
The roots of this meeting stretch back to our first economic
conference in December of 1992 in Little Rock, shortly after I was
elected President. Then, some of the leading minds from around the
country and across the economic spectrum addressed a challenge that, to
all Americans, was immediate and clear: Unemployment was high; interest
rates were high; the deficit was exploding; the debt had quadrupled;
even an apparent recovery was generating no jobs; and inequality had
been increasing for well over a decade.
Thanks to a strategy designed to bring down the deficit and convert
it into surpluses, to expand trade, to invest in education, training,
and technology, and to establish conditions in which the new economies
could flourish, especially in the Telecommunications Act, which was
passed about 4 years ago now, the American people, American
entrepreneurs, have given us a remarkable recovery.
The performance of the new economy has been powered by technology,
driven by ideas, rooted in innovation and enterprise. It has opened
doors of opportunity and challenged our very understanding of economics.
I remember sitting around a table in Little Rock in 1992, asking my
economic advisers how low unemployment could get without triggering
inflation. The consensus was somewhere between 5\1/2\ percent and 6
percent. Now, bear in mind, these were people who were philosophically
committed to low unemployment and were willing to resolve doubts in
favor of it. No one believed then we could have 4 percent unemployment
on a sustained basis without inflation. No one believed that this
economy could generate productivity rates of more than 2 percent a year
on a consistent basis. Now, we're nearly at 3.
There is no single answer about how this happened. I think, clearly,
the nature of the new economy and the strength of the American
entrepreneurial system led the way. The fact that many of our
traditional industries and workers increased their productivity played a
role. I also believe the Government's commitment to fiscal discipline,
to expanded trade, to investment in people and technology, and to
cutting-edge research--and again I say, to establish the conditions in
which the new economy could flourish--played a large role as well.
Now, one of the things that I think is important to focus on is just
some basic facts. Information technology today represents only 10
percent of American jobs, but is responsible for about 30 percent of our
economic growth. It accounts now for about half of business investment.
And just as Henry Ford's mass-produced cars and the assembly line itself
had broad spillover effects on the productivity of the American economy,
these new technologies are doing the same thing, rifling through every
sector of our economy, increasing the power of American firms and
individuals to share broadly in its prosperity.
Today, information technologies allow industries to recognize,
instantaneously, changes in demand and to manage their inventories more
efficiently and quickly. They are speeding the development of new
products to market. Supercomputers, for example, have helped Detroit
automakers cut the development times of new cars by half or more.
They've helped pharmaceutical companies cut down the development time
for new anticancer drugs by several years.

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Clearly, they will have a profound effect, information technologies,
in biomedical sciences in the 21st century, as we see by the simple fact
that in the next few weeks we will announce for the first time the
complete sequencing of the human genome, something that will have been
literally impossible without information technology. And of course, just
contemplating the potential impact of nanotechnology on the biological
sciences alone staggers the imagination.
Information technology clearly is also creating a lot of more
mundane opportunities in E-commerce for traditional businesses, as well
as the dot-com companies. And business-to-business E-commerce is growing
even faster than business-to-customer commerce. In 3 years, it may reach
a staggering $1.3 trillion in the United States alone.
We know all of this is just the beginning. So now we want to share
the best ideas and ask the right questions. Economists, for example,
like to talk about speed limits for the economy: Do we have higher speed
limits today? Do they exist anymore? How do we measure the impact of
technology in this economy? What will be the sources of tomorrow's
growth?
We know when it comes to education that the right teacher and the
right computer can give a student in the poorest neighborhood the same
access to every library and every source of information as a student in
the most privileged private school. But those who are left out will be
left further behind. How do we close the digital divide?
Can poor areas in the United States and entire developing nations
leapfrog an entire stage of development, jumping ahead to cutting-edge
technologies, avoiding not only the time it takes to go through the
industrial economy but also the unpleasant side effects, particularly of
pollution and global warming? How can we best make that happen? How
important is information technology relative to other pressing needs of
developing nations, such as health or education or improving
agricultural productivity? Or do they go hand-in-hand? Technology can
allow nations to grow their economy without harming the environment. How
do we convince people around the world, and even in the United States,
that this is true?
I believe the computer and the Internet give us a chance to move
more people out of poverty more quickly than at any time in all of human
history. I believe we can harness the power of the new economy to help
people everywhere fulfill their dreams. On my recent trip to South Asia,
I saw the beginnings--just the beginnings--of that potential.
But it is clear that none of our hopes for the new economy--which
are really hopes for a better society, one in which we are brought
together, not driven apart; one in which we sustain our Earth, not
exploit it; one in which we lift up the poor, as well as those of us who
are better off--that these developments will not just happen. They, too,
will take new ideas, new initiatives, new innovation, the kind of thing
that so many of you have done for so many years now. I thank you for
being here. I thank you for being part of this dialog. And I'd like to
get started.
Our first panel discussion is entitled, ``Is the New Economy
Rewriting the Rules on Productivity and the Business Cycle?'' And I'd
like to ask Abby Joseph Cohen, chair of
the investment policy committee at Goldman Sachs, to begin.
Thank you very much.

[At this point, the first panel discussion began, and the President
called on several of the participants.]

The President. Thank you. I promised myself I wasn't going to
inject myself into this until we--[laughter]--until we heard from
everybody. But I just want to throw out two or three questions, because
I want to get--after we hear from the panelists, I want Secretary
Summers and our CEA Chair, Martin
Baily, to say a few words. And then I want to
have some questions.
But just--all of you have raised a couple of issues. Let me just ask
you to think about this, everybody. On this question of the business
cycle, we've had, since the Second World War and before the information
technology revolution, generally a trend of longer expansions and
shorter recessions. So that's, presumably, the product of generally
better economic management. Is there something inherent in the
technology revolution, as Professor Romer at
Stanford and others have argued, that basically, if it doesn't repeal
the business cycles, it makes them far more elastic even than better
economic management would warrant?
The second thing I think worth questioning is, have we avoided
inflation due to wage demands because workers are smarter than they used
to be and they understand that they're

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in a global economy and they can't ask for more than their company's
profits will warrant?
And the third thing I wanted to just ask you to think about, since I
was hoping Professor Galbraith would
raise this question of whether I was making a mistake to try to get us
out of debt, because some of my good friends have accused me of
practicing Calvin Coolidge economics--let me tell you what my reasoning
is, and I just want you all to think about this, because I'm prepared to
have somebody say I'm wrong about this.
The reason that I wanted to continue to pay down the public debt is
that private debt in this country is so high, both individual and
business debt, and I worry in the same way you do about that coming down
not only on individual firms and families but also on the economy as a
whole. So I figured what really matters is the aggregate savings rate or
the aggregate debt-to-wealth ratio, and if I can keep bringing down the
public debt, we could keep interest rates down and at least lengthen the
time between now and some darker reckoning on that.
So the reason that I always thought it was important to pay down the
public debt, once we got into surplus, is that private borrowing is so
high in this country. And the debt-to-wealth ratio is not bad at all,
because of the value of the markets. But still, the individual and firm
debts are quite high. So I was trying to get the aggregate balance
right, and that's been my logic all along and why I think it's different
from previous times when, I admit, the Government's been in surplus when
it should not have been.
Professor Nordhaus.

[William D. Nordhaus, a professor of
economics at Yale University, made brief remarks, and the panel
discussion continued.]

The President. Thank you. They did a great job, didn't they? Let's
give them all a hand. Thank you.
I would like now to ask Secretary Summers, and our CEA Chairman, Martin Baily, to make a few brief remarks, and then I will open to
the audience and the panel for discussion.
Larry?

[Treasury Secretary Lawrence Summers and
Council of Economic Advisers Chairman Martin Baily made brief remarks.]

The President. Thank you very much. Anybody in the audience like to
make a comment or ask a question to any of our panelists? Yes, ma'am. If
you could stand and identify yourselves, and then I'll just move around
the room as best I can.

[The question-and-answer portion of the session proceeded.]

The President. I would just like to make a couple of observations
just very briefly about this. Even though the participation of women in
the labor force is the highest it has ever been, the unemployment rate
among women is the lowest in 40 years. That's the good news. The bad
news is there is still about a 25 percent pay gap.
The unemployment rate among African-Americans and Hispanics is the
lowest we've ever recorded, although we've only been disaggregating it
for, I think, just a little less than 30 years. But still, it's much
lower. But the per capita income is still quite--there's a lot of
difference.
The poverty rate has gone down dramatically among African-Americans
and Hispanics but not as much for Hispanics as African-Americans--I
suspect because we have more first generation immigrants coming in
still, who are classified as Hispanics in all this data collection that
we do.
I would just like to posit--first of all, my sense is--and I've
fought this battle hard for all these years--that the opposition to
affirmative action is easing again, as the middle class members of the
majority feel a little more secure. But what I am interested in is, how
do we take these hopeful numbers and sort of translate them into genuine
economic parity?
For example, we're debating in the Congress now how much we ought to
raise the cap for the H-1B visas, basically to get the high-tech workers
into Silicon Valley, into the Washington, DC, area and other places. And
I basically--I'm a pro-immigration person, generally. I think it's made
our country stronger, and I'm not against this. But we don't still have,
in my judgment, a comprehensive enough strategy to move a lot of
African-Americans and Hispanics who are in the work force now--so they
have X level of education, but they're not yet in the new economy--into
that so that they're fully participating. And I think this is still a
continuing challenge for us. Two years ago African-

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American high school graduation rates equaled white graduation rates for
the first time in history. That's the good news, and all these things
you've said are absolutely right. But we're still not there on college-
going, college graduation, and participation in the new economy. And we
need a lot of focus on it.
The second question you asked is, what happens the next time there's
a recession? I'd like to point out, if I might defend the position I
took, briefly, in welfare reform, we basically--welfare reform, in terms
of the money that welfare recipients got, was already a State-determined
entitlement before welfare reform, because the States got to set how
much they were given. So the rate for a family of three varied
everywhere from $187 a month, roughly, in Mississippi, and about that
much in Texas, to $655 a month in Vermont, before welfare reform.
We kept the national requirement for food stamps and for medicine.
And what we're trying to do is find more efficient ways to move people
into the work force. We have done that. The great unanswered question
is, if there is high unemployment again, what do we do with the work
requirements and how do we make sure people get a good income stream
when they literally can't go into the work force? And that's a challenge
that will have to be addressed. But the tools are there to do it.
Yes?