News: Analysis & Commentary: Q&A
Clinton: "I Do Believe in the New Economy" (extended)
President Clinton has a plan to spread the wealth
On the eve of a barnstorming tour to promote his new Medicare plan and unveil an initiative to bring the New Economy boom to inner cities, President Clinton sat down with Business Week White House Correspondent Richard S. Dunham on June 29. Note: This is an extended, edited, online-only version of the Q&A that appears in the July 12 issue of Business Week.Q: Do you think the New Economy is as big a boon as its backers claim?
A: I do believe in the New Economy. Technology is rippling through every sector of economic activity in ways that have given us dramatic increases in productivity and potential for growth without inflation. And I think most [economic] models have not accurately measured it. Therefore, the most important thing for government policy is to be fiscally responsible, to create the conditions where people can prosper, and then to do things that will accelerate the trends that are already under way.Q: Can the economy sustain its current high growth rate?
A: The opportunities are stunning.... If we can adapt the world trading system on the theory of leaving no one behind and making maximum use of new technologies, I think this thing could go on indefinitely.Q: What is Federal Reserve Board Chairman Alan Greenspan's role in the new cycle of prosperity?
A: Mr. Greenspan and the Fed do a perfectly good job, and we've had a good partnership by recognizing each other's appropriate roles. No one believes that we have completely repealed the traditional laws of economics, that we have completely repealed any tendency toward inflation, or that we've completely repealed business cycles. But we've dramatically improved [our chances] through this technological revolution.Q: What about another Fed term for Greenspan?
A: I haven't talked to him [about that]. I don't even know if he's interested.Q: Let's go back to the economic boom. Why hasn't it extended to run-down inner cities and rural areas?
A: There has been a remarkable amount of trickling down. We have the lowest minority unemployment rate among African Americans and Hispanics recorded in the nearly three decades [of such statistics]. Detroit, for example, has an unemployment rate of roughly half what it was in '93. On the other hand, there are two reasons why it hasn't. One is: There are enormous premiums in this New Economy for educational skills, so that people who don't have an education are more likely to remain unemployed, and, even more significantly, are more likely to remain underemployed or relatively undercompensated. The other thing...There are still disincentives to invest in the neighborhoods and people who still need to be brought in.
The business community is not fully aware of the opportunities it actually has to make money. And frankly [there are] still some greater risks in these areas, which we ought to try to overcome by putting in place a framework where there is much more incentive to invest.Q: Some corporations have invested in poor areas, but many others are holding back. What can you do to encourage more companies to take the plunge?
A: There are two things we can do, and I hope to do both on this tour. First, is to make sure that all the people who make investment decisions understand that there are very gifted, very hard-working, very creative people out there in these communities and there are enormous opportunities. To shine the light on what's going on and what's out there...
And secondly, I hope to build bipartisan support for passage of the Markets Initiative, which will, in effect, make it more attractive for people to invest in these areas by giving them a tax credit of up to 25% and making certain investments ineligible for loan guarantees of up to two-thirds of the amount of the total investment. If you a goverment guarantee of up to two-thirds of the total investment and you get a 25% tax credit on what you put up, that cuts the risk considerably in ways that I think are important. So I hope to achieve that.
There is a moral logic here, which is that we don't want to go into the 21st Century at an all-time high in prosperity and leaving so many people behind. There is also a very compelling economic argument. Q:[Citigroup CEO] Sandy Weill says that if the U.S. government can create programs that protect American corporations from some of the risks of investing in developing countries around the world, it should offer similar incentives for American businesses to invest in distressed areas at home. What do you think?
A: What we tried to do is to create at least the same -- if not greater -- incentives for American businesses to invest in America that we give them in developing countries overseas. I've been a vigorous supporter of the Overseas Private Investment Corp. and and the U.S. Export-Import bank...and I have strongly opposed attempts to cut back on them in the last six years. But I woke up one day and realized that American businesses could get lower risk to invest in the developing economies overseas than they could in the developing economy here in America. And I think that's wrong. Hence, the American Private Investment Company that we set up...that directly came out of our attempts to parallel the incentives for investing overseas.Q: What do you think of the efforts Jesse Jackson has made working with Corporate America, Wall Street, and now Silicon Valley to get Corporate America to hire more minorities, to invest more in minority areas, and to help underwrite more minority-owned businesses?
A: Well, I strongly support it, and I've spoken to his Wall Street conference in each of the last two years. I think he deserves a lot of credit. He's been trying to get this done for a long time.Q: The Office of Management & Budget has released new estimates that show the surplus may be $1 trillion bigger over the next decade or so than was expected. Does this increase odds that you and Hill Republicans can cut a budget deal on entitlement reform and tax cuts?
A: When you have more money than you thought you were going to, it should make it easier to have an omnibus agreement. I want to caution, however, that what we have this year [is real]. Everything else, we are projecting. [Still], this should make it easier to make an agreement on Social Security, Medicare, and paying down the [national] debt -- and still have funds for education, medical research, tax cuts, you name it.Q: So all these things are possible...
A: We [still must] have our priorities in order. We don't want to go off an have a big tax cut and ignore Medicare and Social Security liabilities, or the enormous opportunity to pay off the debt over the next 15 years. This idea should have appeal to Republicans as well as Democrats. And I still believe that a big portion of tax cuts ought to be directed toward helping more people save toward their retirement. My proposal deserves some consideration from the Republican majority because I think it's good social policy, and it's a good way to increase savings. Edited by Douglas Harbrecht