FROM THE OFFICE OF PUBLIC AFFAIRS

It is a pleasure to speak with you today. I would like to make a few comments about the state of the global economy, and what we need to do to position our country for strong economic conditions in the years and decades ahead.

The backdrop for my remarks is an environment of uncertainty and challenge in the global economy, which is now well into the second year of a financial crisis that first erupted in Thailand in July 1997. To be sure, there have been some important positive developments in the last six months, including actions to promote growth in some industrialized countries, the reduction of leverage in the global capital markets, and the real progress towards recovery in a number of emerging market economies that have experienced crises, such as Korea and Thailand. However, the fundamental situation remains the same: The problems that gave rise to the crisis took a long time to develop, and they will take a long time to work through.

The crisis continues to have profound effects around the globe. Emerging markets from Asia to Europe to Latin America have been severely affected and their governments face tremendous challenges in pursuing reform programs to achieve financial stability and promote growth. Industrialized nations face serious challenges too -- the IMF has reduced its growth forecasts for Europe, to low levels, and Japan is expected to face flat or negative growth.

Here at home, the most likely scenario in the U.S. economy remains solid growth and low inflation, subject to the usual ups and downs. The President's economic strategy of maintaining fiscal discipline, equipping people for the future and opening markets at home and abroad, in combination with renewed competitiveness by America's industries, has contributed to what many consider to be the best economic conditions in recent memory -- the longest peacetime economic expansion in our history, a very high rate of job creation, the lowest unemployment rate in decades, and real increases in income across all income strata.

The President's strategy is rooted in his underlying view that we benefit enormously from an economy that is open to change, and so he has consistently supported open markets at home and abroad, technological development, and flexible labor and competed markets. In this type of modern economy, knowledge and information are key. As publishers, you know better than anyone how fast our information economy is shifting -- and the flexibility and skills it takes to increase your growth while serving your ever-increasing audience. In that context, I want to focus on three challenges that we in the public sector and you in the private sector must meet to sustain a strong economy as we look forward.

First, we must maintain our leadership on the issues of the global economy and our traditional commitment to open markets at home and abroad.

There is no doubt increased trade has played a significant role in the strong economy this country has enjoyed for the last six years. And while there is the almost universal tendency to extol the benefit of exports, we tend to ignore the benefit of imports. Imports contribute to lower prices and increase choice for consumers, as well as for producers, which should lead to greater job creation and higher wages. Imports increase competition and productivity, and, for all these reasons, reduce inflation and generally lower market interest rates.

The adverse effects of imports are concentrated, and the voices of those adversely affected are loud. But the benefits of trade openness are more widely dispersed -- indeed, those who benefit are often unaware that they are doing so -- and the result is fewer, fainter voices for open markets. As a result, we face increased domestic pressures to close our markets. I believe that we must strongly resist those pressures. One need only recall the example of Smoot Hawley and the competitive devaluations of the 1930s to understand the folly of such a course.

A second major challenge we face in this country is to continue the successful economic strategy of the last six years of promoting fiscal discipline which has been so indispensable to today's strong economic conditions.

It is worth stopping for a moment to see how far we have come on fiscal discipline, because we do tend to forget. Between 1980 and 1992, the Federal debt had quadrupled, and in 1992 the deficit was $290 billion and projected to continue growing. Now -- beginning with the deficit program of 1993 -- we have moved from an era of endless budget deficits, to a budget surplus, and projected budget surpluses for a long time to come.

The consequence of that, I believe, is an historic opportunity to position our nation for the decades ahead, and President Clinton has put forth a plan to seize that opportunity. The President's plan would preserve the preponderance of the surplus to pay down the publicly held debt of the Federal Government rather than eliminating the surplus through consumption-oriented tax cuts or spending and would greatly promote retirement security by strengthening Social Security and Medicare. Using the surplus for tax cuts or spending may be more popular, but in our view promoting fiscal responsibility and national savings is the right path for our future.

The third challenge we must face, although within the context of fiscal discipline, is to continue to invest in areas that are key to future productivity, such as education, health care, and I would argue, providing those who live in the inner cities and other economically distressed areas a real opportunity to enter the economic mainstream. I believe this latter is not only a social issue, but an economic issue, as well. Just think of the difference it would make in terms of productivity and reduced social costs if we could bring all Americans into the economic mainstream.

The importance of investing in our people is made all the more critical by the rapid changes taking place in the information economy. In this regard, let me say a few words about electronic commerce, which I know is an issue that is having a profound impact on your business.

Since the very beginning of this Administration, the President and the Vice President have understood the vital importance of technology to our economy. When the Internet was still largely the preserve of scientists and professors, the President and Vice President had the foresight to see its tremendous economic potential. As you well know, the Internet presents enormous opportunities for businesses to reach customers, here and around the world, more efficiently and more effectively. And the converse, of course, is that customers should have broader and less expensive access to goods and services. But as with all things in life, with these new benefits come new challenges.

The Administration has approached electronic commerce with the belief that the private sector should lead and that government's role should be to create a framework that allows the market to flourish. Our goal has been to establish a set of principles that put consumers, choice and the private sector first. We have promoted the principle both here and abroad that commerce over the Internet should receive the same treatment as traditional commerce. Our work led last year to the passage of the Internet Tax Freedom Act, which provides for a three-year moratorium on new or discriminatory taxes during which representatives of state and local governments, the federal government and the private sector can develop ways to tax commerce over the Internet in the same ways as traditional commerce. The President also fought for and signed into law the Digital Millennium Copyright Act to protect copyright in a digital age and implement the World Intellectual Property Organization treaties on intellectual property. As we approach a new century, we are committed to doing whatever is sensible to promote conditions where American businesses and consumers can realize the full potential of new technology.

In conclusion, let me say that I believe our country is very well positioned economically for the long term, in part as a result of the choices that have made in the public sector such as restoring fiscal discipline and maintaining open markets -- in part because of the extraordinary job the private sector has done over the last decade to restore its competitiveness; and in part for a whole host of other cultural, political and economic factors. Yet there are also enormous challenges ahead, both internationally and domestically, and to realize our strong potential for the long term, we must continue to make the right choices -- in both the public and the private sectors.