View from the Top: Clinton on the New Economy

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President Bill Clinton speaks at the first Granoff Forum, while Philadelphia Mayor John Street, Penn President Judith Rodin and Forum sponsor Michael Granoff C’80 (far right) listen. 

The world—and the economy—has changed a lot since Bill Clinton’s last formal talk at the University [“Gazetteer,” May 1992]. Back then, while still slugging it out for the Democratic presidential nomination, he exhorted the mostly-Wharton audience to help “bring an end to the something-for-nothing ethic of the ’80s”; fired pot-shots at the “do-nothing” president, George Bush; and talked about the positive role that government could play in stimulating the economy.
    This past February, as the inaugural speaker of the Granoff Forum, Clinton spoke on “The New Economy”—and having presided over the longest economic expansion in the history of the Republic, it was a subject dear to his heart. The purpose behind the Granoff Forum—in the words of its sponsor, Michael D. Granoff C’80, president and CEO of Pomona Capital, a venture-capital group—is to “catalyze a dialogue between the business and the public-policy community that will lead to new ideas that will shape the next century.” And in the spruced-up, acoustically friendly confines of Irvine Auditorium, Clinton discussed in detail both the reasons for the booming economy (which included a fair amount of back-patting) and his vision for maintaining it.
    The first factor Clinton cited for the economic expansion was sound fiscal policy—specifically, the nation’s willingness to cut the national debt through spending cuts and taxes after having quadrupled it during the previous 12 years. The budget that Congress passed—by one vote—in 1993, he said, was “designed to cut the deficit by $500 billion; it actually did almost double that.” That and the Balanced Budget Act of 1997 have resulted in “the first back-to-back budget surpluses in 42 years.”
    Those deficit reductions, he added, “set in motion a virtuous cycle—reducing interest rates, freeing up an enormous pool of capital for private-sector investment,” and enabling people to borrow money and invest it in businesses, new technology, houses, cars—even a college education.
    Along with the “good monetary policy coming out of the Federal Reserve,” Clinton pointed to dramatic productivity gains that have allowed unemployment to drop to 4 percent without sparking inflation. Over the last four years, productivity “has grown at the rate of 2.8 percent a year,” roughly twice the rate in the seventies and eighties. And that surge in productivity, he said, was “overwhelmingly” the result of “technology investments,” especially in the realm of information technology.
    “Today, information-technology industries and firms alone constitute less than 10 percent of our employment, but have contributed about a third of our economic growth over the last seven years,” Clinton said. “Generating jobs, parenthetically, that pay about 80 percent more than average wages in America. And just as Henry Ford’s mass-produced motorcars and the assembly line itself had broad spillover effects on the productivity of the American economy, these new information technologies are doing the same thing—rifling through every sector of the economy and increasing the power of American workers and American firms to produce well, and to broadly share [in the profits].”
    That “little-appreciated fact,” he said, “is why everybody underestimated both the length and the depth of this economic recovery. There are very few models which can capture it.”
    Clinton took credit for a number of accomplishments, including “an historic information-technology agreement, which will eliminate tariffs from $600 billion worth” of high-tech products; the “first comprehensive telecommunications reform in 60 years”; and having pushed for “an extension of the research and experimentation tax credit” that increased the national science and technology budget “every single year over the last seven years.”
    But he also gave credit for “two decades of bipartisan support from the White House for open markets in America,” noting: “It’s not just exports that are good; imports can be good, too.” In addition to giving consumers more choice, he said, imports have “contributed to greater competition and kept down the rate of inflation.”
    In praising the role of the nation’s “sophisticated capital markets,” Clinton noted that Americans have been more able to “get credit when they needed it for venture-capital enterprises,” which help “build the new economy.” But he also told the audience that there “ought to be more venture capital” available to those who “haven’t had access to it.”
    To keep the economy roaring, Clinton emphasized the importance of maintaining fiscal discipline, noting that if the nation pays off all its publicly held debt over the next 13 years, it will be “debt-free for the first time since Andrew Jackson was president.” That will give future generations a lower “structure of interest rates,” he pointed out, “and unless you believe that the process of globalization is somehow reversible, and that global capital markets will somehow cease to exist, that has got to be good policy.”
    In addition, he said, “we have to continue to improve the productivity and availability of the American people,” given the substantial numbers of people who are unemployed and underemployed. Given that “two thirds of the new jobs that are being created [are] in the suburbs, and three quarters of the people who want jobs are in inner cities and rural areas,” he said, “we have to take all the people that are on public assistance of some kind or another and make sure they all have education, training and access to jobs.” 
    Clinton’s third piece of advice was to “continue to push for open markets and free trade,” explaining: “That’s why I strongly support bringing China into the World Trade Organization. If we do this, 20 years from now we’ll look back and wonder why we even debated it. And if we don’t, 20 years from now, we’ll still be kicking ourselves in the seat of the pants.”
    In addition to urging Congress to “pass a new bill to open trade opportunities” to places like India, Africa, the Caribbean basin and Latin America, Clinton also said the United States should “do its part” to relieve the debt of the world’s poorest nations in return for a commitment to invest that money in certain areas. A lot of them, he said, “can’t be our trading partners, can’t grow, can’t stabilize, because they’re spending money they ought to be spending on education and health care and economic development, paying interest on debts—and they’ll never catch up.”
    Finally, he said, “we’ve got to continue to deal with the full implications of this revolution” in science and technology. “Sooner or later,” he added, “even the most hard-headed rejectionists will have to acknowledge that the problem of climate change is real—and that we had better find a way to grow our economy and improve our environment at the same time. When we do that, we will realize that there is a $1 trillion potential market that will do wonders for the American economy—if we are out there with the products and services necessary to save the planet.”

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