FROM THE OFFICE OF PUBLIC AFFAIRS

I want to thank you all for being here today to kick-off this year's Savings Bond Campaign, and to honor the individuals and firms who contributed so much time and effort to make last year's campaign a success.

Let me start by personally thanking Frank Bennack for the outstanding job he did leading the New York Campaign last year.

This year, Frank Newman has agreed to lead the Campaign. Let me present this Appointment Certificate to Frank. Under his leadership, I know we'll have a successful campaign.

Next, I'd like to ask Russell Deyo to join me. They represent Johnson & Johnson, which is the country's participation leader this year, with 78 percent of their employees buying bonds and which has been a strong supporter of Savings Bonds for years. It's a great pleasure to present you with our Golden Eagle Award for the tremendous job all of you did with last year's campaign.

In January I presented the Golden Eagle Award to Harry Kamen of Metropolitan Life, which has also done an outstanding job in promoting the use of Savings Bonds by their employees, and Dave Levene of Met Life is here with us today.

Since we are here today because of Savings Bonds, which are about our economy, I would like to use our time together to discuss the state of our economy today, the steps we need to take to foster a strong economy for the future, including by responding to the financial situation in Asia, and the problem of financial instability more instability more generally, and the important role of Savings Bonds to our economic well-being. Overall, we have much to feel good about, with respect to our country's economy, but -- at least in my view -- serious issues we need to face.

To start with the economy, today, the United States has the strongest major economy in the world, and we are viewed as a country that has put its economic house in order. Unemployment is 4.7 percent and it has been under 6 percent for the last three years. The economy has generated over 14 million new jobs over the last five years, inflation has remained low and real wages are rising.

On the private sector side, this success has been critically fueled by the remarkable job American business has done over the past decade in restoring its competitiveness in a broad array of industries, after having been written off by much of the world in the proceeding decade. On the public sector side, key and indispensable to the economic conditions of the past five years has been an economic strategy grounded in fiscal responsibility, beginning with the deficit reduction act of 1993, opening markets, and for the longer term, public investment in our people to promote productivity.

It seems to me that the key now is not to let the progress we have made mask the challenges we face in building a prosperous economy and society for the years and decades ahead. If the United States were a business, and we were enjoying a period of success such as the past five years, we would think about what might be the vulnerabilities to our competitive position five, ten or fifteen years from now, and then we would position ourselves to meet those challenges. That is exactly what we have tried to do in this Administration, and in that context, I'd like to discuss five principal challenges that I believe we must meet to continue our present economic success in the years and decades ahead, in addition to the private sector maintaining its competitiveness.

First, we must remain diligent in keeping our nation's fiscal house in order. The President has made what I believe is a sensible proposal on what to do with budget surpluses: put the money away until we address Social Security reform. What we must not do is anything -- including tax cuts that are not fully paid for - to threaten the fiscal discipline we have worked so hard to restore. Fiscal discipline is not an easy path, but I believe it is the essential path.

Second, we must continue to work to improve education in all of its aspects, but especially our public school system. In today's global economy, education is the key to prosperity for an individual, and for a country. This Administration has focused intensely on improving education from K-12 and beyond by expanding Head Start, proposing volunteer national standards, proposing in the present budget funding for school construction and hiring more teachers to reduce class size, and post secondary school tuition tax credits enacted last year. But, last week's report that American high school students ranked third to last in math and science in a global survey indicates how much needs to be done.

Third, we face the challenge of the tremendous social costs and loss of productivity that results from having millions of Americans left out of the economic mainstream -- a problem that is most closely associated with our inner cities. This is a problem that affects all of us, no matter where we live or what our incomes may be. The Administration has focused on a three part program -- investing in people, strengthening public safety, and expanding access to capital -- to foster growth in economically distressed areas.

When I was still in the White House, a reporter from a well respected European weekly interviewed me, and at the end, said that our economy was doing very well but that ten or twenty years from now we'd be a second tier economy. I asked why he thought that, and he said the answer was our public schools and our inner cities. My own view, now that I've spent five years focusing on our economy and economies around the world, is that we have tremendous strengths and a great potential in a global economy, but we do need to more effectively deal with the critical issues that reporter identified if we are to fully realize that potential.

Fourth, we must continue to be deeply engaged in providing leadership on the issues of international economic policy. A successful strategy on these issues includes three components: first, opening markets and trade liberalization; second, promoting growth and reform in the developing world and transitional countries; and third, dealing with the problems of financial instability and crisis, both when they occur, and in the long term by strengthening the architecture of the international financial system. Let me discuss the third point of financial instability for a few minutes.

I experienced the development of the international financial markets and the global economy when I was in investment banking and I know that many of you all have lived this in your own businesses. Over the last 20 years, most of your businesses have gone from being predominantly domestic to being true global entities, and developing countries have gone from being largely irrelevant to our economic well being to absorbing over 40% of our exports. However, just as these developments have brought great opportunities, there have also been new risks, as we saw in Mexico in 1994 and now in Asia. I believe that our economic well-being in the years and decades ahead will be critically affected by our ability to make the most of those opportunities and to effectively manage the risks.

The interdependence of today's global economy -- and the need to exercise U.S. leadership to protect and promote our interests -- has been brought home by the recent situation in Asia. As you well know, economic instability in Asia has weakened affected countries' markets for our goods and has weakened their currencies, which can adversely affect the competitiveness of our goods around the world. Moreover, if the problem were to spread to developing countries around the globe, it would exacerbate these effects and the potential impact to our economy could be severe. By doing everything sensible to help these Asian countries get back on track, we support our exports to the region and help strengthen their currencies, which helps the competitiveness of our goods in world markets and reduces the risk that financial instability will spread to other developing countries.

The United States has exercised very strong leadership throughout this situation to help resolve the Asian crises. We have worked with individual nations to contain the crisis, and through all of this, the United States has strongly supported the IMF, which has been the central institution in the effort to resolve the financial crises in Asia through reform programs focused predominantly on structural reforms to address the specific causes of the crisis in each nation.

We are working with Congress at the same time to gain the necessary funding for our contribution to the IMF to help enable the IMF to have the capacity to respond if the crisis were to worsen or spread. While we think the risks of that happening are low, if it does happen the international community needs to have the capacity to respond effectively.

Even as we work to secure this funding and to solve the immediate problems in Asia, we are working to build a new architecture for the international financial system. While the global economy and the global financial markets have grown very rapidly and become very sophisticated in recent years, the institutions for preventing and dealing with these crisis has changed far less. At Treasury, we have been working with the Federal Reserve Board to make that architecture as modern as the markets. But, these are deeply complicated problems and major steps forward will take time.

As the situation in Asia demonstrates, U.S. leadership in the global economy is critical to our own well-being. Yet one of the lessons I draw from the past few months is that there needs to be a redoubled effort by all of us to communicate with the American public the dynamics of the new global economy and the importance of U.S. leadership in the global economy to our well being. I am deeply concerned that public support for forward looking international economic policies may be moving backwards at a time when this country's economic, national security and geopolitical interests require just the opposite.

One of the real problems that stands in the way of building support for a forward-looking international agenda is that the benefits of globalism are not evenly shared. One troubling facet of the global economy is that workers with high skills and in high-value added industries are doing very well, but low-skilled workers and workers with low education are not doing very well. Ultimately, this is an issue we need to address if we are to build support for flexible labor markets, trade liberalization and maintaining leadership in the global economy. And the way to address it is to have forward looking domestic policies that compliment forward looking international policies.

Our final challenge must be to make it easier for families to save and for the nation to expand its savings. For the nation, more savings means more investment and greater productivity. For families, that translates into higher wages and greater opportunity.

Increasing the savings rate has been a high priority for President Clinton -- and encouraging Americans to buy Savings Bonds plays a crucial role in our efforts. The work you are doing with the Savings Bonds program helps make your employees lives more secure financially. You help get them to focus on their future needs -- a first home, perhaps, or children's education or a secure retirement. And then, you help them to take action. And it also helps the nation increase its savings rate, both directly and because the Savings Bond campaign is also an education campaign on the importance of saving. As part of this, Savings Bonds have a special role in introducing the concept of saving to kids. I can remember when I was very young, and I received my first Savings Bond from my grandfather -- and that introduced me to the concept of saving, and Savings Bonds are still widely used by parents and grandparents as gifts to their kids and grandchildren.

In conclusion, let me say that the United States is well positioned to maintain a strong economy for the future and to be a leader in the global economy. But our success depends on business doing what it must to maintain its competitiveness and government doing what it must to address the issues I have discussed. If we work together, we can keep the economy on the right track and meet the challenges of the new century. Thank you very much.