From Mail-Server@lex-luthor.ai.mit.edu Fri Aug 6 19:58:37 1993 To: Clinton-News-Distribution@campaign92.org, Date: Fri, 6 Aug 1993 18:28-0400 From: The White House <75300.3115@compuserve.com> Subject: Altman, Tyson Briefing - 8/6/93 THE WHITE HOUSE Office of the Press Secretary ______________________________________________________________ For Immediate Release August 6, 1993 PRESS BRIEFING BY DEPUTY SECRETARY OF THE TREASURY ROGER ALTMAN AND COUNCIL OF ECONOMIC ADVISORS CHAIR LAURA TYSON The Briefing Room 1:28 P.M. EDT MS. MYERS: Hello. First we'll have an on-the-record, for camera briefing by the Chair of the Council of Economic Advisors Laura Tyson, who has to leave. So she'll take a few questions and then Roger Altman will brief. And then in the unlikely event there are additional questions, I will be happy to answer them. Q Very unlikely. (Laughter.) MS. TYSON: Well, we are very gratified to announce that since the Clinton administration took office the economy has created more than one million jobs. On average, the economy has been generating about 172,000 a month, compared to only 45,000 jobs a month under the Bush administration. In the six months -- six months of this administration, the economy has created 94 percent of the private sector jobs created in four years under the Bush administration. The unemployment rate announced today is the lowest in nearly two years. Now, it's true it's still not lower than it was at the end of the recession. There are still 8.8 million workers unemployed. There are still 1.2 million workers too discouraged to continue looking for work. We must continue to pursue policies that will boost employment, will bring the unemployment rate down. The first step we believe is passage of our economic plan. That's my formal statement. I'll be happy to answer questions. Q The President said in his interview with USA Today that he believed, without making an iron-clad pledge, that he believed that he could resolve the rest of the deficit without tax increases, that these would be the last tax increases. Do you agree that that will be possible? Can you forecast that as an economist? MS. TYSON: I think that we have to look through a variety of steps that one has to take; the economic plan is the first step. That if you look out there and you look to see what causes the deficit to rise again toward the end of this decade, that it is in the area of health care spending primarily. And we believe that the only way to get health care spending under control is a health care reform. We also believe, based on numbers which have been put together by the Health Care Task Force, that there is enough inefficiency, redundancy, administrative overhead in the current system that we can gain a tremendous amount from reform that should allow us to bring the rate of growth of health care spending under control. So in that sense, I think our strategy is to look for additional spending cuts throughout government, also through the national performance review. Q Just to follow up. You think you can provide health care to those who don't have it and reduce the deficit without another round of tax increases in the next three and a half years? MS. TYSON: What I think is that there are enough redundancies and inefficiencies in the existing system to allow us to end up through a gradual process, a gradual process, to cover the uninsured and to bring the rate of growth of aggregate health care spending down in the country. Q Is that a yes? Q So you're saying it won't involve new taxes? MS. TYSON: I am not speaking to the issue of the details of the health care reform package at this point. I'm speaking to the numbers. What the numbers show you is that if you look at the anticipated savings from reform, from a variety of different studies by independent experts around the nation, and you look at the costs associated with covering the uninsured -- that the savings in the system from reform can cover that. That is what I'm saying. As far as the details of the health care reform package, it's premature to comment on those. Q Some of the savings have also indicated -- some of the documents that the task force has put out have indicated you're considering some sort of recapture tax, at least for those industries which you feel are benefitting from reform. Is that not being considered, or don't you consider that a tax? MS. TYSON: Let me just -- without -- since this is really a briefing on employment and unemployment rates, let me just emphasize that the health care reform process -- the decisions on health care reform are not finalized. So it's really premature to speculate on the individual components of health care reform. Let me emphasize, however, that the system we currently have in place has a number of implicit taxes, if you will. It was observed, I believe, by The Washington Post correctly that any attempt to eviscerate the Medicare or Medicaid programs without reform would essentially result in a huge implicit tax on those who are insured and on the private sector that provides insurance in the form of much higher insurance premiums. So the system as it exists, through cost-shifting mechanisms, does involve parts of the system paying for coverage of other parts of the system. But I really -- it's premature, because no decisions have been made on the specifics of health care reform to really go into that discussion here. Q All those jobs since January 20th -- every single one of them should credit the Clinton administration with their employment? MS. TYSON: What I said in my comment was since the Clinton administration took office, the economy has created more than one million jobs. I think that there has been a lot of speculation about whether or not -- concerns in the private sector about our plan might be undermining the job creating capabilities of this economy. I think if you look at the numbers, that really suggests that the economy, in anticipation of our plan being passed -- there's full knowledge out there of what this plan entails -- has, since the beginning of this year, created more than one million jobs. And in that sense -- and we believe strongly that it has been in anticipation of the plan's passage and the 100 basis point reduction in long-term interest rates which has fed into growth in business, fixed investment; it's fed into growth into consumer spending, particularly on durables, such as automobiles. And that has helped the private economy to create jobs. Q Does that anticipate a short-term contraction when the plan is passed that is liable to cost jobs? MS. TYSON: Well, the plan has created -- I think the truth is that when we started this process, our approach as economists was to assume that the plan would generate substantially lower interest rates. The timing of that, when interest rates would fall and how rapidly they would fall, is a little uncertain. Existing models don't tell you that. We have -- I think the economy has benefitted tremendously from having an early anticipatory reaction to anticipated passage of the plan in the form of this dramatic reduction in long-term interest rates. Long-term interest rate decline takes a while to feed its effects into the economy. In fact, one would anticipate the effects would build over time, rather than be reduced over time. We anticipate, and most private sector forecasters anticipated a stronger second half of this year than first half, and a stronger next year than this year. And that is based on the interest rate effects on spending on encouraging more investment spending and more consumption spending. Those effects occur with a lag. So that as the government is reducing its spending as part of deficit reduction, and as the government is increasing its revenues as part of deficit reduction, the economy will be shifting demand towards those parts of spending that are most intrasensitive. And that is the strategy and that is why we believe that the economy will grow through deficit reduction. Q Is it going to pass? Q Then why is the Index of Leading Indicators so lackluster if you're saying that all these jobs were created as early anticipatory reaction? MS. TYSON: I guess what I would say there is we have underway what is a modest economic recovery. We hope that the pace of economic recovery picks up. We believe that it will, because if you look at the timing of interest rates' effect, they do occur with a lag. I think that any residual uncertainty out there about what is in the plan, how it will affect the average small business, how it will affect the average consumer, that those uncertainties will be resolved by passage of the plan. That the reality of the plan is very different from a lot of the stories out there about what the plan will do. That will, I think, help to secure the pace of a faster recovery in the second half of the year. Q When did the recovery stop being a jobless recovery? MS. TYSON: I would say the following about the recovery. In fact, what the numbers show you is that the rate of growth of jobs creation in this recovery -- if you go back to the beginning of the recovery -- the end of the recession, which is now well over two years ago, the economy itself has had a very slow pace of recovery and, therefore, a very slow rate of job creation. The pace of economic recovery started to pick up in the last quarter of last year. The employment numbers started to pick up. So I think you would say that the recovery has been a modest recovery compared to other postwar economic recoveries, and in that sense, we certainly have not created -- the economy has not created as many jobs as would be characteristic of a strong recovery. This remains a modest recovery. Nonetheless, I want to emphasize that the pace of recovery has really picked up. If you look at the numbers and you look -- again, just let me leave you with what to me is perhaps the most salient fact -- that since, in six months, the economy has created 94 percent of the private sector jobs that were created in the previous four years, the pace of recovery has certainly picked up. We want to secure that. We need to secure that by passage of this plan. If the plan doesn't pass, we're very concerned that interest rates will rise and that the boost to spending, which has primarily been in the intrasensitive components of spending, that that boost will dissipate and that, in fact, we will have a strangulation or a slowing of the pace of recovery because of higher interest rates. Q So, with hindsight, the short-term job-creating stimulus package really wasn't necessary? MS. TYSON: Let me also leave you, though, with the other numbers. This is a modest recovery. There are still 8.8 million workers who are unemployed and 1.2 million too discouraged to continue looking for work. The economic stimulus package was a very reasonable, fiscally-responsible, cautious down payment on an investment agenda which would have created more jobs in the short run. It was a sensible part of the plan. It was defeated. I hope the next sensible part of the plan is not defeated. Q What do you think, will it be? DEPUTY SECRETARY ALTMAN: Hi. I'm just going to say a word or two from the perspective of the so-called war room. A lot of people have asked what's going on, what are we doing in the wake of last night's vote and today. And I would simply say that we're continuing to do what we have been doing, which is primarily addressing the task of expanding public support for the President's economic plan, dispelling a series of myths about it, and explaining to the American people why it's good for jobs, as Laura just alluded, why it's good for growth, and why it's good for the country, and what the consequences of not passing it would be, and why they would be adverse from the point of view of financial markets and the economy. It's a hard job because our opponents have spread a lot of distortions about this plan. You hear that the middle class is going to bear the brunt of new taxes, and certain polls still show that. And, of course, that's not true, with 80 percent of the taxes in the plan being paid by Americans earning more than $200,000 a year. We're trying as hard as we know how to be sure the American people understand that. You hear, of course, that there are no spending cuts in the plan, and yet, there are $255 billion and they're laid out line by line, program by program, in it. You hear that the plan is bad for small business, and yet, of course, 90 percent of small businesses are going to be eligible for a tax cut and only four percent of them are going to pay higher taxes, and those four percent don't happen to be those that are primarily creating new jobs, or at least the ones that are creating most of the new jobs. And as far as the consequences of not passing it are concerned, we've said quite a few times that it would undoubtedly unnerve financial markets and interest rates would rise. That environment usually unhinges the stock market which is at a record high. It would -- business confidence would take a hit; consumer confidence would take a hit, and we would slide backwards. A lot of you know that we've had a great deal of business support for this plan. A long list of chief executive officers around the country who have been working to help us pass it, interacting with all of you and interacting, of course, with members of Congress. We've had a series of the most prominent financial leaders and business leaders in the country in the last few days trying to explain the consequences of adopting the plan versus the consequences of not adopting it. And that also continues. In the most basic sense I think we're finding that when the public understands what is in the plan and what is not in the plan, public support for the plan rises. And that's what we're continuing to try to do. Our effort there is primarily focused out in the country, not relative to the Hill. Q Are you going to pass it? I mean, you don't sound very optimistic. DEPUTY SECRETARY ALTMAN: Oh, we think we'll pass it. Q Do you have the votes? Do you have Kerrey? DEPUTY SECRETARY ALTMAN: We think we'll pass it. Q You all have emphasized in the last few days a commitment to more budget cuts and, in fact, another round of budget cuts in the fall. Can you -- how do you justify some of the deals that were cut in the last 24 hours? You've got a nuclear weapons plant for Amarillo for Bill Sarpalius, Solomon Ortiz got the promise of defense conversion projects for Texas, job corps centers for Earl Hilliard in Alabama. How do you explain those kinds of arrangements in the context of promising congressmen that you're going to keep cutting the budget? DEPUTY SECRETARY ALTMAN: Well, as I said, there are very, very major spending cuts in this budget -- $255 billion. And as I say, they're laid out in great detail. It's one of the greatest assaults, if not the greatest assault, on not just deficit reduction, but the spending side of that equation that we've seen. And we're serious about it. It's very evident that the congressional mood is serious about it. And I think the amount of deficit reduction which we have pledged to achieve -- reducing the deficit in half in relation to the size of the economy, getting to the point where the relationship of the national debt to the economy is turning back down again, both of which will happen at the end of this budget period -- we think those will be achieved. Q How do you defend these kinds of projects, which is old-fashioned congressional pork, trading pork for votes? DEPUTY SECRETARY ALTMAN: Well, I just think, Andrea, we're committed to achieving what we have pledged to commit in terms of our deficit goals, and I think we will. Q Well, why can it not be said that you're buying votes, that you're giving away the store to get what you want? DEPUTY SECRETARY ALTMAN: I think, speaking for myself, I think the legislative process is the legislative process. Q It's pretty ugly, huh? (Laughter.) Q the budget cutting measures that were announced yesterday on the Hill by the House leaders, are you still considering some form of either White House conference or budget session as proposed by Senator Kerrey? DEPUTY SECRETARY ALTMAN: Well, our main focus is on accomplishing what we've pledged to do. The Vice President's national performance review will undoubtedly come forth, even though final decisions haven't been made, with some very substantial recommendations in terms of consolidations and other methods of achieving savings. I think people will be surprised at how sweeping those recommendations are. And -- but I think if we achieve what we said we will do -- and I think that we will -- in terms of these spending cuts and this amount of deficit reduction, it will be quite and achievement, and that's our focus. Q Director Panetta, when asked a similar question a few days ago, said that he thought an idea like a budget session might actually be complementary to what Vice President Gore is trying to accomplish. And the one, as you know, is just more focused on just reinventing government and improving services, not necessarily going in and reexamining tax incentives, et cetera. DEPUTY SECRETARY ALTMAN: Except that what we're addressing here through the national performance review is basically a question of efficiency and waste. And I know that some of the things they're taking about in regard to the Treasury are very substantial from the point of view of consolidating activities and doing more with less. And I think that will be a major additional step, as will health care reform. Q What about budget session, this idea of a budget session? Is there no room for that in addition to the national performance review? DEPUTY SECRETARY ALTMAN: If the question is a budget summit of the type we've had before, we've made clear we don't think that's a good idea. Q That was not what the proposal was. It was an idea like perhaps a 10-day period on the Hill where congressional -- the Congress could look at various ways of cutting spending through entitlement cuts, discretionary cuts, even reexamining existing tax incentives, or, perhaps, the President himself calling a conference for a few days. It was indicated yesterday by the administration official that a White House conference could be within the parameters of what Senator Kerrey wanted. I'm just asking you, are you still considering either a White House conference on budget cutting, or would you endorse the idea of a separate budget session being held in Congress in September? DEPUTY SECRETARY ALTMAN: I really can only say, given what my responsibilities are and what they aren't, what we're focusing on now, which is to get this plan, which we think is a good plan, adopted and get that ball over the goal line. Q What are you doing today in terms of educating the public and surrogates and media in, say, Nebraska? (Laughter.) And do you think your operation will continue? If the Senate passed the bill today, do you think your operation would continue, or do you think you'll shut it down? DEPUTY SECRETARY ALTMAN: First of all, it will continue for a while, because we still have work to do in terms of dispelling some of these myths and explaining again and again and again why this is good for the country. So we're going to continue in business for a while. Q What about Nebraska? What are you doing today, specifically? DEPUTY SECRETARY ALTMAN: Well, we have an effort underway today which is similar to almost every day we've had. We have a variety of surrogates doing the type of work they've been doing. We have a constituent outreach effort continuing, probably at its peak today in terms of a Senate vote. We have a lot of media work that's continuing and so on. There's no special concentration on Nebraska. Q Can I follow up that? The Republicans are making a big deal out of the retroactivity in the floor debate this morning. They were raising questions about the constitutionality of having a retroactive tax not only before the session of Congress started, but before the Inauguration. And they're saying this is the first time in U.S. history there's been a retroactive tax before the Inauguration and before the session of Congress. Is that true? DEPUTY SECRETARY ALTMAN: Wolf, what they don't want you to know is that 98.8 percent of American taxpayers are not influenced by this issue. If you listen carefully to what Senator -- or, if you listen at all to what Senator Dole says, he fogs it up. And I've been listening very carefully to these debates and getting a lot of questions about it. And when you explain to people that roughly one percent of taxpayers are conceivably influenced by this, most people, of course, say, "They are? I didn't know that." But that's the most important single fact. Second of all, it's not retroactive in the real world. The President said literally thousands of times during the campaign what he intended to do by way of income tax changes. His proposal on February 17th was exactly what he had said it would be during the campaign. So many Americans, of course, shifted income from '93 into '92 in anticipation of that. And in terms of what retroactivity means to me as a businessman, it's not retroactive. There couldn't have been more advance notice of this if every city had a huge dirigible flying around above it. Q There's a column here in the Wall Street Journal that's saying that the President is floating in a forthcoming Fortune Magazine interview the idea of a value-added tax because the bill that you're now backing just doesn't provide the revenues. Do you have any response to that? DEPUTY SECRETARY ALTMAN: I don't know anything about it. Q Why would the markets react badly if the bill goes down as a result of the demand for more spending cuts and more deficit reduction? DEPUTY SECRETARY ALTMAN: Markets hate uncertainty. And there will be great uncertainty created by a hung jury here. And if you just take a look -- it will take you just a couple of minutes -- at the credit market column the last few days in the Wall Street Journal, you'll see that the market has been reacting very noticeably, according to the Journal, to the prospects for completing the plan or any uncertainties about completing the plan. I really don't think there's much doubt that a failure to adopt the plan would be bad for financial markets. And certainly some of the leading financial experts in the country, from Paul Volker to Henry Kaufman, have been calling various members of Congress to make that clear. Q Mr. Altman, just a question about -- in your briefing in the Treaty Room a couple of weeks ago, you said there were no numbers to show how many jobs were created by small businesses earning different amounts of money. Now, today you just said that four percent of the small businesses that are affected by this aren't the ones that are creating new jobs. DEPUTY SECRETARY ALTMAN: By and large. Q Okay, but the last time we asked this question you said there was no way to know. DEPUTY SECRETARY ALTMAN: Since I said that, a person who's probably considered the leading expert on small business job creation, David Birch at MIT, has released a statement. And the essence of his statement is that the firms that tend to be creating the most jobs among small businesses are those which are investing -- which are growing fast, reinvesting their profits into investment, and who don't typically have earnings at the threshold which would make them eligible for the new tax. He happens to call them gazelles -- you know, little businesses leaping forward. And I just think he's put it well. And, as I say, he's probably the leading expert in the country on that. And we didn't have anything to do with what he said. Q Are you going to win? DEPUTY SECRETARY ALTMAN: I think we are. THE PRESS: Thank you. END1:50 P.M. EDT