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

Weekly Compilation of Presidential Documents, Feb 28, 2000

Before I go on to talk about how we can keep it going and spread it, let me just mention, there are other factors as well. I don't think there's any question that, in addition to fiscal policy, we've had good monetary policy coming out of the Federal Reserve. And the reason is, the Chairman of the Federal Reserve, Mr. Greenspan, was able to look at the evidence of the new economy over the traditional ideology, which would have said, "You better stop this thing now, because it's gone on longer than anything else has. Therefore there is by definition inflation, even though you can't see it. So raise interest rates and stop it right now." He was resisting that, because he knew something was going on, even though no economist could give him a model which proved it. And I think that that has been very important.

I think the fact that we have had two decades of bipartisan support in the White House for open markets in America has been very important. You know, when politicians talk about trade, they only talk about the products and services we sell around the world, and then they become vulnerable, because we have a trade deficit. Well, one of the reasons we have a trade deficit is we quadrupled our debt over the previous 12 years before I came here, and another reason is that our economy has been stronger than other people's economies, so we've had a demand greater than our ability to sustain it here at home. But I think it's important to point out that it's not just exports that are good. Imports can be good, too. Most of you who are here are wearing something that was made in another country. And you might rail against imports, but I bet you're not going to throw it away, whatever it is. It broadens consumer choice, and something else that has happened that almost nobody talks about is that the fact that we have h ad open markets has contributed to greater competition and kept down the risk of inflation.

I never will forget when interest rates came way down in a hurry after I took office, and the homebuilding business just was booming. And everybody started buying homes because they could finance their mortgages at such low rates. And there was a shortage of timber, and the price went through the roof. And I looked at the indicators, as I have every month since I've been here, and I said, "Oh, my goodness, maybe we're not going to--surely this is not going to happen right now. Surely we're going to get more than a 2-year recovery." And it wasn't 2 months before the price of lumber had gone back down because of import substitutions, because when the price went up, the market became attractive; the market became sated, went back down, and we continued to grow without inflation.

So I think that has been underappreciated. That's why we've tried to build bridges to Latin America, to Africa, to the Asian-Pacific countries, and I'll say more about that in a minute. But I think it's very, very important.

I think the role of sophisticated capital markets in America is very important. Every-body knows what mistakes were made in the bad days in the eighties with the savings and loan crisis. We don't give enough credit to the fact that people have been able to get credit when they needed it for venture capital enterprises, continue to invest, and build the new economy. And those of us who want to see it spread believe there ought to be more venture capital into places and to the people who haven't had access to it.