FROM THE OFFICE OF PUBLIC AFFAIRS September 19, 2000LS-886 SECRETARY SUMMERS' REMARKS TO THE NORTH CAROLINA DELEGATION Let me start by thanking Representatives Clayton, Etheridge, Hayes, Jones, McIntyre, and Watt for inviting me to talk to you today. I am pleased to have the opportunity to talk to this distinguished group of business and community leaders. Today I would like to take a broader perspective and focus on what the next Administration - regardless of which party is in control - should do to confront the longer-term challenges facing the American economy. We come together at a moment of remarkable success for the American economy. But this is not a moment for complacency. Prosperity and credibility are attributes that are rented, not owned. If we as a country are to take maximum advantage of this moment then we must face up to the big choices that will determine whether our long-term future will continue to be prosperous. What are those big choices? Let me focus today on three:
I. The Importance of Continuing to Reduce Government Debt. During the post-war period, the U.S. has made a major fiscal choice every decade or two. Some of those choices were made wisely, some less so.
We again face major choices today, at a time when record economic strength is giving rise to substantial budget surpluses and the reduction of national debt held by the public. The question we face is whether to keep our country on a path toward eliminating publicly held debt, or to devote the bulk of projected surpluses to alternate uses instead. The advent of a new economy fundamentally changes the stakes involved in the choice of our nation's fiscal policy. In a world that is rich with investment opportunities, and where investors can quickly understand the implications of changes of policies five and ten years out, the importance of running a surplus and pursuing prudent policies becomes much, much greater. That is why we have emphasized a multi-year approach, and one that focuses on protecting the Social Security and Medicare surpluses and paying down the debt. Like tax cuts, reducing publicly held debt also delivers substantial direct benefits to the pocket books of American families:
Debt reduction can provide these kinds of benefits to American families in a way that also supports the long-term strength of our economy at a time when the return on investment is probably greater than it has been in a very long time. The bottom line is that the more we save through debt reduction, the more that America's businesses will be able to invest in the technologies that will shape our future. II. Pursuing the Right National Growth Strategy in the New Economy. At the same time, we must take into account the changing nature of the American economy by adapting the institutions of our market economy to meet the challenges of the information revolution -- just as we re-defined these institutions for the industrial revolution more than a century ago. And that means understanding what is new about the "new economy". Let me outline three key strategic implications of the new economy. First, we should invest in people through better education. The most robust empirical finding about the new economy is that the return on investment in human capital has risen faster than the return on investment in physical capital. If investments in factories were the most important investments in the industrial age - the most important investments in an information age are surely investments in the human brain. As Chairman Greenspan has so often emphasized, in such a world, goods are increasingly valued for the knowledge that is embodied in them rather than for their physical weight. Increasingly, our economic fortunes are determined by how much we know not how much we can lift. We have an enormous opportunity now to perpetuate our prosperity in a knowledge-based economy by increasing our investments in the users and producers of information - and the most important contribution we can make is in education. The digital divide is a very important problem in America. And the greatest source of the digital divide is the inability to read.
Second, we should make markets as large as possible. It is a characteristic of the "weightless" goods of this new economy that there will often be very high initial fixed costs and low, even zero marginal costs. In the new economy industries, growth has a greater potential to snowball. Success may have greater potential to become self-perpetuating, as growth leads to rapid declines in prices, and so to further expansion in the market and further growth. This reality - that growing demand and growing markets and networks will tend to reduce costs and raise efficiency - makes successful economic management all the more important. It also points up the importance of making sure that we function with as large markets as possible. The crucial implication for those of us in government is that policies that help to expand the size of markets in any way become that much more important. Deregulation becomes that much more important, to ensure that government is not preventing or distorting the development of fast-growing markets. For example, that is why we worked so hard to pass the right kind of Financial Modernization legislation last year. Third, we should expand the global market. Equally important, the information technology revolution highlights the enormous benefits that will flow from successful global economic integration. We stand at the hub of a world trading system. And the bigger that world trading system is, the more open it is, the more we will benefit from our position at its hub. That is why we need to do all we can to keep our markets open, and to work to ensure that other countries open theirs:
III. Ensuring that all Americans Benefit from Economic Growth. If we are to maximize our economy's productive potential, then it is also important that we work towards a more inclusive prosperity within America. In an economy where for the first time jobs are looking for people and not people for jobs, ensuring that no American is left behind is as much an economic as a moral imperative. It says something about the US labor market today that companies are actually hiring planes to advertize jobs fairs in the skies over Baltimore Orioles games. It is a different world, indeed, from the one of a decade ago, when we debated the sources and causes of what was then referred to as "the jobless recovery." To write the next chapter of America's economic success story most effectively, we must leverage our nation's latent potential in all neighborhoods - including in the inner cities and rural areas. Let me mention three ways in which this Administration is working with Congress to provide a more inclusive prosperity that will strengthen the economy as a whole:
IV. Conclusion. Let me conclude by emphasizing the importance of using what is new about the new economy to widen the circle of opportunity for everyone. Technology does provide Americans with remarkable opportunities. But they are not there for those who lack the basic means to take advantage of them. And it has been estimated that in America today, a child born of a single teenage mother who did not finish high school has an 80 percent chance of living in poverty at the age of ten. Male life expectancy in Washington, DC is several years below that in Mongolia or Belarus. If our success is to continue, if our economy is to be what it has to be, and if it is to be a secure prosperity that we enjoy, then we as a country have to do more to ensure that all are included. That is why expanding support for the working poor through the Earned Income Tax Credit is so important. And that is why we need to expand programs such as Head Start and the Child Health Insurance Program so that every child starts out in life with the core essentials. Equally, although technology is transforming our economy and our society we need to recognize that there are some things that many Americans would like to stay the same. As we work to build a modern financial system we have also to ensure that every consumer's right to privacy is properly protected. As we work to build a more global economy we have also to work to prevent a race to a bottom in the policies and protections that matter to us. As important as new markets, new technologies, and new global integration are, we have equally to recognize that their full potential will not be realized without the right kind of public purpose. Thank you. |
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