July 9, 1997
One hundred and sixty-five years ago, Alexis de Tocqueville journeyed to a new world. For nine months, he traveled the United States from top to bottom and back again -- seeking to discover what made America unique at that time, and perhaps for all time. He visited our nation's capital, sixteen states, and the uncharted wilderness of the Michigan Territory.
He talked to farmers tilling small plots of land, and workers laboring in early factories.
What he saw was a young country beginning an historic transformation -- from the age of agriculture to the age of industry, from an old economy to a new one. But what amazed him more than any single sight was the spirit of a people in the midst of what could have been a terrifying change. Because, instead of retreat or resignation, Tocqueville saw relentless courage and infectious optimism.
And he returned to his native France to proclaim that the new American nation was, to use his phrase, "filled with promise." America -- in the words of his contemporary Ralph Waldo Emerson -- was "the land of tomorrow."
Now, I'm no Tocqueville. But in April, I decided to set out on a journey of my own. For the past three months, I have traveled America to witness something new -- to see an old economy once again giving way to a new one. During these three months, I have seen the new economy unfold in mammoth airplane hangars in Seattle, in the sunny cornfields of Iowa, on the streets of inner-city Detroit, in the high-tech labs of New England, and even in the far reaches of cyberspace.
I have seen the new economy -- an economy driven by information, research, knowledge, and technology. A new economy that values the productive capacity of people above all else. A new economy linked to a global marketplace that zaps dollars, deutschemarks, and data around the world at the speed of light. A new economy that brings the promise of a better life for all Americans.
I have discovered many things on my journey, and have as many questions as I have answers, but one thing's for sure: this is not your father's economy. The new economy is workers who learn throughout a lifetime, not those with a single skill. It is entrepreneurs who take risks, not managers who take a pass. It is economic growth because of environmental protection -- not in spite of it. The new economy is networked, not hierarchical. Distributed, not top-down. Creative, not complacent. Multicolored, not single-hued. It thrives on reinvention, not bureaucracy. It focusses on results, not red-tape. It is customized, not standardized. It is bits, more than brawn. Wits, more than widgets. Wired, not tired. Partnership, not confrontation. The new economy is hyperlinked, hyperspeed, hypertext, and at times just plain hyper.
And as I've talked to the Americans who are building this new economy, I have seen an America like the one Tocqueville saw -- a nation filled with promise. And I have seen an America that, in Emerson's wonderful phrase, has reclaimed its position as the land of tomorrow. And I've seen Americans do all this with the same relentless courage and infectious optimism of their forebears.
For the last several months, across America, I have seen the new economy -- and I am here to tell you that it works.
I have seen the new economy at the New England Development Center of the Oracle Corporation in Nashua, New Hampshire. Two hundred brand new high-paying jobs on the cutting-edge of the Information Age. In a workplace that treats employees as assets to be developed rather than costs to be cut, the men and women of Oracle are building new low-cost, highly-efficient machines to cruise the information superhighway.
I have seen the new economy in North Carolina, where I've met with entrepreneurs, engineers, and venture capitalists who are inventing new technologies, new ways to structure business, even entirely new industries -- generating enormous wealth and setting the standard for the entire world.
I have seen the new economy on my own personal computer at a web site called Parent Soup. Parent Soup is a virtual community of parents, a thriving business that could not exist without the Internet. And it shows that the changes of the new economy go beyond just the way we do business. Parent Soup is just one example of how the new economy is changing almost every aspect of how we work and live.
But make not mistake about it: the new economy is not just computers -- it is taking root in every sector of our economy. The way every American works is changing -- must change -- to adapt to the opportunities and demands inherent in the new economy. I have seen that on the factory floor of Munoz Manufacturing in Detroit, Michigan -- a resurgent metropolis that is a far cry from the outpost Tocqueville described as a "fine American village" and a far cry from the devastation which followed the exodus of the auto-industry in the 1960s and 70s. With Empowerment Zones, the forces that shape the new economy are being used to lift up areas thatonce faced a bleak curtain of despair. With the support of the automobile industry which has come back to Detroit, Munoz Manufacturing is returning jobs and hope to the heart of a great city - by responding to the entrepreneurship incentives and tax relief of our Empowerment Zone program. They are proving that the new economy can be everybody's economy.
I have seen the new economy in Johnston, Iowa -- at Pioneer Hi-Bred, a company that is marrying our oldest industry with our newest science. At Pioneer, genetic engineers are developing new seeds to grow sturdier crops our farmers can then export to the world. And just as important, Pioneer is rated one of the fifteen finest corporate citizens in the entire country. This successful company is showing that treating workers and the environment right is smart business in the new economy.
I have seen the new economy in Atlanta, at the Delta International Air Cargo Terminal - where goods made in America are being exported to consumers on every continent -- and where the benefits of free and fair trade are lifting the lives of middle-class Americans.
I have seen the new economy take hold in New Castle, Pennsylvania, the home of Berner International - a company run by one of the winners of the Small Businessperson of the Year award, Gloria Berner. This one-time English literature major runs a business that makes heavy equipment -- and steady profits. The new economy is no longer an old boys club. Today, women-owned businesses employ more people than the entire Fortune 500 combined. Women owned business are increasing at twice the rate of businesses generally. This is definitely not your father's economy.
I have seen the new economy in a gargantuan hangar of the Boeing plant I visited in Seattle. There, unionized workers are building the Triple Seven - the jet that will fly us into the next century. Teams of highly-skilled workers have been empowered to act quickly on their own, free from chain-of-command second-guessing.
How did all this happen? How did this new economy come to be? There are two main answers. One is that Americans worked hard. They shed old ways of thinking, retooled ailing industries, and invented new products, new services, new ways to do business.
But the other reason is that President Clinton put in place an economic strategy that was based on a solid understanding of what was new about the new economy. Our economic strategy combined three elements never before tried in collaboration.
First, reduce the budget deficit. Forget the gold standard, the new economy operates on the information standard. Financial markets around the world make and execute decisions about a government's fiscal policies every day in millions of transactions. If investors believe you're playing games with the budget, or using smoke and mirrors, interest rates will climb almost instantly. The future implications of policy changes are judged in the present -- and so reducing the deficit is the most potent way of keeping interest rates in check and freeing capital for newenterprises.
The second part of our strategy: invest in education and technology -- because in the new economy, education is the key to opportunity and innovation opens the door to higher levels of productivity.
The third component of our new strategy: open new markets for America's goods. In our first term, the Clinton/Gore Administration hammered out more than 200 new trade agreements to bring down tariffs on American products.
Enacting this three-part strategy of lower deficits, investments in our productive capacity, and free and fair trade was certainly not easy. Every element of our strategy faced stiff and organized opposition from those who either didn't understand the new economy -- or who understood it and wanted to hold it back. In 1993, our budget plan passed by a single vote in the House -- and a single, tie-breaking vote in the Senate. Some courageous members of Congress even lost their seats doing the right thing. It was hard. In 1995 and 96, the other party shut down the government rather than agree to the strategic investments we believed the new economy demanded. And on trade -- NAFTA, GATT, and all of those other agreements -- we rejected the advice of those in both parties who said we should build walls around the old economy instead of bridges to the new, global economy.
Each time we tried to ready Americans of this century for the economy of the next century, we faced resistance. We heard a chorus predicting gloom and doom if we carried out our plan. Each time we tried to introduce a new way of thinking about the economy, we had to break through the din of special interests and take our case directly to the American people. Each time, for every part of our plan, it was a fight -- a knock-down, drag-out, bare-knuckled fight to the finish.
In spite of a few scars and bruises, I am proud to say these were fights well worth waging. Halfway through 1997, the evidence is in. The American economy is the strongest in a generation, the envy of the world. We don't endorse their phrase, but Fortune magazine wrote recently that it is not only the best economy in a generation, but the best ever in American history. In any case, we've had the creation of 12.5 million new jobs. The growth rate close to 6 percent -- the highest in a decade. Consumer confidence stands at a 28-year high. The welfare rolls are down 3.1 million. After a long decline, incomes across the spectrum are finally ticking upward. The unemployment rate at historic lows -- just five percent last month -- and with none of this triggering inflation.
When the President and I came to office, the United States was experiencing stagnant job growth. Each time the economy was close to climbing out of its rut, businesses trying to borrow ran smack into a government trying to finance its enormous, nearly $300 billion annual deficits. That pushed interest rates higher -- and shoved the nation back into a recession. Back then the question before us was: How can we lift the economy out of its rut for good and get Americaback on track?
When the dust cleared from all those fights, our new economic strategy answered that question loudly and clearly.
Four and a half years later, as we enter the first summer of our second term, and the American economy is again the world's powerhouse, we face a new question: whether we can consolidate our gains and make sure this new economy continues to take root. Are we going to continue to press forward and bring all Americans into the new economy? Or are we going to creep backward into the destructive comfort of the status quo? That is the choice we face today. Reduced to three words, the choice is this: forward or back?
That is the central question Congress faces as it returns to Washington this week to begin work on taxes, the budget, and trade. As we evaluate each initiative, we must apply the same standard: does this help Americans like the ones I've met over the last few months prosper in the new economy? Does it move America forward? Or does it tug us backward?
The next 90 days will determine the answer. In the next 90 days, Congress will decide whether to continue a three-part economic strategy that recognizes what's new about the new economy, and that equips all Americans to prosper in a time of exhilarating change.
The first part of our strategy has been cutting the run-away deficit we inherited. Already, because of the plan we fought to pass in 1993, and because we refused to turn back in 1995, the deficit has gone down 77 percent. Now we have to finish the job. We need to balance the budget -- and do it in a way that continues to support the new economy. After long and difficult negotiations, we reached a bi-partisan agreement to balance the budget. A balanced budget -- the first in a generation -- would mean we could continue the low interest rates which have freed up the capital needed by entrepreneurs to invest in the firms of the future.
And yet, believe it or not, there are those in Congress who oppose the balanced budget agreement. Some say the spending cuts are too deep; others say the tax cuts are too small.
And voices can now be heard saying that our incredible progress in reducing the deficit should excuse us from taking the last steps to get that deficit down to zero. Now that the pressure's on and it's time for tough decisions, we must accept responsibility and embrace the lessons of the new economy. Now is not the time to pull back from the hard decisions and refuse to recognize that a new economy calls for new policies.
And now is not the time to heed the calls of those who say the budget will balance itself. Hoping the budget will balance itself is not the answer. The only answer is to make hard choices, pass a credible plan, continue on course, and eliminate the deficit.
As we balance the budget, we must also continue to transform the federal government. But new ideas must be implemented in new ways. Over the past decade, American business haschanged the way it does business. It has emphasized choice, quality, and efficiency. All around America, companies large and small have stopped doing "business as usual." And in the past four years and a half years, this Administration has stopped doing "government as usual." Our Reinventing Government initiative is one of the reasons we have the ability to both balance the budget and still increase our investments into the future. We have cut 300,000 government employees from the federal workforce and are getting rid of 16,000 pages of unnecessary regulations. But even more importantly we have changed the way government views its role. We're listening to federal employees and following their ideas. Once the focus was on filling out paperwork and making sure forms were done in triplicate -- today the focus is on serving the customer and offering them choices.
I'm pleased that both houses of Congress having been moving ahead on a balanced budget. Now, the Congress and the White House must work together to produce a conference agreement that is consistent with the Bipartisan Balanced Budget Agreement and put the final nail in the coffin of fiscal irresponsibility. We cannot build the new economy on a foundation of hot checks. Those who oppose a balanced budget and refuse to make cuts in spending are refusing to give the new economy the breathing room it needs to grow.
At the same time we must also continue with the second part of our strategy: investments in the future. These are needed to give the new economy the energy it needs to grow. We should reject the views of those who say that a balanced budget and the lower interest rates it brings will be enough by themselves to build our new economy. For in the new economy, the true engines of growth are ideas -- and the technology and higher productivity created by those ideas.
That is why we need to make the priority investments the new economy demands. Investments in education, technology, and the environment. The budget agreement calls for the largest increase in our commitment to education in a generation -- by increasing Pell Grants, by making sure that our schools meet the highest world class standards, by deploying an army of a million reading tutors for our children, and by reforming the public school system so that it follows the model of decentralization and choice epitomized by the vanguard companies of the new economy. And because technology is always changing and the science and technology revolution is still accelerating, we need to continue to increase our investment in research and development. Ideas, innovations, and inventions are the forces moving the new economy. And unless we help them along, the new economy will pass us by. Our willingness to make investments like these created a vibrant middle class, built the federal interstate, and even today is taking us to Mars. Abandoning these investments now will keep too many Americans stuck on the launch pad of the new economy.
We need to invest in America, but we also have to make it easier to let Americans invest in themselves. The answer to the challenges we face is not just more spending, but equipping citizens to master their own destinies -- trusting Americans to make the right decisions for themselves. And that's why the President put forward a tax cut plan last week that is built around the idea of Americans getting ready for the opportunities of the new economy.
At the moment there are three tax packages on the table for the American people to consider -- the President's plan, and the plans passed by the two branches of Congress. Each contains different priorities, each has a different vision for America's future, each responds differently to the challenges presented by the new economy.
Well, I have seen the Republican tax proposals -- and I am here to tell you they don't work.
Where the President's plan treats education as a necessity, the Republican plans see it as a luxury -- a nice little bonus to add onto your resume, if you can afford it. Perhaps they don't understand the new economy, or perhaps they just don't understand what it means to the nation. But by the year 2000, a little more than two years from now, more than 60 percent of jobs in America will require the use of information technology -- and a high school education just will not be enough. We need to make sure that every young person is ready for the future.
That's why the President has included the HOPE Scholarship in his tax cut plan -- a real HOPE Scholarship providing a real hope for those that desperately want to go to college and want to swim with the rising tide of the new economy. The Republican plans provide some support for the first two years of college, but not enough to make their HOPE Scholarship more than a mirage. In between all of the percentage signs and decimal points of their plan, hope is lost and so is the promise of the new economy.
And unlike the Republican plan, ours offers help to students in all four years of college, including graduate education beyond that. But it's not just the young. In the new economy, education is becoming part of the working day of every American. That's why one of the most important differences between our tax cut plan and the congressional plan is in how we view lifetime learning. Their view of the economy is mired in the forgotten past of a day when employers thought a worker's education was likely to get in the way. The new economy is different because it is a learning economy. A flexible and engaged mind is as important today as a strong back and a sturdy work ethic were in earlier generations. Every job requires workers to constantly upgrade their skills. Technology is changing so fast that manuals are obsolete before their ink dries.
Unlike the Republican plan, ours therefore has a 20 percent tuition tax credit that provides support for Americans to learn throughout their lives. Our plan excludes employer provided education benefits from taxation and has a 10 percent employer credit for training in small businesses, the lifeblood of the new economy. Today, you are never old enough to stop learning. We have to recognize that in the America of the new economy, the more we know, the more we grow.
Tax cuts are good for America -- but there is a right way and a wrong way to go about it. The Republican tax cuts cut too many Americans out of the new economy and tax the patience of families that are trying to get ahead.
Another way our tax cut plan provides critical support for the new economy is through our targeted small business capital gains tax incentive. This will help small technology companies raise capital more easily. Under our plan, investments in companies with assets of up to $100 million will be eligible for reduced taxes on capital gains. These small start-ups provide the energy and vigor of the new economy -- they are the laboratories where the land of tomorrow is now being born. This kind of capital gains tax cut will help more start-ups get off the ground, and ensure that America continues to lead the world in high technology.
And, of course, we must invest in the environment. We have to protect our environment and make the investments necessary to keep our air and water clean and safe. Because, in the new economy, protecting the environment is not a sacrifice we make by slowing the economy, it is a precondition for a growing economy.
Investing in the new economy -- by using the tools of both the budget and tax cuts -- has been, and will continue to be, the key to our success. And our investments in education, technology, and the environment have responded to the new economy in a way that recognizes that the world has changed. The old debates of the extremes of both ends of the political spectrum just don't make a whole lot of sense anymore.
On one hand, there are those who criticize the budget for cutting spending too much. Their vision seems to be one of a large, centralized government protecting Americans from any adversity and proposing a program for every problem.
On the other hand there are those who criticize this budget for cutting spending too little. Their vision seems to be one of almost no government -- where every American is on their own and Washington's only job is to get out of the way.
Well, both are wrong. Their debate is straight out of the 1930s. Its irrelevant to the new economy. Americans in the new economy don't want government to be our nanny or a deadbeat dad. What we want is government to be our partner -- not to do things for us and not to leave us twisting in the wind, but to help empower us do things ourselves. That's what our investments are all about.
Government should neither hold our hand and nor give us the back of the hand. But, in the new economy, government must give us a hand in building a better future.
This was the vision of government we set forth in 1993, the vision we defended in 1995. Today, the lines of battle are being drawn again. Listen carefully and you will hear the huffing and puffing of out-of-shape and out-of-date dogmas trying to keep up with the dynamism of the new economy. The new economy has trumped old politics time and time again. The fights on the budget and taxes will show whether we will face the new economy with courage -- or flinch from it in fear.
Once it finishes hashing out the budget and tax plans, I expect Congress will turn its attention to addressing the third element of our economic strategy: our commitment to free and fair trade. Our administration will press the Congress for fast-track authority to expand free trade, particularly in this hemisphere. And once again, we must insist that they look at this issue through the prism of the new economy. Because the new economy is a global economy, woven to the world. That is an undeniable truth. The workers at Boeing know it, the workers at Munoz Manufacturing know it. Now, we need to make sure our elected representatives in the Congress know it.
President Clinton and I fought hard to open foreign markets to U.S. products with some 200 trade agreements. But each time, we faced resistance - from those who believed we'd reach prosperity by building walls instead of bridges. Each time there was a fight.
The fight continues today. If protectionism was wrong in the Industrial Age, it is just plain dangerous in the Information Age. At a time when knowledge is the most important component of national success, America -- the land of innovation -- should embrace free and fair trade with open arms. At a time when we trade in goods and services with every corner of the globe, America -- the most diverse nation the world has ever known -- has a comparative advantage the rest of the world could only dream of. And at a time when people around the world watch our movies and our TV shows and listen to our music, America -- the superpower of creativity -- is looked to for leadership and inspiration. This is one area where America, in Tocqueville's phrase, is truly filled with promise. Protectionism risks draining that promise away.
And yet even today, with the new economy a fact of all of our lives, there are those who subscribe to the mistaken belief that building fences tall enough will keep change away -- and keeping change away will make America more prosperous. This philosophy hinges on the belief that American workers and American entrepreneurs aren't as good as the rest of the world -- and need to be protected by a benevolent government. That is just manifestly wrong. In my journey to see the new economy, I found an America that has shown itself to be the most creative, most innovative, most productive economy in the world -- and that didn't happen because of government protections. Done right, with agreements that safeguard the environment and the rights of workers, trade can lead us to a more prosperous tomorrow.
The new economy is all around us. Ask the auto mechanic who works on cars like the Ford Taurus, a car that has more electronic equipment than the lunar landing module that took men to the moon. Ask the nurse who relies on computers to track records and monitor patients. Ask the kids who chuckle to think that there was a time before ATMs and cable TV. And then chuckle yourself for thinking about how their kids will laugh at a time before videoconferencing and auto-pilot cars were standard. We truly are the land of tomorrow.
Just as the past 90 days have helped me to articulate my vision of the new economy, the next 90 days will shape our nation's response to the new economy. And as I said earlier, buriedin the all the talk of resolutions and reconciliation, hidden amid the distributional tables, between the lines of the footnotes to all the fine print there is a simple question: forward or back? Will we renew the economic strategy forged in 1993 or veer off to follow the sirens' song of the extremes? Will we embrace the new economy or try to recreate an obsolete past? Soon all these questions will have answers. We must choose wisely. We've done it before, we can do it again.