Current Shareware 1994 January/SHAR194.ISO/articles/wh930806.zip/8-6E.TXT

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From [e-mail]  Fri Aug  6 19:58:37 1993
To: [e-mail],
Date: Fri, 6 Aug 1993 18:28-0400
From: The White House <[e-mail]>
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