FROM THE OFFICE OF PUBLIC AFFAIRS

It is a pleasure to speak with you today. You play a vital role in forging public understanding on the vastarray of issues that are enormously important to the country.

In that context, I’d like to speak with youthis evening about the current, very sound economic conditions inthe country and the challenges we need to meet to foster aprosperous America as we enter a new century.

This weekend, I attended a meeting with thefinance minsters and central bank governors of our G-7 partnersin Washington. Just a few years ago, the other industrializednations would use meetings like this to roundly criticize theUnited States for not addressing its economic problems. Ournational debt had quadrupled in the twelve years from 1980 to1992 and budget deficits were spiraling out of control.Unemployment was over 7 percent. Job creation was sluggish. Thecompetitiveness of American industries had eroded. The UnitedStates -- in both the private and public sectors -- was, to someextent, viewed as yesterday’s economy.

Four years ago -- although sometimes it seemslike a lifetime -- President Clinton came to office with acomprehensive economic strategy to put our country back on theright track, both for the short term and the long term. Iremember a seminal meeting in Arkansas of six and a half hourswith then-President-elect Clinton and the just-named members ofhis economic team during the transition. The President made itclear that there were a number of important issues key toAmerica’s economic success, but that the threshold issue wasto get our fiscal house in order. He proposed, fought for andthen enacted a deficit reduction program in 1993. That plan hassince brought the deficit down by over sixty percent, drivinginterest rates down and restoring business and consumerconfidence, which, in turn, fueled an economic turnaround.

Over the last four years, our economy has creatednearly 12 million net new jobs. Unemployment is now at 5.2percent and inflation has remained low. Real incomes have

finally started to rise. There have been recordlevels of business investment, building a foundation for futuregrowth. Meanwhile, our businesses made great strides in regainingtheir competitiveness. Now our trading partners -- as I heardonce again this weekend at the G-7 meeting -- view the UnitedStates as the world’s economic leader.

We have made real progress. But we must not letthat progress mask the challenges that we must meet if we aregoing to continue to have a successful economy in the yearsahead. And just as deficit reduction has been the critical factorin the current favorable economic conditions, so is it criticalto a strong long-term economy. Now is the time to finish the jobof balancing the budget. And all of us -- Democrats andRepublicans -- must, should and can work together to do so.

The President has proposed a budget which wouldlead to balance by 2002. We’ve met intensely amongstourselves in the Administration and with Congress to try to reachagreement on a balanced budget. In these negotiations, I havebeen struck by how much the atmosphere has changed over the lastfour years. Compared to last year, the tone of the negotiationsis much more constructive and positive. Last week, the Senatepassed the Chemical Weapons Convention, showing that when we putaside our differences, we can work together for the good of thecountry. Likewise, with the budget I believe we are workingtogether in a constructive spirit that will allow us to resolveour differences. But the budget atmosphere has also changed inthe sense that there is now a broad-based agreement that we needto get to balance. The question is how, and this is a questionthat does involve real issues and real differences.

The President’s perspective has always beenvery clear: balance the budget, while investing in those areasthat are critical to future productivity and growth. Let mediscuss, for a moment, three of those areas.

The first is an area which has receivedconsiderable attention: education and training. As the Presidenthas often said, we live in an era marked by a dynamic, globalizedinterdependent economy, and the countries that are going to dobest are the ones that equip their workers and families with thetools they need to succeed. I just got back from Vietnam and whatmost struck me, just as I have been struck in other Asia-Pacificcountries, many of which were impoverished thirty years ago andare now dynamic growing countries, is how focused they have beenon education. You can’t help but think that a strong workethic and education are critical to any country’s success.

Education has always been the path to a betterlife. But now more than ever, getting a good education, andlearning new skills throughout your life, is critical toprosperity. In today’s economy, the paramount tool allworkers need -- whether on an assembly line or in an office -- isknowledge. All of you know this better than anyone, because yournewspapers cover intently local debates over education. PresidentClinton, too, understands this deeply -- he has focused oneducation for his entire career, and it permeates all of histhinking about economic policy.

That is why, in this year’s budget, thePresident has emphasized more funding for existing educationprograms and proposed new initiatives from kindergarten tocollege: Head Start to strengthen education for students at theearliest levels; a program to combat illiteracy; theestablishment of voluntary national standards so all students arechallenged to learn the basics; more funding for Pell Grants; andtax credits to help middle income families send their children tocollege.

Let me turn now to two priorities in our budgetthat have not received as much attention.

One is to promote economic growth in an area ofthe country that has been abandoned for too long: the innercities. I have long believed that this country will never reachits full economic potential -- and this affects all of us, nomatter where we live or work -- unless we deal with the problemsof the inner city and bring the residents of the inner citiesinto the economic mainstream. As business editors and writers,you play a critical role in helping the American peopleunderstand that, as the President says, all of us are in thistogether.

Treasury has been bringing its broad expertise inthe capital markets and tax policy to bear on the problem of asevere shortage of financial institutions and a shortage ofcredit to create housing and jobs in the inner city. Alreadywe’ve taken a number of steps. We've strengthened theregulations under the Community Reinvestment Act to encouragemainstream financial institutions to lend to creditworthyborrowers throughout their community. We made permanent the lowincome housing tax credit. We've launched the CDFI Fund to createa nationwide network of community development financialinstitutions, and we created a new Presidential awards program tohighlight best practices in micro-enterprise development.

In this year’s budget, we have proposed anew tax incentive to clean up abandoned industrial properties ineconomically distressed areas -- so-called brownfields, and a newtax credit for equity investments in CDFIs. Separately, we haveintroduced legislation for new Empowerment Zones.

In my opinion, in order to marshal support forprograms to help revitalize our cities, we need to emphasizefirst, that this is an issue of great importance to all of us, asI said earlier, and second, that there are programs that work. Iwas in Los Angeles last summer and met Juanita Tate, fromConcerned Citizens for South Central LA, and I saw how they tookan environmentally contaminated area, a brownfields site,restored it and set up a selection and training program for innercity residents to provide an employment base for prospectivebusinesses coming to the area. By creating this environment, theyhave now gotten commitments from developers and manufacturingbusinesses and they were on their way to having a fully leasedindustrial park. These businesses have made economic decisions tolocate in the inner city. These are precisely the types ofprograms we should study so we can replicate their successelsewhere. Just last week, the Center for National Policy issueda report that talked about programs around the country that areworking and the report mentioned this program in Los Angeles. Byworking together -- government at all levels, community groupsand businesses we can make a difference.

The final area I’d like to discuss isAmerica’s engagement and leadership in the global economy.Part of this is not related to the budget; that is, theimportance of continued trade liberalization. The Administrationhas a full agenda in the trade area and we will be working withCongress to establish the appropriate negotiating authority forfuture trade agreements, and to maintain most-favored nationstatus -- that is, a normal trade relationship -- with China.

The world is liberalizing with us or without us.The question is will we be part of the trend towards more openmarkets and prosper by it. The answer, in large part, depends ondeveloping a better understanding among Americans of theimportance of our role in the global economy. This is a topicthat gets little space in your newspapers and magazines, but itis vitally important to your readers.

As I said a moment ago, we live in an era markedby true global interdependence. Millions of Americans depend ontrade for their livelihoods and our economic success isinextricably linked to a healthy international economy. Theimpact of trade is sometimes direct when a company sells itsproduct abroad. But the impact is also felt by the companies thatsupply exporters, even the convenience store that sells toworkers in these companies. Now more than ever before, whathappens abroad deeply affects our well-being at home. U.S.leadership in the global economy is thus critical to buildingprosperity at home and creating jobs.

A crucial part of fostering a healthy globaleconomy is to promote reform and growth in developing nations.Developing countries are becoming increasingly important to oureconomic well-being. They account for 40% of U.S. exports -- andthose exports are increasing at a pace that is faster bytwo-thirds the rate of exports to developed countries. Promotinggrowth in the developing world creates new markets for U.S. goodsand services and helps foster greater social and politicalstability.

International institutions such as the UnitedNations, the World Bank, the IMF and the regional developmentbanks are vital to this effort. These organizations play acrucial role by helping developing countries and transitionaleconomies create market-based economies and open markets. Theyalso help lay the foundation for long-term growth by supportingprojects in health, education and infrastructure.

A poll once showed that Americans believe wespend 15 percent of our budget on organizations like these andother foreign programs. The same poll showed that Americansbelieve we should spend five percent. We actually spend only alittle over one percent.

In fact, the United States is vastly behind inits payments to these institutions and the only major nation inarrears to them. There are even efforts by some in Congress toreduce our contributions to them further. There is no doubt thatthese institutions have had their problems. But there is also nodoubt that they are working to address them. Our ability toaffect change in them will be drastically reduced if wedon’t pay what we owe. Our leadership in the global economyis on the line.

In the last two years, I have visitedmultilateral development bank projects in India, Indonesia, thePhilippines, Argentina, Brazil, and just this month, Vietnam,seeing their effectiveness first-hand. In the Philippines, I meta woman who had received a micro-enterprise loan and had bought ataxi, enabling her to dramatically improve the life of herfamily. I only wish that every member of the US Congress couldsee what our money buys.

There are voices urging that America retreat fromthe world. That retreat can come in the form of building walls ofprotection around our country, as some would have us do, and itcan come by not participating in the international financialinstitutions. Let us remember one of the great lessons of the20th century: withdrawal from international affairs cannot work.When we withdraw, we suffer; when we engage, we prosper. We mustnot reverse the tremendous gains we have made in fostering growthin the global economy over the last fifty years.

As business writers and editors, you can be apowerful voice in reminding your readers of the importance ofAmerica’s continued engagement in the world -- and the linkbetween developments in Washington, and the success of a localfactory exporting, or selling to a company that exports to adeveloping nation. I think such an understanding is very muchneeded.

As the President has often said, today’seconomy presents major challenges and opportunities.

Each of us have an important role to play inmeeting these challenges and opportunities. Those of us inWashington need to work together to get this done, despite ourdifferences. And we look to you in the media to help families andbusinesses across America understand what we do in Washingtonshould matter to them and what’s at stake in the decisionsbeing made. I believe that if we stay on the course we’vebeen on, we can improve productivity, increase incomes andprovide for a healthy economy for years and decades to come.Thank you very much.