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 Barrick, Dan



CONCORD, NH 03301-3576

 Terms: (John w/3 Sununu and american stock exchange and date is 1989)

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Federal News Service












LENGTH: 5146 words


GOV. SUNUNU: It is a pleasure to be here with you today.  Obviously it is a gathering that not only is representative of what is important and strong about America's economy, but what is important and strong about the world economy.  Those of you who are here from outside of town and outside of this country, let me add my welcome to that, which I'm already positive you have heard from previous speakers.

 It is my understanding that Brent Scowcroft was here ahead of me.  I'll have to remind him one of my jobs is cleaning up after him.  (Laughter.) But it is my understanding that Brent was here a little earlier and talked to you about some of the wonderful, amazing things that are taking place around the world today.  And as trite as a statement of, "These times are the most interesting and critical times in a long, long time," as trite as that statement may be, I really do think it is applicable in the sense of both what is happening and the potential for what can continue to happen and impact the world around us.

 I'm sure Brent spent a little time talking to you about what was happening in the context of a victory for Western values.  And it really is, although, we are very careful at times not to give it that emphasis: Any careful reading of what is taking place -- the Soviet Union, Eastern Europe, even in China, although it was aborted a little bit, and around the world, is a celebration of victory in two respects.

 First of all, the American, the Western commitment to democracy is being rejoiced around the world in political change and reform that is being pressed from within, being pressed from the bottom up in many cases, and accompanied, surprisingly enough, constructively enough, by a pressure that joins what is coming from the bottom up by a movement aggressively in that direction in virtually all those countries from the top down as well.  It has created a sense of inevitability in many cases for the kind of political change that has been the hope and dream of free countries around the world to see extended to those countries that have lived in less free environments.

 In the same respect, accompanying this, we see changes on the economic side, changes that, again, it is not inappropriate to say is a celebration of the Western commitment to the free market approach, the Western commitment to a capitalist society.  It is surprising to me that even those of us in this country who are -- have an opportunity to discuss our own economic system, seem reluctant at times to suggest that it is a capitalist society, and yet, that is a fact, and we ought not to be uncomfortable with that world.  And what we are seeing in these countries around the world is a yearning to make themselves a structure in which the economy and the benefits of free markets are accrued to their citizens, and in order to do that, they understand that one thing that has to be done is to establish an internal economic stucture that is attractive to investment, attractive to capital.  And I find it amazing that we can go to Poland and hear the President of Poland and the leader of the Communist Party in Poland asking the President of the United States how that economic system can create incentives for capital investment so that they can improve their situation and job opportunities.

 And it's amazing then to move down to Hungary, and hear the leaders of the Communist Party in Hungary talk about the changes they are going to make, and again, emphasize their understanding that what they need is a society that is attractive to capital investment, so that a strong economy can be created.  In the context of that discussion, just before the President of the United States was to go to Karl Marx University to give a talk on the issues of democracy and free markets, it was just unbelievable, and yet, that is what is happening.  And I only point that out, that as we in this country have opportunities for establishing policies that are incentives for the investment of capital, we ought to just keep in our mind the amazing contrast that the rest of the world at times seems to understand this better than those of us who have had these benefits all along.

 There are other issues taking place not only -- developing not only in this country, but around the world, that will impact what is clearly understood now to be an economy that is so globally interwound that major changes in one country, whether it is over-regulation or appropriate regulation or deregulation, can have impacts on what takes place in other countries around the world.

 A situation that is real, a situation that is of interest, a situation that is of concern and a situation that is populist enough to capture headlines is the situation involved in terms of the environment.  And I am fortunate today, as I came to talk to you, to have join me in the visit here, although they're not scheduled to speak today, Bill Reilly, who is the administrator at EPA, and Dr.  Allan Bromley, who is the President's advisor on science and technology, both of whom, who are very much involved in the development of environmental policy, very much involved in the development of economic and domestic policy for this administration.  And I point that out because what I would like to touch on for a little bit this afternoon are some of those issues involved in terms of the environment and the approach that I'm sure will have all the details filled in by Bill Reilly when he makes his presentation tomorrow, but I would like to talk about the approach that has been taken by this administration to bring together some of these very same basic principles that are clearly the strength of this nation and the strengths that are being aspired to by countries around the world.

 This president, President Bush, has laid out a series of initiatives, an agenda on the environment, that is as much an agenda involving the economy as a commitment to making sure that we fulfill our responsibility as stewards of the environment.  And it is important that we understand that national and international environmental policy is, in part, a component of national and international economic policy.  They go hand in hand.  An effective focus on these issues provides policies that are complementary, rather than contradictory.  An effective focus, a focus that deals with our responsibilities across the board, is a focus that yields to no one in our -- the strength of our commitment to the environment, yet yields to no one in terms of our understanding that a strong economy is critical so that we can fulfill the obligations of that stewardship.

 And so what the President has put forward in terms of environmental initiatives -- the Clean Air Act, a bill that was presented by the Congress to break the logjam that existed for nearly a decade in terms of dealing with our needs of establishing policies that were broad enough to deal with the environment and protect the air quality of this country and constructive and realistic enough to allow that and, in fact, require that to be done without gutting the strength of the economic system that supports it.

 That plan was sent up by the President.  It was a plan that was balanced.  It was a plan that reflected an understanding of the role of the free market itself in creating domestic and internal incentives to do what is right.  It was a plan that balanced out the requirements and the commitments and, in fact, the impositions that are necessary for us as citizens and for us as members of public institutions, such as local government, state government and the federal government to deal with these issues.  It was a plan that understood that a level playing field, not only domestically, but internationally, requires us to do this in a way that does not put our domestic industries at a disadvantage and, yet, it was a plan that was realistic enough in terms of what had to be accomplished for the environment, that it was recognized as being a significant step forward in that direction.

 And I urge you to understand that the balance that was developed within that program is one that must be maintained and kept as we work this through Congress.  And I understand that everybody impacted one way or the other is tempted to suggest that the dials ought to be readjusted to give them individually or corporately a little bit more preference.  And I hope that that part of the system does not so disrupt the balance built into the program that, again, this country will lose an opportunity to get enacted Clean Air legislation that is both effective and will work in partnership with our economic strength.

 The President, in addition to that, has proposed a phase-out of the chlorofluorocarbons that have a negative impact on the quality of not only our own environment, our own air quality, but in terms of the international aspect, in terms of the long-range capacity of the world environment to thrive.  And we made that commitment to phase these out in a practical way, in a responsive way, by the year 2000.  It was done with an understanding that merely stating the phase-out, without recognizing that the partnership with the private sector would be required in order to develop the alternatives, would impose on us the obligation to have a timeframe that was do-able.  And it was done with that in mind, and in a balanced way that, again, this administration believes, and it's across the board in all the departments of this administration, we believe that that approach is one that meets both the environmental and the economic responsibility.

 This administration has taken action again in dealing with fuel economies.  It's taken action again in addressing our responsibilities towards the global environment in terms of global climate research.  The President's budget that he sent up in February included significant increases for this research, both to measure and to model what impacts specific pollutants have on the capacity of our environment to maintain not only air quality integrity, but the integrity of the thermal balance that is so critical.  We are spending as a government in the budget proposed by the President almost 1/2 a billion dollars, about $500 million dollars across all government entities, in the research that is necessary to help us define a policy that makes sense and addresses not only our needs within our own borders, but makes us a constructive partner for policies around the world.

 Now, let me address that, because it has become an issue that is easy for folks to get headlines with.  It has become an issue that appears to be a bit contentious, and yet the fact of the matter is an issue that must be examined not only in a popular sense, not only in an emotional response to the concern that caring citizens around the world have for the environment, but it must be dealt with in such a way where the policies which will shift the focus of resources probably in a global level unprecedented in history.  It must be done in such a way in which that shift of resources truly has the promise of having a beneficial impact.  For those of you that may not know the general history of that issue, let me point out that in the last couple of years, as a result of examination of some data and, as a result of some of the computer modeling, the analysis that is being done, there has been discussion of a coupling between the emissions of some of the industrial products that we have, some of the inevitable industrial products that we have, as having an impact on the environment's tendency to be warmed as a result of the non-linear relationships between energy in and energy out, depending on the composition of the environment.

 Carbon dioxide is one of the components of concern.  Carbon dioxide is an inevitable product and it is virtually an unscrubbable product of the combustion of any of the fossile fuels, whether it's natural gas or coal or oil or wood.  And the fact is is that there have been in recent years over the last handful-and-a-half of decades a build-up of the levels of carbon dioxide in our atmosphere.  And there is some concern that there is a coupling between that build-up and the change in average temperature, the mean temperature, of the world's atmosphere over a period of time.

 There has been significant work done in this direction.  There is significant work yet to be done.  May I point out tangentially that the level of concerns which focused worldwide attention were concerns in which people determined with the intial models that about a four or five to nine degree rise in temperature might be expected if we would over a period of years, 30 to 50 years, double the concentration of CO2 in the atmosphere.

 There have been in recent months some refinements of those models which, fortunately, in terms of policy, and certainly these are not yet in themselves definitive models, models which suggest this rise may be less but still in that same direction.  It's been reported in a number of journals in recent months that worked on at both the British Meteorogical Office and worked on at the National Center for Atmospheric Research in Boulder -- have indicated a rise of between one and two degrees is a more realistic assessment.

 The point is is that neither the older pessimistic numbers nor the current optimistic numbers should be taken as the final word.  And what we ought to do is to commit ourselves to the kind of investment both in terms of dollars and national resource that the President

 has laid out as part of his agenda to determine as quickly as we can, and as accurately as we can, both the quantitative impact and cause of the kind of problem we are concerned with, and the benefits of any remedial action that may result from international policy to mitigate this change.

 Those are both the kinds of obligations we have to ourselves as members of a nation, and to ourselves as a nation as members of an international community.  And I guess one concern that I have, as I look at those who are involved in policy development on the Hill, is a sometimes irresponsible commitment to older data because it seems to fit the more populist image than newer data that seems to reflect that a more prudent approach might be more constructive.  And I ask that those of you that care about this issue, that those of you who understand the coupling of this issue to economic well-being, so that we can meet our responsibilities to those parts of the world that do not enjoy the quality of life that we do, and I am talking very specifically about our economic capacity to deal with parts of the world that have hunger problems, the parts of the world that have problems in terms of their development and their industrialization, that we understand that we have a responsibility to do this right, not only to ourselves, but to the billions that fall into the categories of the "have nots" around the world.

 Bill Reilly and Alan Bromley will be going to the Netherlands in about a week to discuss with the international community how we can responsibly, and the emphasis is on that word "responsibly" address the current status of understanding of the problem; the current commitment to developing a better understanding of the issue; and the utilization of that better understanding in the development of international policies that can constructively deal with our obligations across the board.  And it is important to understand that as they do so, they are going again in the context of an administration that has made a commitment to deal with this issue, an administration that has laid out an agenda working with the United Nations Intergovernmental Panel on Climate Change to develop by 1990 -- by November 1990, a report in which the status of what is understood, both as the state of the art on the science, and the capacity of economic and industrial response to deal with the environmental needs, can be put into a worldwide context.  And in that respect, Administrator Reilly and the President have made the commitment to host here a meeting, probably in very early 1990, with the working group that is developing those policies.  And it is expected that as part of that program, there will be initiated discussions that will continue what have already been initiated, namely, the discussions on a framework convention on this issue of global warming.

 Now, I spend a little bit of time in my presentation today on this issue because I find it is one that is certainly important as people who care about the environment examine the obligations of countries around the world.  But it is also important as we developm domestic policy to deal with our own obligations to our economy.  And rather than suggest a conflict, let me suggest that they can be developed hand in hand, and that one of the hallmarks, I believe, of what President Bush has succeeded in doing within an administration that is committed to that broad agenda, is to take the diverse viewpoints -- the constructively diverse viewpoints -- of the different departments in the federal government and bring them together in active debate to make sure that as he develops policy, that policy is reflective in the best sense of the word of the differences brought to the table, freely debated, argued, examined, and constructively adjudicated, if you will, by people who care about doing the responsible thing in the most effective way.

 And as the details of those debates come forward, I can tell you that this administration is not concerned about the intensity of internal discussion, but rather, proud that it does take place and that it generally takes place in a way to provide an amalgamation of a policy that reflects and respects the variety of perspectives put forward.

 Those of you who have followed the development of policy over the last ten months have seen that kind of approach taken in terms of our international issues, in terms of our issues dealing with international trade, as well, in terms of our dealing with issues as we put together the Clean Air Act, and in terms of the approach tht was taken by this administration in sending up its budget and fiscal policies.  It probably is the healthiest, most intense, and yet most coalescing of consensus of any approach in recent decades in terms of policy development.  Let me address one last point, and then I will open it up to a couple of questions if we have some time.

 The last point I'd like to stress is that we are at that period of time in negotiations between the Executive Branch and the Legislative Branch where the tough decisions on budget and reconciliation will have to be brought forward.

 Again, a little bit of history.  The President sent his budget package up in Feburary.  Worked aggressively through the leadership of Secretary Brady and Budget Director Darman in crafting a budget agreement with both House and Senate leadership, Republican and Democrat, and now we are looking at the products of that agreement as they have passed through the House structure and as they have passed through the Senate structure.  There is a general disagreement in the product that evolved from both houses of the Legislative Branch, and we certainly hope that those differences can be reconciled.

 The fact of the matter is that the stalemate that now exists exists in the Legislative Branch.  And it is important that we keep our eye on the fact that if the system is to work, we've got to give whatever constructive encouragement we can to the leadership of both House and Senate to try and develop a package that not only flows receiving the consensus by both those houses, House and Senate, but we hope a consensus of agreement between Legislative Branch and Executive Branch.

 It is pretty clear that this nation is moving forward if it can reconcile those differences, and yet, surprisingly enough, if those differenes cannot be reconciled, I assure you that President Bush has directed, and I think we have achieved within the departments and agencies, that we be prepared to manage the sequester that we are currently in in the most effective, constructive way.

 Let me close with some statistics on sequester which I find interesting.  Under sequester, under the rules now in place, under the rules under which the government is now being run, we are spending $50 billion a year more than we did under the budget of 1989, which ended September 30th.  So sequester, as stringent as it sounds, is still a process in which $50 billion a year more will be spent.  It means we are spending more in October than we spent in September, and it means, if needs be, sequester can be managed and managed effectively.

 With that, let me thank you again for the chance to visit with you.  I hope I've had -- been successful in giving you a taste of some of the kinds of issues and some of the way this administration approaches those issues that are of concern not only to this nation within its own borders, but in terms of its interaction with an international community that, again, bring us back to where we started from.  Scenes in the throes of a transition towards political and economic approaches that are consistent with the Western values, the values that we have tried to run ourselves with over these last 213 years, I believe.

 Thank you very much for the chance to be here.  I hope you have a great session today, tomorrow, and so on.  Thanks again.  (Applause.)

 MR. SHIELDS: Do you want to take one or two questions?

 GOV. SUNUNU: I'll take a couple of questions, but you'll have to make some noise when you raise your hand because I can't see a thing with the lights.

 Yes, sir?

 Q You didn't address the problem of water in the United States.

 GOV. SUNUNU: Well, there's a lot of issues I didn't address.  (Laughs.) It doesn't mean we don't care about them.  It means I had 20 minutes to speak.

 Q And the CO2 problem which is impacting due to the great destruction of the equatorial forests, the rain forests (of the world ?).

 GOV. SUNUNU: Well, let me go to the second part of your question first.  The issue in terms of the buildup of CO2 is both the level of production of CO2 by combustion processes as well as a reduction in the capacity of the ecosystem to convert, through Mother Nature's process, the return of CO2 to carbon and oxygen.  The loss of forests is a very important part of that.  We feel that there certainly ought to be incentives -- and I put it in the context of incentives, rather than the more punitive aspect of demands -- incentives for those countries in which policies that have been stripping the forests might be reversed.  And I hope that one of the things that Bill Reilly and Allan Bromley will come back with, as they discuss these issues with the international community, are some suggestions on how those incentives might be effectively put into place.

On the first part, on the issue of water, one of the reasons we don't focus on the water issue is that we have put into place a very aggressive program in this country for dealing with some of the issues in terms of quality of water.  And the record of improvement of water quality in this country over the last decade and a half is extremely impressive.  In my own part of the country up in New Hampshire, we have the Merrimac River coming back, in terms of quality, where the spawning of the salmon has been returning the river.  We are seeing that in rivers around the country.  We are seeing improvement in the water quality in areas where, for example, no public use and bathing was possible.  And in fact, we hope as this develops, we can even expand our accessibility to water in terms of the quality for drinking.  Yes, sir?

 Q The last several months we've seen some economic data -- (inaudible).  Are you concerned that the economy is slowing down too much, may be teetering on the edge of a recession, and do you think the Federal Reserve is being accommodative enough of economic growth?

 GOV. SUNUNU: Well, I think you look at two sides of the data.  You look at the level of growth and I think the level is about 2-1/2 percent for the last quarter, at the lower end of the band that we feel comfortable but certainly within the band.  And the combination of that plus the data on inflation taken together are not bad.  And I think it is important for us to focus on that in tandem.  Obviously we would love to see a stronger growth rate in the years to come, and I think what you will see is a fulfilling of the various responsibilities of the Executive Branch and the pieces of the Executive Branch as the President and his department heads see them, and fulfilling of the responsibility at the Federal Reserve as those members of the Federal Reserve see them.  And I suspect there will be both privately and publicly a continual exchange of dialogue as the system wends its way back and forth.  It is not -- to borrow from control theory, it is not an open loop where a number is picked on and you stick with it forever.  It is a closed loop control system in which those parties who are involved in it continually adjust their number to keep the track moving.  And as long as the track keeps moving with a good balance between growth and inflation, I guess all sides can take credit for doing something constructively.

 Q Have you decided that if you don't get a capital gains cut that you're willing to --

 GOV. SUNUNU: I hear a voice and I don't see who is asking the question.

 Q Oh, okay.  Have you decided that if you don't get a capital gains cut you're going to live with the sequester rather than have a budget deal?

 GOV. SUNUNU: Let me make it a little bit starker than your question.  The President wants a budget deal if it is a good budget deal and does not want a budget deal if it is a bad budget deal.  There are a lot of things that go into that decision.  Capital gains is one part of it, what happens with the repeal of Section 89 is another, what happens with some of the health care issues is another.  They are being crammed into this reconciliation package. Obviously, we would love one that did provide incentives for capital investment.  That's what capitalism is all about.  That's why when I started my discussion, I made note of the fact that sometimes people forget it is a capitalist society.  But we will continue to put pressure on, to urge Congress to allow the majority of members of the House and the majority of the members of the Senate that support capital gains to have a chance to vote on it.  But in the absence of getting that, we do believe that a good budget is better than a bad budget, but that sequester is in itself also better than a bad budget.  So somewhere amongst the possibilities and variations of those choices, we hope to end up with the best possible decision.

 Q Does that mean it's a bad deal without capital gains -- a bad budget?

 GOV. SUNUNU: It means that an encumbered bill without capital gains is not a very attractive bill; but again, its full attractiveness depends on exactly what's there and not.

 I'll take one more, or leave quietly, whichever you prefer.  (Laughter.)

 Yes, sir?

 Q (Off mike.)

 GOV. SUNUNU: Well, in fairness, as one who cares about the fundamental aspect of your question, who picks up the cost of all these environmental issues, the fact of the matter is, is who picks up the cost if we don't fulfill our responsibilities as stewards of the environment is also part of the question.  And what I am suggesting is, is that the optimal result for us and for everyone around the world, is to meet our responsibility as stewards of the environment and do what is now pretty well recognized, do it in the most economically viable way possible.  The Clean Air Bill the President sent up recognized that there are both advantages and disadvantages associated with regulating the emission of sulfur oxides and nitrogen oxides, and in fact, created within it a free market trading system for those utilities in particular that might be most impacted.  And all of a sudden, we're discovering that a lot of those folks that thought that they were being impacted most severely by the requirements set forward as we included -- targeted 107 of the major polluters in the country -- are discovering that the market trading structure that we have given, so that they can reduces their emissions even beyond their requirement and then sell across borders, both utility borders and state borders, the rights -- pollution rights that are associated with that, they have discovered there is an economic value to that. And that's the kind of thing that I am talking about, is a very innovative and constructive approach at meeting our responsibilities to the environment, and our responsibilities to the consumers.  People who care about the environment and people who are consumers happen to be the same people.  They both have priorities, or they have both priorities, and those two priorities are caring about the environment and caring about economic viability.

 And this President and this administration are convinced, and with the leadership of Bill Reilly, have come up with packages that address both of those.  Yes, there will be a slight cost, but if it is done constructively, the long-term cost will be less by doing it right now than it will be by trying to retreat from a disaster of, say, 50 or 100 years from now.

 Q (Off mike.)

 GOV. SUNUNU: Would that give extra short-term pressure on consumer inflation rates?  I suspect that, in the abstract, the answer would be yes; in reality, the answer is no.  Let me give you a number to think about.  We are talking about costs on an annual basis of perhaps a few billion dollars in an economy that is a five trillion dollar economy.  And therefore, if I accept merely the fact that it might add proportionately, you're still looking well to the right of the first decimal point.  It can be done constructively, and that's what we intend to do.

 Thank you very much for the chance to be here.





















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