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| DEMOCRATIC ECONOMICS
AUGUST 27, 1996TRANSCRIPT |
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Using Chicago as an example, Paul Solman does a walking tour of the Democratic economic plan with Clinton advisor Laura Tyson.
PAUL SOLMAN: Four years ago as the nation slogged its way out of recession, Bill Clinton made the state of the economy the centerpiece of his campaign against George Bush. So earlier this month we asked Clinton's chief economic adviser, Laura Tyson, to review the four year record of Clinton economics in the Democratic convention's host city, Chicago. We met up at O'Hare Airport so that Tyson could take us on a tour of the city to illustrate the administration's economic achievements.
LAURA TYSON, Chair, National Economic Council: Well, I think the main thing we've done is put a very firm foundation for private sector growth by reducing the deficit, that's helped bring interest rates down, that's helped spur an investment-led economic expansion, which has been strong enough to create over 10 million jobs and an increasing number of high-paying jobs.
PAUL SOLMAN: While the Dole campaign is blasting the Democrats for slow growth, to Tyson, the numbers speak for themselves: unemployment down from 7.1 to 5.4 percent; interest rates on 10 year loans the lowest since the Johnson administration; new business formation at a record high.
So many of the economic data look good. But aren't there problems? For instance, what about Clinton's economic promises of four years ago? On a tour of the 1992 convention city, New York, Clinton adviser Ira Magaziner had wound up at Manhattan's debt clock where he pledged that a combination of tax hikes, defense cuts, and trims in the federal bureaucracy would indeed slow substantially the rate at which the debt clock was then ticking.
IRA MAGAZINER, Former Clinton Adviser: (July 1992) The Clinton plan is going to cut the speed of that rise in half within four years.
PAUL SOLMAN: In fact, Clinton has done even better than promised on this score. The yearly deficit has come down 60 percent, in large part because of tax hikes and budget cuts. This explains, say the Democrats, why interest rates are down and the stock market up some 75 percent since Clinton took office. Not all economic promises have been kept, however. Remember the one to promote economic growth with a $200 billion investment strategy in people and infrastructure--like bridges, smart highways, and high speed rail? What happened, because there's none of that now?
LAURA TYSON: Well, there is some of it. But it's a world of trade-offs and priorities. When we came, the first thing we discovered was the budget deficit situation was about $100 billion worse than we thought. Frankly, we had to make choices. We couldn't invest as much as we had hoped. We tended to put our priorities mainly in the education and training area, do some targeted investments in infrastructure and science and technology, but really focus on people.
PAUL SOLMAN: These are some of the people Tyson says the administration has invested in--the kids of the Pablo Casals Elementary School in inner city Chicago, seemingly irrepressible, and yet in a classroom, they were uniformly dressed, uniformly attentive. Part of the reason, says the administration, federally funded state of the art computers in a well maintained environment. Clinton's proposing to fund further computerization and upkeep of the nation's schools on the premise that economic competitiveness comes from a well educated work force which comes, in turn, from investments in education. But how does an economist evaluate investments like this?
LAURA TYSON: Now let me give you an example. In the early 1970's, a high school graduate compared to a college graduate, the numbers were something like a college graduate earned something like 45 percent more than a high school graduate. Today, a college graduate earns 84 percent more than a high school graduate. What's happened is the technology has increased the demands for higher skills. Another study shows that if you are a worker and you can use a computer, as these students can, you will get just from your ability to use a computer a 20 percent rate of return, meaning your wage, on average, will be 20 percent higher than a comparable worker who can't use the computer.
PAUL SOLMAN: Laura Tyson's next stop highlighted a very different aspect of Clintononmics--free trade, a policy economists tend to love, traditional Democrats to distrust. This is Verson, which makes machine presses, including the world's largest used to stamp out automobile bodies. Chrysler is the major buyer, even using one to make cars for export to Japan.
LAURA TYSON: The President has negotiated over 200 trade agreements. The notion that we can now compete more effectively throughout the world is one of the things that's encouraged business investment.
PAUL SOLMAN: Now, you're part of an administration that has negotiated GATT, NAFTA, and a lot of people complain that that has cost us American jobs and so forth.
LAURA TYSON: Mmm-hmm.
PAUL SOLMAN: So what's the response?
LAURA TYSON: Well, our response is that exports have created about--they've contributed 1/3 of our economic growth over the past three and a half years. Export jobs, jobs that produce for American exports, are good jobs. They pay a wage premium over the average wage, 13 to 15 percent. The key to our future prosperity since 95 percent of the world's consumers live outside of the United States, is access to those growing markets. So when this company, Verson, can sell two of its technologically advanced metal pressing--metal forming presses--to Mexico, those are two major sales that keep high skilled jobs at home.
PAUL SOLMAN: Tyson says the administration deserves credit for such successes. But that prompted a question to Verson's president, Marty German.
Are you convinced that if the Republicans had been in power, the good things that have happened here in the last few years wouldn't have?
MARTIN GERMAN, President, Verson: Well, what I have to say is that certainly the Democrats have been in power and we've had low inflation rates, we've had interest rates that are low, and the economy is great, and this has enabled us to spend about 25, 30 million dollars on new plant and equipment and to add about 300 jobs, and also to pursue technology, and that's what we're all about 300 jobs, and also to pursue technology, and that's what we're all about.
PAUL SOLMAN: But are you a life-long Democrat?
MARTIN GERMAN: No. Excuse me. Can I stop or no--
PAUL SOLMAN: I was just asking a question.
MARTIN GERMAN: No, sir. I'm a Republican.
PAUL SOLMAN: You are?
MARTIN GERMAN: Yes, sir.
PAUL SOLMAN: But, but the Democratic program has worked for your company?
MARTIN GERMAN: It most certainly has. Yes, it has. And I think I've learned a lot from it also.
PAUL SOLMAN: Now rather than watch Marty German turn even redder from embarrassment, we'll move quickly to our last location, a micro-brewery. Goose Island was encouraged to invest in a rundown warehouse district which has been designated an enterprise zone, one of five in the U.S. which offers federal tax incentives.
LAURA TYSON: This investment in this micro-brewery was financed with an industrial development bond, which is a tax exempt bond, which encourage entrepreneurs to come in, set up a new line of production in an area which is really run down, where manufacturing has left, and employ people from the community.
PAUL SOLMAN: Now when I was in Houston four years ago with Clayton Yeuter from the Republican Party, we went through a housing project and he made exactly this argument, that is, that we need to revitalize areas through enterprise zones and so forth. I wonder whether it's not fair as critics sometimes have said from the left, call you an essentially liberal Republican administration since a lot of the things that you're talking about are sort of market solutions to traditional problems that Democrats in the past have had a more active government solution to.
LAURA TYSON: I think it actually is unfair to use that term. I think it obscures some very important differences. First, just on the issue of fiscal responsibility, Republicans talk a good game about fiscal responsibility. The Democrats, under President Clinton, delivered. We're the ones that brought the deficit down by 50 percent. Second of all, let's go to the issue of education and training. Last year, the Republicans wanted to cut $30 billion in education and training. We wanted to add $30 billion to education and training, to train workers like the workers who work in this factory.
PAUL SOLMAN: Once again, we put the question to the businessman. Wouldn't he have made the same investment under the Republicans?
JOHN HALL, President, Goose Island Beer Company: We might not have done it on this scale, and the point is, is that we have a consistent policy that works over time.
PAUL SOLMAN: But why couldn't that be in a consistent Republican, as opposed to a consistent Democratic policy?
JOHN HALL: In truth, it could, but I think what we see right now is that we're pleased at what we see coming out of Washington with the policies for investment in the enterprise zone and empowerment zone.
PAUL SOLMAN: As our tour of Chicago came to an end, we had one last question for Laura Tyson.
PAUL SOLMAN: Four years ago, arguably, the most important economic problem in the country, the destitution, despair of inner cities, and the widening income gap, and you guys talked about it then. Four years later, despair in the inner cities, and a widening income gap, so ultimately, what have you accomplished?
LAURA TYSON: I think we've put in place a strategy which is beginning to deal with both of those problems. We have a major economic expansion going on. If you look at the 10 major urban areas of this country, including Chicago, the unemployment rate has come down 1 or 2 percentage points, we have millions of new jobs, in each urban area. That's one way to generate income. Two, we have increased the tax credit for the working poor, many urban residents are the beneficiaries of that. Three, we are now about to sign an increase in the minimum wage, and that will bring up families who are out--in poverty out of poverty.
PAUL SOLMAN: In the end, then, the Democrats say, they're trying to address America's most intractable economic problems and delay economic insecurity by helping those who need help in an economy that otherwise has done pretty well, they say, these last four years.
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