Remarks to the Granoff Forum at the University of Pennsylvania in Philadelphia, Pennsylvania

Weekly Compilation of Presidential Documents, Feb 28, 2000

Now, why is this a good thing? Because the deficit reduction set in motion a virtuous cycle: reducing interest rates, freeing up an enormous pool of capital for private sector investment. It enabled people to borrow money to invest in new businesses, in new technologies. It enabled consumers to borrow money at lower cost for homes, for car loans, for college loans. A study I received a few months ago estimated that the average American family had saved, now, as a result of lower interest rates, about $2,000 a year on home mortgages, and $200 a year on car payments and college loan payments, because of the lower interest rates that were the direct result of getting rid of the deficit.

Therefore, I would argue that, whether you are a Republican or a Democrat, whether you consider yourself a liberal or a conservative, you should be for this. If you are a conservative, the case is self-evident. If you're a liberal, you ought to be for it because it helps poor people as well as wealthy people, and it gives the Government money to invest in education and health care and social projects without harming the economy. America needs a national consensus for a solid economic policy that responds to the realities of the global economy, and I believe we have it now.

Now, I think it's also fair to say that almost nobody thought it would work as well as it did. And that's the second question. Okay, everybody--I thought it would work, but I remember when I was sitting around the table in Little Rock in December of '92 with the Democratic economists, not the Republicans, and I said, "Okay, how low can we get unemployment without inflation." And the consensus was, somewhere between, oh, 51/2 and 6 percent. You get below that, and you're going to have inflation, and the Fed will have to raise interest rates, and then it will slow the thing down.

My instinct was we could do better than that. But I can tell you, nobody thought we could have 4 percent unemployment on a sustained basis without inflation. How did that happen? Because of a dramatic increase in productivity by American businesses and American workers. Productivity over the last 4 years has grown at the rate of 2.8 percent a year, about twice the rate we saw in the entire decades of the seventies and the eighties.

Why did that happen? That's the second thing I want to look at. Overwhelmingly, it was the role of technology investments, especially in information technology, that boosted this productivity. 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 several years, 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 wealth and to broadly share it.