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| TREASURY SEC. SUMMERS | |
 September 23, 1999 
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U.S. Treasury Secretary Lawrence Summers examines the tax plan veto, alleged Russian money laundering and the U.S. dollar's falling value against the Japanese yen. |
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LAWRENCE SUMMERS: Good to be with you, Jim. JIM LEHRER: You were listening to that debate between Congressman Bonior and Congressman Watts. Is the end result just going to be a campaign issue for the year 2000? |
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| The tax plan veto | ||||||||||||||||||||
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I think that's the discussion we should be having. It's the one we certainly want to have with all sides and to work out what's best and reflect everybody's priorities as to how best to do what I think most people who look at the American economy think we need, which is paying down that debt, and using the surpluses to meet the obligations that we know we're going to have in the future and budgeting in a real way, not so we can grow the government. God knows, it's 500,000 fewer people than we had six years ago. But rather, so we can avoid having huge 50 percent cuts in education and Secret Service and all the things that the government does. That's what we ought to be sitting down to do. And that's certainly what the president made clear today he's prepared to sit down and do. JIM LEHRER: But Congressman Watts just said that the president has yet to come to the table. There have been no negotiations between the White House and the Republican leadership or the Treasury Department and the Republican leadership. LAWRENCE SUMMERS: Well, the president has laid out a Medicare plan. The president has laid out a framework where you put that money into Social Security. No, the president isn't going to talk about tax cuts that would use up all the available funds and force 50 percent cuts on education. He's not going to do that. No, the president's not going to sit down and have a negotiation about privatizing Social Security because that's the wrong thing. If there is agreement on the basic thrust, as he said today, which is saving the surpluses, using them to extend solvency of Social Security and Medicare, I can assure you that we're ready to sit down anytime and to try work something out. |
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| Alleged Russian money laundering | ||||||||||||||||||||
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JIM LEHRER: All right, Mr. Secretary, on to some other things here. On money laundering, you and Attorney General Reno announced some proposals today to tighten the laws on money laundering. But the head of the I.M.F. said today they have found no evidence of fraud and money laundering in the Russian government. Does that jive with your understanding of the situation?
You know, a few years ago in Russia, a pack of Marlboros costs the same amount as a barrel of oil. And in that kind of environment, you're obviously going to get people with oil who are exporting it for dollars and all kinds of distortions. We've worked to reduce those kinds of situations. So I don't think anybody who's looked at the Russian situation can be satisfied or can fail to recognize that Russia needs to put in place the rule of law. But I do think, without minimizing their problems in any way, that people also do need to remember that it's a different country than it was a decade ago. It's turned, I think, irrevocably from communism. It's spending 10 percent of what it used to be spending on defense. It's much more open. What we've got to do is be very hardheaded but recognize that we do, as a country, have a huge interest in whether Russia becomes a market economy, whether it stays a democracy, on how it makes the very difficult transition from a society that was really ruled by the law of force to a society where it can be the force of law that's decisive. JIM LEHRER: So the I.M.F., despite the corruption, the money laundering, the I.M.F. is correct and you support their decision to go ahead and continue giving the loan money to Russia? LAWRENCE SUMMERS: Jim, I support the decision that they've made with our very active involvement in the current context, which is different from the way it had been before the financial collapse in August of 1998. What the I.M.F. Is doing today is a partial refinancing of the debt that's coming due to it from Russia. So that Russia will, on net, be paying back the I.M.F., but the I.M.F.'s not collecting everything that's owed. It's refinancing a portion. And it's doing so using a technical device known as special drawing rights which has the property that the money can be used only to pay back the I.M.F. It's not possible for it to be diverted. I think that's a prudent safeguard in the current circumstance in Russia. JIM LEHRER: Mr. Secretary, I know that what you just said about Russia and how important it is. But just in simple terms, to the average American, why does it matter to the United States whether or not Russia is having serioU.S. economic problems? LAWRENCE SUMMERS: It matters because we've seen historically what can happen when strong countries are humiliated. Think about what happened in Germany in the 1920's and 1930's and what it led to. It matters because the strength of Russia's economy affects its ability to control its 30,000 nuclear weapons. It matters because the capacity of Russia to join the world of market economies with more oil and mineral resources than any other country in the world outside of the Middle East with technological prowess that it showed during the Cold War period was really quite substantial. For all of those reasons, but I would say the most important of them is our basic national security interest which has permitted U.S. to be secure in a way that we certainly weren't when I was a child because Russia is no longer hostile to the United States in the way that it was. And keeping that situation, it seems to U.S. , it seems to most people who look at it, requires encouraging Russia to be democratic, to develop its democracy and to become market-oriented. |
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| The falling dollar | ||||||||||||||||||||
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JIM LEHRER: On another subject, the U.S. dollar. The value has fallen sharply against the Japanese yen this past summer. Why?
That's what we're doing when we work on budget surpluses, when we work on funding and reforming Medicare, when we work on encouraging Americans to save, when we work on opening foreign markets, when we work to stress education. Ultimately, what will be most important for the success of our economy is building fundamentals that are as strong as we possibly can. JIM LEHRER: But, if a strong dollar is good for the America and the dollar is weak against the yen, that's bad for America, right? Doesn't that add up? LAWRENCE SUMMERS: Well, you know, there are a lot of currencies in the world that you have to look at in thinking about that. But I think the more fundamental point really is economic fundamentals, both here in the United States and in Japan and really the priority for Japan at this point, in our judgment, has to be growing its economy based on domestic demand. That means not gaining its economic strength from selling things abroad but gaining its economic strength from selling things at home based on Japanese consumers spending more, Japanese businesses investing more. That's what we'll be discussing with the Japanese at the upcoming G-7 meeting.
LAWRENCE SUMMERS: Well, Jim, as you can appreciate, it's not my place to give people investment advice. I think that. . JIM LEHRER: But, how to read that? LAWRENCE SUMMERS: By and large, I think it's a mistake to try to interpret day-to-day or week-to-week fluctuations in markets. Certainly, we've had a very great improvement in the fundamentals of our economy over the last few years, and that's been certainly perhaps the main or one of the driving factors behind the strength of markets. But I don't think that we can prudently assess a single day or two's movements in markets from what our people in the Treasury who watch these things tell me, there were a variety of factors, both domestic and international that were operating in the markets today. JIM LEHRER: If you felt, if you decided... I know you won't go into detail on this. But, if you decided that there was a necessity to intervene, to do something to help the dollar, do you feel you have the tools available to do it? LAWRENCE SUMMERS: Well, the whole question of what actions we might or might not take in markets is not something that for obvioU.S. reasons, we talk about -- we talk about publicly, Jim. I think there's no question that the United States has significant reserves and tools at its disposal. JIM LEHRER: Okay. Now, back to the yen and the effect it has also on the trade deficit. There's been some new figures out this week. The U.S. trade deficit is way up to record heights. What's the cause of that and what can be done about it? LAWRENCE SUMMERS: I think the largest cause, Jim, ironically is the strength of the American economy because our economy has grown more rapidly than other economies. We've been in a position to demand more imports from them than they've been able to demand from U.S. because they haven't been doing so well. That's why I think the crucial global economic priority that we'll all be discussing at the G-7 meeting and the I.M.F./World Bank meetings in the next few days is how to achieve more balanced growth globally. Because I think a more balanced pattern of global growth will contribute, obviously, to the welfare of other countries, but most importantly, for U.S. as Americans to a greater level of exports and a reduced trade and current account deficit and that means a healthier economy. JIM LEHRER: Balance meaning what? Everybody goes up and down at the same time rather than the U.S. does this and Japan does that? Is that what you mean? LAWRENCE SUMMERS: By balance, I mean the United States isn't the single engine propelling the economy, but that you have some impetU.S. to global growth coming from Europe and Japan. There are some encouraging signs in that regard. But there's also a lot to talk about. JIM LEHRER: Finally, on a personal note, Mr. Secretary, much was said and written in July about how difficult it was going to be for you to replace Robert Rubin. How hard has it been? It's been three months, almost three months, two and a half months. LAWRENCE SUMMERS: Bob Rubin is a remarkable man and a tough act to follow. But, he and I worked very closely together during the time that he was secretary and I was deputy secretary. I think we've managed a transition that I feel good about, and I think that under President Clinton's leadership, the right basic course has been set at Treasury. I think we've been carrying on that course. What I think is always the most important measure for U.S. , which is now the American economy and how the American citizens are doing, those measures look pretty good right now. So I feel good. JIM LEHRER: But is the Summers Treasury Department following Summers policies and philosophies? LAWRENCE SUMMERS: Any Secretary of the Treasury puts his stamp on what the institution does over time. But I think we have done that, recognizing that we're starting from a very strong economic situation and that the basic tenets of our policy, fiscal discipline, budget surpluses, opening markets abroad, making key investments here, modernizing the financial system, responding to international problems as they need to be responded to. You know, those basic tenets are in place. I think what we need to implement them in as effective a way as possible. And that's what all the people at the treasury are working very hard to do. JIM LEHRER: All right. Mr. Secretary, thank you very much. LAWRENCE SUMMERS: Good to be with you, Jim. |
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JIM
LEHRER: Now to a newsmaker interview with Treasury Secretary Lawrence
Summers. Mr. Secretary, welcome. 
LAWRENCE
SUMMERS: I hope not. I hope we'll focU.S. on doing what we've got a real
opportunity to do in this country this year which is to take advantage
of the surpluses, to put money aside for Medicare, put it aside for
Social Security, make sure we can keep funding our education programs
and pay down the national debt. I think that's what will keep the terrific
strength of our economy going. There are a lot of different ideas as
to how that should best be done. 
LAWRENCE
SUMMERS: Well, I think you have to look at a number of different elements,
Jim. In Russia, our understanding is that there's no evidence that the
I.M.F.'s funds themselves were diverted for purposes other than those
for which they were intended. But, we've all known for a very long time
the corruption is a large problem in Russia and the capital flight is
a large problem. And that's why the thrust of our efforts in Russia
have been to establish the rule of law, have been to resist corruption
by getting rid of the opportunities for corruption. 
LAWRENCE
SUMMERS: Jim, we don't try to interpret the fluctuations in currency
markets. You've heard me and my predecessor Bob Rubin state our policy
many, many times that a strong dollar is in our interest. But I think
the right priority and focU.S. for those of U.S. in government is not to
try to manage markets or manage two markets but instead is to concentrate
on the fundamentals of our economy. 
JIM
LEHRER: What advice would you give to all of U.S. for how to interpret
what the stock market did today in reaction to what the yen is doing
against the dollar? The Dow was down over 200. NASDAQ was down over
100. Give U.S. some advice on that, please, sir.