Matching our Economic Course to Current Realities

Former Vice President Al Gore

Delivered at The Brookings Institution

Matching our Nation's Economic Course to Our Current Realities

Wednesday, 2 October, 2002

Introduction

Good morning. I want to thank Bob Litan, Strobe Talbott, and everyone here at the Brookings Institution. In a time of so many challenges, the scholars here provide a service to our nation by honestly examining our government's policies and sharing your best analysis, and I thank you for your leadership.

Last week, I spoke about the relationship between the proposed war on Iraq and the war on terrorism.

When I spoke in San Francisco, I outlined my disagreements with some of the ways President Bush is pursuing a war against Iraq. But whether you agree or disagree with President Bush's approach, all Americans should acknowledge that when he feels strongly about an issue, the President can be focused and determined.

Today, I want to urge the President to focus on our stalled economy as he has focused on international affairs.

I say this because I am deeply worried that America's economy is in big trouble and that our current approach is failing.

President Bush believes that it is urgent that the Congress act on the issue of Saddam Hussein prior to the election on November 5th. I think it's even more urgent that both he and the Congress take action to strengthen our economy prior to the election

Is it really essential that the Congress authorize war prior to the election, but can wait until after the election to deal with the economy?

Millions of Americans are being harmed by the rapid deterioration of our economy, and I believe it is urgent that we have presidential leadership to completely reassess and change our economic policy.

If we turn a blind eye to our weak economy, it will eventually undermine everything else we're trying to accomplish - from winning the war on terrorism to giving all families the economic opportunities they deserve.

This morning, I'm here to tell every American that regardless of your political party or your views on starting a war with Iraq, we all have an enormous stake in fostering the widest possible discussion about our economy.

We will pay a price for any further delay. If the President does not propose action before the election, we'll have to wait until next year when the new Congress convenes - and more likely - until the Spring when Congress gets down to serious business. In the interim, a global recession - or worse - could have already taken hold.

On every continent, the economic trends are dangerous and are worsening rapidly. As bad as our markets have been hit - especially during these past three months - the markets in Europe and Asia have been hit worse.

In Latin America, free market reforms once reinforced democratic capitalism. Today, both free markets and democracy itself are threatened by economic crisis.

Throughout the world, all hopes are focused on the possibility that America's economy will recover.

We share that hope, but looking at our economy today, it's clear we have a lot of work to do.

Business investment has declined every single quarter of the Bush Administration. In fact, over the last two years it has dropped more sharply than at any point in the past half century.

Not since the Great Depression has our stock market declined so dramatically.

In less than two years, we have lost $4.5 trillion dollars of stock market wealth - more than a quarter of our total wealth. And if we have another quarter like the one we have just endured - our national losses will take us into truly uncharted realms.

This week, millions of Americans whose retirement savings are invested in 401(k) plans are receiving statements with the shocking news that much of their hard-earned wealth has disappeared.

And this will be on top of last year, when 401 (k) and similar plans lost $210 billion while IRAs lost $230 billion. Thank goodness that President Bush did not succeed in persuading Congress to privatize Social Security and invest the trust fund into the stock market just before it collapsed.

And retirees are far from the only victims. The unemployment rate has shot upward - adding more than 2 million Americans to the unemployment lines since last January.

Long-term unemployment has more than doubled. In fact, this Administration has become the only Administration in 50 years to preside over a net loss of private sector jobs.

Even those Americans who still have a job are finding that their purchasing power has dropped sharply.

Those earning the minimum wage, for example, have lost more than 10 percent of their real income. At the same time, living costs have skyrocketed.

Health premiums alone have jumped 27 percent. Affordable housing and quality childcare are increasing out of reach for average families. Consumer confidence has plummeted by almost 20 percent. Home mortgage foreclosures have reached a 30-year high, and personal debt is approaching it's highest level ever.

What all of this means to families, is that they are working longer hours for less money.

They are more worried about the future, they are less able to provide for their loved ones, and millions are postponing or interrupting retirement to work for many more years than they had planned.

The quality of life in most communities is also suffering because local and state budgets have been devastated by this historic economic decline. Forty-five of our fifty states are now in deficit. Sharp cuts in spending for education, job training, and income supports are now being planned.

Perhaps worst of all, due in substantial part to this failed economic policy the over $5 trillion surplus that had been projected for the next ten years has virtually evaporated - and with it our best chance to pay down our national debt. Under President Bush's stewardship, not even Social Security has escaped the damage. Bush's budget calls for draining more than $2 trillion out of Social Security surpluses to hide the extent of the budget catastrophe.

Avoiding Responsibility

According to President Bush and his economic team, none of this was supposed to happen. Even though much of it was predicted by opponents of the President's economic plan, all of it has come as a shocking surprise to the President and his team.

Partly for that reason, there is diminishing confidence that the President's economic predictions for the future are any more reliable than the ones he made in the past. In fact, there is now a crisis of confidence in U.S. economic leadership throughout the world - and this lack of confidence is itself an obstacle to a global economic recovery.

Rather than take responsibility for failed policies, President Bush and his political team have tried to create the impression that our economic problems are primarily due to the terrorist attacks of September 11th, 2001.

But no serious objective economist agrees with the President's assertion.

The economic damage from the attacks of September 11th was considerable, but unrelated factors - including bad economic policy - were clearly responsible for most of the economic damage we have suffered.

When seeking office, President Bush said he would lead a new "Era of Responsibility." But today, he won't take any responsibility for the damage economists say his policies have created. The President needs to take responsibility for the fact that his own fiscal policies are the largest factor responsible for the $5 trillion evaporation of our surplus. The President needs to take responsibility for the failure of his economic team to respond in a swift and coordinated fashion to our domestic and international crisis. And he needs to take responsibility for the fact that these policy failures have contributed to the crisis in confidence in U.S. economic leadership.

Even worse, anyone who offers ideas about fixing our economy is not met with interest, but with insult.

For example, when Majority Leader Tom Daschle questioned these policies two weeks ago, the President's budget director described his speech as "a tantrum" and the President's chief congressional ally in the House of Representatives attacked Senator Daschle's motivations saying his speech was "driven by political greed, not the public good." Apparently, the President's efforts to "change the tone in Washington" have not yet borne fruit when the subject is economic policy.

Solutions

But Democrats should not make the same mistake. We owe the nation more than saying "I told you so." We need an alternative plan to get back on the right track.

At this moment in our nation's history, America is laboring under a weak economy, experiencing a crisis in our financial markets, and moving closer to war. If we are to be responsible stewards, we must take steps to match our nation's economic course to our current realities.

I know we can get back on track. We've done it before. So today, in the spirit of helping our country start a much-overdue discussion, I want to put a few ideas on the table.

First and foremost, the President and Congress should undertake a complete reassessment of our current economic blueprint --because what we are doing today is not working. The President needs to come to the table with leaders in Congress to survey the current economic landscape and chart a new course.

I am not asking the President to abandon his ideology. I am suggesting that he should try to reconcile his ideology with the realities now being faced by the American people. I am asking that he do no more than what his ideological hero, Ronald Reagan, did at the same point in his presidency, before the midterm elections of 1982, and engage the bipartisan congressional leaders in a complete reassessment of our nation's economic policy to examine what is working and what is not. I didn't agree with President Reagan's ideology, and as a member of Congress, I voted against his economic plan. Neither did I agree with all of the changes that came out of the reassessment of 1982 - but I respected President Reagan's willingness to recognize reality and his openness to an honest dialogue with those who held different views.

I am convinced that unless we immediately make some serious mid-course corrections, the Bush economic plan will continue to drag us down and undermine our future. Clearly, it is time for the President to engage the bipartisan leadership in both houses of Congress in a re-examination of how we can get our economy - and our decision-making process - moving again. Yet, like a lost driver who won't stop to ask for directions, the President clutches his old plan and racing in the wrong direction - farther and farther into the economic wilderness -- with the fate of nearly 300 million Americans in tow.

It's time for a reality check. If the President would take an honest look at our economic realities, we could begin the process of moving forward.

It's time for the president to recognize the severity of the problem and come to the table. President Bush needs to sit down with the Democratic leadership - and with those in his own party - and honestly reassess where we are.

There are pressing questions that must be answered. How does the president plan to pay for war, homeland security, Social Security, and Medicare? How can we refocus our resources to help our military win overseas and to help our families stop losing ground at home?

We need to start asking these questions, and we need the President to be part of the discussion.

Responsible leaders have the courage to seek out what's needed when circumstances change.

At halftime, any football coach worth his salt will look at what's working and what's not. He'll make course corrections and tailor his plan to the reality on the field.

Sports teams do it, workers do it, but for some reason this Administration is unwilling to do the responsible thing.

We're not asking the President to do something extraordinary - just to do what millions of American families are forced to do - to reassess their plans in light of a failing economy.

Just think about all the people who have lost their jobs in the past 18 months or the Americans who have seen their retirement savings shrink. They're reassessing - figuring out what they can afford today, and then setting new priorities.

The American people are doing the responsible thing. Unfortunately, their White House is not. Their solution is to tell us -- "Don't worry. Things will fix themselves." Well, it takes more than words to restore confidence in our economy. It takes action.

Cheerleading won't restore confidence - a responsible economic plan will.

Second, in addition to placing the current entire economic plan on the table, we need to identify a group of first priorities that we are taking off the table. These are priorities that we all agree, given our current conditions, must come before any other proposals.

In my opinion, those first priorities are threefold: resources for homeland security; a fund to cover the estimated costs of a potential war in Iraq; and a short-term stimulus, including extended unemployment benefits and help for small businesses, to jolt the U.S. economy out of stagnation.

Third, in order to restore confidence in America's economy, we need to be honest with ourselves about our true situation. Unfortunately, the President's budget and economic plan are based on Enron accounting. They project revenues that will never appear and hide expenditures that will.

One of the most important factors in the success of the Clinton-Gore economic policies was a rigorous insistence by every member of our economic team on the most conservative assumptions concerning expenditures, revenues, deficits, and economic performance. We simply must have a speedy return to honest numbers in order to create the basis for an economic policy that works as intended.

We also need to recognize that some members of Bush's economic team simply do not inspire confidence in the markets nor carry weight on his behalf on discussions in Congress, the Federal Reserve, the business community and economic policy makers in other countries - and they need to be replaced.

Lastly, the President should recognize that importance in investing in sustainable growth and energy independence.

Investing in renewable energy efficient technologies will not only create new jobs and open new markets, but will also decrease America's dangerous dependence on foreign oil.

The president should challenge the telecommunication and computing industries to "go the last mile" in finally connecting Americans in their homes and workplaces to the new data services that require high bandwidth.

Let me close with this thought: Don't give up hope that we can control our own economic destiny. After all, President Clinton and I also inherited an economy deep in trouble. Yet, after a few years of sound economic policy (albeit a policy enacted by the margin of a single vote) we turned deficits into surpluses and joblessness into 20 million new jobs. We transformed a weak economy into the strongest economy America has ever known. This was accomplished by the American people their boundless energy and ingenuity. And no doubt with the right economic policy in place - on that's focused on the future - we do it again.

As Americans, we need to insist that the President open a full discussion of economic policy during the five weeks between now and the election. I am optimistic that working together we can make the right choices and start moving back in the right direction. We have gotten our economy back on track before. We can do it again.

ENDS

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