William J. Clinton: Remarks at
the Goldman Sachs & Company
2004 Global Conference
A Sighting from The Catbird Seat
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WILLIAM J. CLINTON FOUNDATION
Speech: Remarks at the Goldman Sachs & Company 2004 Global Conference
December 3, 2004
New York, NY
Thank you very much. Thank you. Thank you very much. Thank you. Thank you, Hank, for that wonderful introduction. I probably should quit while I’m ahead. [LAUGHTER] And thank you, ladies and gentlemen, for the warm welcome.
I admire Hank Paulson very much for many things. His interest in Asia and our long-term relationship with the Asian Pacific community and particularly his leadership of the Nature Conservancy, some of you may not be familiar with it, but it is the principal private organization facilitating the preservation of precious natural land in the United States, and increasingly, in other places on the globe. I don’t think I ever told Hank this. But when I was the Governor of Arkansas, we used the Nature Conservancy more than any other State in the country.
I also want thank the people at Goldman Sachs, many of whom have contributed to the work of my Foundation, and the work we do around the world to try to fight AIDS and extend economic opportunity, to promote education and citizen service and to try to bridge the racial and religious divides that still bedevil the world. And I want thank Goldman Sachs for hiring at least a dozen people, who worked in the White House and other places in the administration. I was worried about what all those young people were going to do when we left office. [LAUGHS] So I am deeply in your debt.
We’re going to have a Question and Answer period later and if you want to talk about anything, including the last election, I’ll be happy to do it. But I thought I would try to speak a little today from my own notes. Look, I may have to put my glasses on [LAUGHS] about where we are with economic policy and where we’re going. The great thing about being a former President is that you’re not running for anything. You can’t run for anything and you can say whatever you want. [LAUGHS] The bad thing is you have no power so no one has to listen. [LAUGHS] My major power today is taking constituent requests for the Junior Senator from New York. [LAUGHS] I’m a Westchester County Caseworker for Hillary and I, [APPLAUSE] and I’ve enjoyed it a lot and I’m very proud of her.
But I’d like to talk a little bit about where we are economically and what the government’s policy choices are, because I think it was one of a number of issues that were not really discussed in great depth in the last election. Although it was to be sure a substantive election. We had three good debates. It was so much captured by the psychology of the moment and the questions about Iraq and the continuing efforts against terror, that there wasn’t a lot of discussion about it. So I wanted to just basically review what I consider to be some of the major decisions that will have to be made in the next four years.
Let me begin with 1992. When I was elected President, the country was experiencing slow growth. We’d been kind of in and out of a recession. We had high interest rates necessary to keep the dollar from collapsing because the deficit had quadrupled in the previous The debt had quadrupled in the previous 12 years and in addition to the government deficit, we had a huge trade deficit. We adopted a strategy, which was spearheaded by someone else I stole from Goldman Sachs, Bob Ruben, of deficit reduction designed to lower interest rates and increase investment; expanding our exports; increasing our investment in education, training and new technologies, especially to facilitate defense conversion, because we were having a huge defense downsizing and there was a lot of work that had been done in defense technologies that had civilian applications.
We also tried to get capital to businesses and individuals who were on the margins of society. We strengthened the enforcement of a banking law, called “The Community Reinvestment Act,” which had been enacted in the 1970’s and over 95% of all the money loaned under the CRA by 2000 had been loaned in the previous eight years. We increased loans to minorities and women through the SBA exponentially, created the empowerment zone and later the new markets program to give people more financial incentives to invest in poor areas, doubled the earned income tax credit, increased the minimum wage and passed Welfare Reform, all of which contributed to a substantial reduction in poverty and an increase in workforce participation.
Finally, we tried to remove the barriers to growth erected by the government for social ends, through Al Gore’s reinventing government program and particularly though the use of more market mechanisms to achieve environmental goals. By 2000, the country certainly not only because of government policy, but in part because of government policy, had enjoyed a record period of growth with more jobs, more new businesses and an astonishing drop in poverty, and this was due primarily to government policy. A hundred times as many people moved out of poverty in the eight years in which I served as in the previous 12 years.
We had a surplus. We had a program that I left in place, that if the interest savings from the surplus has been applied to Social Security, it could have been stabilized under the present form until 2053. Low inflation because we had kept our markets open, and among other things, we were buying about 35-40% of China’s exports with a country having, at that time, about 22% of the globe’s GDP.
Now it was interesting there, because there was a big article in the paper today about Chairman Greenspan and the head of the European Central Bank talking about the rise of Euro. In 2000, the Euro fell to 82 cents to the dollar and it was a terrible worry.
And there were already storm clouds on the economic horizon when I left office. There were problems with overbuilding in telecom and in the dot com markets, the NASDAQ. The telecom problem was fundamentally a problem of investments being made based on the, the late 1990’s, the mid-1990’s, when utilization was going up 500-700% a year. And when it collapsed, utilization was still increasing 50-75% a year but not enough to absorb all the investment which had been made.
We had also had a decade of zero growth in Japan. And Japan had reached clearly, I thought, the limits of conventional economic policy and deficit spending for dealing with this, with structural changes absolutely mandatory. We also had stagnation in the EU, where they had strict limits on how much annual deficit spending could be, but had not found a political response that could be implemented to changing the social contract in the EU enough to permit growth and new jobs to resume without giving up the things that make Europe special, like support, work and family life.
Into this mix, we had an election in 2000 and President Bush ran on what I thought was one of the most politically brilliant slogans I ever heard, “Compassionate Conservatism,” which was a code word to the swing voters that had voted for me, that had previously been voting for Democrats, that said, “Hey, I’ll give you everything Clinton did with a smaller government and a bigger tax cut. Wouldn’t you like that?” [LAUGHS] That’s basically what “compassionate conservative” was designed to convey to the swing voters. And the election came out as it did.
In 2001, we did something unprecedented, that apparently looked safe because we had a projected surplus of $5 Trillion dollars. We adopted a huge tax cut, before we adopted a budget, before we knew what our income was going to be, before we knew what our expenses were going to be, and before we knew what our emergencies would be.
Then on September the 11th, we had a terrible, unforeseen emergency. Combined with the underlying problems in telecom and the NASDAQ, 9/11 slowed the economy dramatically reducing government revenues at the very time when we had to have a big increase in government spending for defense to prosecute the conflict against Osama bin Laden and the Taliban in Afghanistan, and substantial increases in homeland defense. And later, of course, there were big increases to prosecute the conflict in Iraq and its aftermath.
In 2002 and 2003, we had modest growth with few jobs, most of which paid much less then the jobs which had been lost. Another round of tax cuts heavily weighted to capital and upper income people and we had a manageable rate of unemployment in part because so many people dropped out of the workforce. If workforce participation rates had been the same as they were in the late 90’s, the unemployment rate would have been over 7%, but a lot of people just quit looking for jobs. We also resumed our upward climb in bankruptcy filings, and one of the most disturbing things of all to me, there was a substantial increase in poverty.
In 2004, we had a huge, huge government deficit and a big trade deficit. We had to borrow a lot of money from somewhere. Increasingly our deficit is financed by foreign governments, particularly the governments of China and Japan, who want to prevent a precipitated fall in the dollar so that we will still be able to buy their exports. We see the Chinese currency remained tied to the American dollar with affects that were both positive and negative for us and for them. The Euro went above $1.30 with a lot of hand-wringing, which continues.
And oil went above $50 a barrel although it’s moderated now. It was quite interesting to me to see that the impacts of the increased oil prices were significantly less then they had been in the 70’s, partly because, except for automobiles, we’re more than twice as efficient now as we were then in the use of our energy.
So here we are about to enter 2005. President Bush has a new term. Politics, at least for the moment, are on the back burner. What should we do about the current economic conditions? The President wants to make the tax cuts permanent and apparently pass some more. There will be a huge request for supplemental funds for Iraq. He just announced that he wanted to send more soldiers to Iraq, a position I strongly support. If you want our soldiers to come home and that mission to succeed, we have to have enough people there in the short run to see that the elections are carried off and to more rapidly build the security forces of the Iraqis themselves but it will cost money. And we know that there are still We, New Yorkers, particularly know this. But we know there are still substantial specific unmet needs in homeland security.
We’ve done a good job of correcting the problems which caused 9/11, so nobody can hijack an airplane with a razorblade anymore. But that’s not what Osama bin Laden and the really sophisticated terrorists do. They are always looking for the next crease in our defenses and I'll just give you three examples.
They bombed the African Embassies in ’98, al-Qaeda did, because in the countries they used (Kenya and Tanzania) there were substantial African Muslim populations, which would give support to people coming in. Because a lot of the Embassies, including the American Embassies, were in old Colonial structures, which were right near the street and because the countries were poor and had insufficient and insufficiently trained security forces to protect these buildings from things like a truck with a bomb coming up, so it was easy to do.
So after that happened, I appointed a Commission and we scurried around and we improved Embassy security. But by then, they were on to a whole different thing. The next big target was the United States Cole, in the harbor at Yemen. And that was very interesting because the little boat that had the bomb that blew up the Cole, was the product of a lot of study of the behavior of American ships in port. In fact, as a matter of international law and able policy, we had a right to blow that boat up before it got close enough to do any damage, because it came without appropriate approval. But they studied this behavior and they realized that the American Navy could not blow up a boat that might just be a drunken fisherman, who had a bad night the night before and it was no win friends and influence people to be in a foreign port and then start shooting little boats out of the water. So they knew even though we could do it, we wouldn’t do it, because we wouldn’t dream that that would be the case. So the Cole occurred. And then adjustments were made by the Navy and their policy, and where they dock the boat and how people came into port and how they dealt with small ships, but they were on to something else, which was far worse, 9/11.
One of the things that I recommended to the 9/11 Commission is whether or not they unified all these Intelligence agencies or not, they should get the brightest people from them and put them in a separate place, create a think tank and start thinking like the terrorists do. “What’s the next thing they’re going to do?” Not the last thing. You have to fix the problem once you find it. But that’s why I say we need specific investments in homeland security. I’ll just give you two that affect New York, and to a lesser extent, the rest of the country.
There have been plans drawn, engineering plans for some time to reinforce all the subway tunnels here. It costs about $600 million dollars. It wasn’t done so the tunnels had to be closed under Madison Square Garden when the Republicans met in convention here. Because if you blew up a bomb in the right place in a subway tunnel, you could take down the Garden, from the bottom. That’s money, in my opinion, that ought to be spent. It wouldn’t stop a bomb being set off in a subway and the people being killed on the train or in the station, but it would stop the upward impact of all but the most powerful explosives.
Another and far more important example is that we only check 5% of the cargo containers at our ports and airports. If I were looking at how to harm the United States, I would being asking myself, “Could I insert a biological, chemical or small-scale nuclear device into one of the untolled hundreds and thousands of containers that come into this counter every day at our ports and airports. There was a security report received by the Congress a little over a year ago, which said that, “You don’t have to check them all. And in fact, if you check 10-20%, you would have some significant deterrent affect on this.” Because all these cargo containers are clearly marked. You know where they came from and it would be pretty easy to trace and the chances of catching who did it would be rather high. It costs a billion dollars per 5% of checks, for example. You could double the container checks for a billion dollars and you could quadruple it for $3 billion dollars.
Under the Budget Rules of the Congress, if the White House doesn’t propose this and the Congress does, they have to pay for it, either with a new tax, or some other revenue generator or some spending cut. The proposal made by David Obey from Wisconsin was defeated because it would have reduced the taxes of 200,000 people in America (including me) who paid-- It would have reduced the tax cut for the 200,000 people that paid taxes on over a million dollars, from an average of $88,000 to $83,000. I think it was a big mistake not to pass it because I think most people in that income group would have been glad to make a $5,000 contribution to the security of 300 million Americans. But there were ideological and political fears that it was the tip of the iceberg and it shouldn’t be done so the White House and the House Republican leadership opposed it, But we have to find some way to do this. And the election’s over now and we need to find a practical way, in my judgment, to deal with it.
Now let’s talk about what our economic options are, and I’ll just say what I think should be done. We could go on with this forever. We could make the tax cuts permanent. We could have more tax cuts. We could say, “We have to worry about social security reform, and tax reform” (and I’ll say more about that in a minute) and say, you know, “The Chinese and the Japanese need our market, so they’ll prop our dollar up.” So we’ll just keep spending more than we are willing pay for and we’ll not worry about the trade deficit and we’ll not worry about the budget deficit, which we have far more control over. And we just know this’ll go on forever, because they can’t afford to let the dollar collapse because then we won’t be able to buy our exports. So we just know that we alone, among all countries in the world (because trade is carried on in dollars and because we’re the biggest market), we can forever act in a way different from our stated values, defying the laws of arithmetic and different from the way we would let anybody else behave.
If Brazil or Mexico adopted the sort of economic policy we have, they’d be punished in a nanosecond. They couldn’t get away with it for a long weekend. We can say, “But we have a right to do this. This is the decision we made. We want to spend money and we don’t want to be taxed to pay for what we spend and you guys got to buy our debt, because you can’t afford for us not to buy your products.”
But I think it would be better if we had some more control over our future and we tried to get some more equilibrium into the global economy and help, and not expect the Japanese and the EU to bear too much of the load from their rising currencies and not basically be dependent on what the Chinese decide to do on both buying our debt and valuing the _____. So I think we should have a serious deficit reduction plan.
The second thing I think we need is a renewed vigor to expand our trade relationships. The biggest trade surplus growth we had when I was President was with Latin America. We need to proceed with the Free Trade pact of the Americas, or within individual countries or regions within the Americas, if that is not possible. I strongly support what the administration is trying to do with the Caribbean Trade pact, for example. I think we need to give more support to people at the bottom of the economic ladder to get them back into the workforce to make them consumers again, to make them contributors again, taxpayers again.
When I was President, we reduced the Welfare roles by 58% but very few of those people were just lost. Let me briefly back up and say-- I signed Welfare Reform legislation, which I strongly supported, because it required able-bodied people who could work, to work. It provided more support for education, training, child support and transportation and reinstated two things the Republicans tried to take out, a guaranty of food and medicine for low income families. However, the Bill did have one provision the Republicans wanted that I disagreed with, which was a five-year lifetime limit on Welfare. I thought that was a mistake because if someone’s five-year lifetime limit ran during an economic downturn, they would be thrown off the Welfare rolls with no reasonable prospect of getting employment.
So what you see now is the Welfare caseload that stayed down during the present economic downturn, but the workforce participation rate has not risen, as they did when we raised the minimum wage and increased support for lower income people, particularly lower income parents to go into the workforce. We have to change that, because we’ve got to get more people at the margins, into the workforce. That helps our economy as well as promoting social justice. I think we should be doing the same thing around the world.
The President went to Monterey, Mexico last year to the International Conference on Development and proposed this Millennium Challenge Account, which was a pretty good idea, I thought. Because he said, “We’ll give more money, but only to countries that will use it responsibly.” In that sense, it was an extension of what we did in 2000 with Global Debt Relief. “We’ll give forgive your debt if you’re a poor country, but only if you put the money into education, healthcare and economic development.” And it’s had a very, very positive impact. So I thought that the idea that President and the administration had was good, but we haven’t spent much money. And we know now that there are proven strategies to reduce poverty and increase earners and therefore consumers in the developing world, that I believe need to be much more aggressively pursued.
The fourth thing I think we need to do is to ask ourselves a simple question, “What could be the source of the kind of good, new high paying jobs in American in this decade that the high technology industry gave us in the decade of the 90’s? Where they comprised maybe 8% of our employment but contributed to 30% of our growth. An enormous increase in productivity, not just in the dot-com companies, but more importantly in traditional industries.
My major candidate is energy and the environment. We know there’s a $1 trillion dollar untapped market for energy conservation and clean energy products at today’s level of technological development. We know we are very, very close to new breakthroughs which will exponentially increase the size of that market.
I’ll just give you a tiny example. I just built my Presidential Library and dedicated it, in Little Rock. We had a big facility that I was determined would avoid the primary architectural problem of other presidential libraries, which is that there’s always a beautiful entrance. (Like if you’ve been to the Kennedy Library, where I.M. Pei shaped it like a sailboat going out in the Boston harbor). There’s that beautiful glass atrium, then the rest of it is dark.
Or if you’ve been President Bush’s Library, there’s a really gorgeous rotunda you walk into. The rest of it is three yellow brick walls. Why? Because under the rules, we have to keep all of our documents forever, and they can never be exposed to ultraviolet light. But it’s very difficult to have a museum which tells the real story of America and the world and our transition into the 21st Century, if you can’t have more light. So what we did was build two buildings. We put the documents in a building that was basically brick and put half of it underground. Then we put the exhibit building up off the ground and in glass and steel and the like. But it meant it was going to be an energy-guzzler unless we did some things. Some we adopted We bought some very fine-grained glass, which blocked almost all the ultraviolet lights and a lot of the heat. We put tubing, gradian(?) tubing under the floor, which carried hot and cold water, which reduced the need for air conditioning and heat from traditional sources, and we put 308 solar panels on top of the document building. And in total, we reduced the traditional consumption of that very large structure by a third. If I had more time and a little more money to figure it out, we could have reduced it by 50%.
All the solar panels were built in New Jersey by American workers. There is an unlimited set of options for doing this kind of thing. Of all the issues that were not discussed in the 2000 election, in any detail at all, that will affect the lives of Americans, I personally thought that energy, global warming and the environment topped the list. We had three debates and if the security issue, an economic issue, an environmental issue, and there was one question in three debates on it, from the people who were doing it. I think we can really significant advance the American economy and also set an example, which will cause different decisions to be made by China, India and others, in a way that benefits the economy if we do this right.
Finally, I think there are two or three structural questions we have to ask, in addition to what we’re going to do about deficit reduction. We still have a healthcare system that is high quality, but high cost and low coverage. We spend much, much more on administrative costs in our health system because of the way it’s financed than any other country in the world, between 8 11 cents on the dollar, as opposed to what we ought to be spending, which is 2 3 cents. And in a system that takes up roughly 15% of the GDP, that’s a huge amount of money. So we have to have some serious thought given to that...
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