Laura Tyson on the Gore Economic Platform
BAY: Tonight we begin a special series leading up to the New Hampshire primary next Tuesday, "</s>MONEYLINE 2000: The Candidates." We'll look at the platforms of five White House contenders, look at how their proposals would affect Wall Street, the economy, corporate America and your portfolio, and your pocket book. We begin with the Democrat who emerged from last night's Iowa caucus, with a huge victory, Al Gore. In just a few days, the current boom will break the record as the longest expansion in American history and the vice president has been in the White House throughout it. But how would he manage the economy if he becomes President Gore?</s>GREG VALLIERE, CHARLES SCHWAB WASHINGTON RESEARCH GROUP: If the upcoming election is strictly a referendum on the economy, Al Gore should win.</s>BAY: The challenge for Gore is to share the Clinton administration's economic successes without being overshadowed by its scandals. In 1993, Gore cast the tie-breaking vote that gave the U.S. its biggest tax increase in history. As to future tax increases, Gore says, quote: "I am ruling them out under circumstances that approximate what we have today." Gore proposes modest tax cuts: $250 billion to $300 billion over the next 10 years. His goals: double the standard deduction for couples to ease the marriage penalty; expand the earned income tax credit; create a 401 (j) account, to help people save for education; and make permanent the research and development credit that helps fund private sector innovation. A Gore administration would oppose cutting capital gains or estate taxes and support the temporary, though not permanent, moratorium on taxing Internet sales. It is the sweetest of dilemmas for a politician: How to spend a $3 trillion surplus. But a dilemma it is.</s>VALLIERE: All of the politicians now have crawled into a self- imposed straitjacket, vowing not to spend any of the Social Security part of the surplus.</s>BAY: Indeed, Gore proposes setting aside more than $1.8 trillion to shore up Social Security.</s>THOMAS GALLAGHER, ISI GROUP: Early on in the Clinton administration, there were some decisions made to pursue a more market-oriented approach, to emphasize fiscal discipline rather than public investments.</s>BAY: A Gore presidency would continue that emphasis, calling for modest increases in defense and education over 10 years. Gore talks the talk Wall Street likes to hear.</s>VICE PRESIDENT AL GORE (D), PRESIDENTIAL CANDIDATE: I'll fight to maintain our fiscal discipline. I'll fight for free and fair trade to create more high-paying jobs here at home. And I'll invest in our people.</s>BAY: A NAFTA proponent, Gore also supports Chinese entry into the WTO, though with caveats.</s>GALLAGHER: Democrats are more and more firmly in the camp of wanting to condition future trade deals on environmental and labor stands.</s>BAY: Endorsed by Robert Rubin, Gore has on his economic team, White House adviser Gene Sperling and former Fed Governor Alan Blinder. And he's a strong supporter of Alan Greenspan.</s>VALLIERE: I think you have to say that Gore would be a traditional Democrat on the economy, moving more to the center as Bill Clinton did, trying to keep the bond market happy. That is a crucial point: to keep Alan Greenspan and the bond market happy.</s>BAY: Still, the temptation to propose ambitious new programs or sweeping new tax cuts may grow harder to resist. The Congressional Budget Office is expected to revise surplus estimates upward later this week by as much as a trillion dollars.</s>BAY: Gore goes into this primary season with the financial backing of some big corporate names. According to the Center for Responsive Politics, top contributors include those with affiliations to Ernst & Young, Viacom, Bellsouth, Goldman Sachs and Citigroup. Those connections have paid off handsomely. Gore has raised approximately $28 million and has a little more than $5 million cash on hand. In terms of economic advice, one key person on the Gore team, is Laura Tyson, former chair of National Economic Council during the Clinton administration, now the dean of the Haas School of Business at Berkeley. Laura, welcome back to</s>MONEYLINE. LAURA TYSON, GORE ECONOMIC ADVISOR: Nice to be here.</s>BAY: In your opinion, what is the single most important thing that Vice President Gore could do to keep this economic boom going and to build upon the record of the Clinton Administration?</s>TYSON: Well, the single most important thing is to keep the macroeconomic environment sound. And the two parts of that really are to continue on the path of fiscal responsibility, which Gore did cast the deciding vote for, and to continue to have very good relations with the Federal Reserve, which has been a very important part of the last eight years as well.</s>BAY: And he has been quite a vocal supporter of Greenspan, as have most folks.</s>TYSON: Absolutely.</s>BAY: It was interesting the "Journal" today looked at federal spending and suggested that President Clinton was the only post-war president to reduce real spending per capita. Is that something that Gore would likely continue, if elected?</s>TYSON: Well, you know, what the president and vice president did was they changed the trajectory of the economy. We were on a deficit as far as the eye could see. The idea was to cut spending and to change taxes in such a way that we generated these large surpluses. Now it's time to spend a little more on things like shoring up Social Security, shoring up Medicare, doing some more for education, but always within the context of a sustained surplus position in the government accounts.</s>BAY: Still continue to trim defense spending?</s>TYSON: I think defense spending is an issue, as you notice, Vice President Gore is proposing to increase defense spending. I think everyone is proposing to increase defense spending somewhat always, though, within the context of other priorities as well. I would say defense, Social Security, Medicare, education are areas where we need to spend more and we can afford to spend more.</s>BAY: Real quickly, we know that the vice president is a believer in the new economy...</s>TYSON: Yes.</s>BAY: ... and supports keeping the moratorium temporarily on Internet taxation. Temporarily, means what? does he have a plan for taxation on the Internet? does he think there should be taxation there?</s>TYSON: No, I think that what the U.S. position is, and what Vice President Gore has been pushing very hard, is to allow this new economy to really flourish. And the way to do that right now is to allow for a tax-free environment. As we move down this path, we'll discover more and more about how the new economy functions, but there's no hidden agenda here to increase taxes.</s>BAY: You wouldn't rule out taxation in the future there?</s>TYSON: But there is no plan to increase taxation either.</s>BAY: Laura Tyson, thanks for joining us. Tomorrow, the Republican victor of last night's Iowa caucus, Texas Governor George W. Bush, who spelled out his tax manifesto last month.</s>GOV. GEORGE W. BUSH (R-TX), PRESIDENTIAL CANDIDATE: We will take down the toll gate on the road to the middle class in America.</s>BAY: But his rivals say otherwise, we'll look at whether the Bush platform would win votes on Wall Street, that is tomorrow night on MONEYLINE. Still to come, AT&T; beats the Street, but paints a gloomier picture for this quarter.