Wednesday, October 11, 2006

Remarks by the President on the Economy and Budget

10/11/2006 3:34:00 PM

To: National Desk

Contact: White House Press Office, 202-456-2580

WASHINGTON, Oct. 11 /U.S. Newswire/ -- Following are
remarks by the president on the economy and budget:

Room 450

Eisenhower Executive Office Building

2:10 p.m. EDT

THE PRESIDENT: Thank you all. Please be seated. Good
afternoon. Thanks for coming to the White House.

In 2004, I made a promise to the American people, we
would cut the federal budget deficit in half over five
years. Today I'm pleased to report that we have
achieved this goal, and we've done it three years
ahead of schedule. (Applause.)

This morning my administration released the budget
numbers for fiscal 2006. These budget numbers are not
just estimates; these are the actual results for the
fiscal year that ended February the 30th. (sic) (see
note 1) These numbers show that the budget deficit has
been reduced to $248 billion and is down to just 1.9
percent of the economy. As a percentage of the
economy, the deficit is now lower than it has been for
18 out of the last 25 years. These budget numbers are
proof that pro-growth economic policies work. By
restraining spending in Washington, and allowing
Americans to keep more of what they earn, we're
creating jobs, reducing the deficit, and making this
nation prosperous for all our citizens.

Today I'm going to talk about the pro-growth economic
policies that helped bring a dramatic reduction in the
federal deficit. I'm going to remind the American
people that we cannot afford to be complacent. I'll
discuss some of the issues that I intend to address
over the next two years to help ensure that our
dynamic economy continues to grow and provide jobs.

Before I do so, I do want to recognize members of my
Cabinet who have joined us. I want to thank the
Secretary of the Treasury, Hank Paulson, for being
here today. Mr. Secretary, thank you for your service.
(Applause.) And the Director of the Office of
Management and Budget, affectionately known as OMB --
Rob Portman. Thanks for coming, Rob. (Applause.) I
thank Steve Preston, who is the Administrator of the
Small Business Administration. Thanks for being here,

I see members of my staff who are here who probably
should be working -- (laughter) -- instead of taking
time off. But I thank you for coming.

The reduction of the deficit I've announced today is
no accident. It is the result of the hard work of the
American people, and because of sound fiscal policies
here in Washington. When I first came to office, I
thought taxes were too high -- and they were -- and
this economy of ours was headed into a recession. Some
people said the answer was to centralize power in
Washington and to let politicians decide what to do
with the people's money. I had a different approach. I
have a different view. And therefore, we chose a
different course of action.

See, I believe that our economy prospers when we trust
the people to make the decisions on how to save,
spend, or invest. And so, starting in 2001, we worked
with members of the United States Congress to pass the
largest tax relief ever passed since Ronald Reagan was
the President. We cut taxes on everybody who pays
income taxes. I was concerned about this kind of
selective tax cutting. I didn't think that was fair.
Our attitude was if you pay income taxes, you ought to
get relief.

We reduced the marriage penalty, we doubled the child
tax credit, and we put the death tax on the road to
extinction. We cut the tax rate paid by most small
businesses. Most small businesses are a sub-chapter S
corporation, for example, or a limited partnership
and, therefore, pay tax at the individual income tax
rate, and therefore, when you cut the rates on people
who pay income taxes, you're cutting tax on small

And by the way, it was really the cornerstone in many
ways of our economic recovery policy, because we
understand that 70 percent of new jobs in America are
created by small businesses, and therefore, when small
businesses have more capital to spend, it is more
likely they'll create jobs.

We increased the amount small businesses can expense,
on the knowledge that providing incentive for people
to buy plant and equipment will cause somebody to have
to make the plant and equipment that the person
purchases. We encouraged economic expansion by cutting
taxes on dividends and capital gains, understanding
that by cutting those types of taxes, we're reducing
the cost of capital, which makes it easier for people
to borrow so we can expand our economy. In other
words, we had a comprehensive plan that when enacted
has left nearly $1.1 trillion in the hands of American
workers, families, investors and small business

And they have used this money to help fuel economic
expansion that's now in its 37th straight month of
growth. The theory was, was that if we can encourage
entrepreneurship and investment and consumption by
reducing taxes, it will cause the economy to recover
from a recession, and a terrorist attack, corporate
scandals, war, hurricanes -- and it has. The
pro-growth policies have worked. Since August of 2003,
this economy of ours has added more than 6.6 million
new jobs. And the national unemployment rate is down
to 4.6 percent. People are working. And that's good
for our country.

Behind these numbers are millions of individual
workers who start each day with hope because they have
a job that will enable them to do their duties to
support their families, or to put food on the table.
Behind these numbers are small business owners that
are being rewarded for taking risk. Government can't
make anybody successful; we can make the environment
such that people are willing to take risk. And when
small businesses take risk, the economy flourishes and

You know, last week I went to a FedEx facility here in
D.C. The Secretary and I went, and we met with a group
of entrepreneurs who are helping to drive this
economic growth. It was a fascinating meeting. It was
really exciting, wasn't it, Hank? I mean, it was so
wonderful to sit with dreamers and doers. We met a guy
-- I think he said he was an engineering graduate from
Perdue -- who on his way from upstate New York to
Purdue to go to college, he and his brother would stop
and dive for golf balls -- (laughter) -- and then
they'd sell the golf balls to help pay for college. He
has since -- he and his brother have since started an
Internet company that sells golf clubs. And he's
successful, and he's employing people, and he's
excited, and he appreciates the tax cuts. (Laughter.)

We talked to the Under Armour man. I don't know if you
ever heard of that product. I know I'm not supposed to
advertise -- (laughter) -- so I won't. (Laughter.) But
here's a dreamer. The man had an idea. He didn't like
the way the cotton shirts that he wore absorbed his
bodily fluids when he exercised, so he came up with a
better product. And it worked. And now he's built a
huge business. And he's talking about how to continue
to expand, and he's worried about our trade policy.
Here's a small business guy who came out of a garage,
and he's talking to the Secretary of the Treasury and
the President of the United States about making sure
we have intellectual property rights protection in

My point to you is, is that America must remain
entrepreneurial heaven if we want to be the leading
economy in the world, and we will do so through good
policy. And that's by keeping taxes low. As a matter
of fact, the best policy would be for Congress to have
certainty in the tax code by making the tax cuts we
passed permanent. (Applause.)

Back to the budget. When we announced -- when I
announced the plan to cut the deficit in half by 2009,
a lot of folks said it's just simply not going to be
done. They said that we had to choose between cutting
the deficit and keeping taxes low -- or another way to
put it, that in order to solve the deficit we had to
raise taxes. I strongly disagree with those choices.
Those are false choices. Tax relief fuels economic
growth, and growth -- when the economy grows, more tax
revenues come to Washington. And that's what's
happened. It makes sense, doesn't it? As businesses
expand people pay more taxes, and when you pay more
taxes, there’s more revenues that come to our

Tax revenues grew by $253 billion in 2006. That's an
increase of 11.8 percent. Over the last two years,
we've seen the largest back-to-back increases in tax
revenues ever, and the largest percentage increase in
25 years. In other words, when you put policies in
place that cause the economy to grow, tax revenues

I know that sounds counterintuitive for some here in
Washington. People say, well, they're cutting taxes;
that means less revenue. But that's not what happened
over the past two years. As a matter of fact, I'm
convinced that if we had raised taxes it would cause
there to be an economic decline, which would make it
harder to balance the budget over the years.

In February this year we projected the federal budget
deficit for 2006 would be $423 billion. That was the
best guess. Today's report, as I mentioned to you,
shows that the deficit came out at $248 billion -- so,
$175 billion less than anticipated. The difference is
because we have a growing economy, and the difference
is because we've been wise about spending your money.

Congress votes every year on day-to-day spending, and
it's called discretionary spending. There's two types
of spending in Washington: discretionary spending,
over which Congress has got discretion -- and we're
involved; we submit a budget and we've got the
capacity to veto to help bring some discipline to the
process -- or mandatory spending. Mandatory spending
helped -- just happens. It's formula driven. It's --
the Congress doesn't allocate money for it, it just
comes to be, based upon the circumstances involved.

Every year since I took office, we have reduced the
growth of discretionary spending that is not related
to the military and the homeland. And the reason
that's the case is I believe it's important for the
President to lead and to set budget priorities, and so
long as we've got kids in combat, they're going to
have what it takes to do their job. (Applause.) And so
long as there's an enemy that wants to strike us,
we'll spend money to protect the homeland. Those are
the most important jobs we have. (Applause.)

The last two budgets have actually cut non-defense,
non- homeland discretionary spending. And I want to
applaud the Congress for making hard choices. Every
program sounds fantastic in Washington, until you
actually determine whether or not they're working. And
a lot of times, the nice-sounding programs are not
delivering the results that the people expect. And so
we worked with Congress to focus on those programs
that work and do away with those that don't work. It's
not easy, by the way, to get rid of somebody's pet
project that's not working. But you've just got to
know that Rob and his office are working hard to do
just that.

I believe Congress can make the President's job more
effective in dealing with bad spending habits if they
gave me the line-item veto, and let me tell you why.
The President is presented with a dilemma: On the one
hand, we sit down and we negotiate the budget with the
Congress. We say, here's the top line we can live
with, and they'll pass appropriations that meet our
top line. But the problem is within the appropriations
are oftentimes programs that may not have been
properly debated, in other words, stuck in, earmarked.
They may not be meeting national priorities. And
therefore, the President is confronted with either
vetoing a good budget bill because he doesn't like
parts of the bill, or accepting the overall bill and
the bad parts exist in it.

And so one way to remedy that is to give the President
the capacity to analyze the appropriations process, to
remove -- approve spending that is necessary, red-line
spending that is not, and send back the wasteful and
unnecessary spending to Congress for an up or down
vote. That's how we define line-item veto.

It makes sure that the President is directly involved
with the process in deciding the size of the slices of
the pie once the size of the pie has been delivered.
But it also makes sure that Congress is involved with
the process of approving up or down whether or not the
spending is needed or not needed.

Governors have got this power; 43 governors have got
the authority, and they use it effectively. One of the
advantages is this, that they know -- if the chief
executive has got the line- item veto, then
legislators will understand that a program they may
try to sneak into a bill will see the light of day,
and therefore, make it less likely somebody will try
to sneak something into the bill. It's kind of
preventative maintenance.

The House has passed the bill. The Senate really needs
to get the line-item veto to my desk. If senators from
both political parties are truly interested in helping
maintain fiscal discipline in Washington, D.C., and
they want to see budgetary reform, one way to do so is
to work in concert with the executive branch and pass
the line-item veto.

And for those of you who are here, who are helping us
get that legislation out of the Senate, I want to
thank you for your work. The reason I brought it up is
I am absolutely convinced it is necessary to make sure
that we continue to maintain budget discipline here in
Washington, D.C.

We've made good progress, as I mentioned to you, in
getting the fiscal house in order, but there's another
problem with our budget, and that has to do with
mandatory spending, particularly with Social Security,
Medicare and Medicaid. These are really important
programs. They're called entitlement programs because
when each of us retire we're entitled to a benefit, in
Social Security for example.

And yet the health of these programs -- the health is
in serious jeopardy. Why? Because there's a lot of
people like me and Paulson who are fixing to retire.
(Laughter.) As a matter of fact, both of us reach
retirement age at the same time, which is in 2008.
That's quite convenient in my case. (Laughter.)

But unlike the previous generation, there's a lot more
of us, and we've been promised greater benefits than
the previous generation. In other words, the
government has made promises with a future
generation's money that we can't keep. And so the
fundamental question facing the government in
Washington, D.C. is: Will we have the will necessary
to deal with these entitlement programs to leave
behind a better budget picture to deal with the
unfunded liabilities and the mandatory programs for
future generations?

One reason Secretary Paulson came to work in this
administration is because he wanted to understand
whether or not we were committed to continue trying to
bring Social Security reform, to modernize the system.
Look, you don't have to cut benefits. You've just got
to slow the rate at which benefits are growing in
order to make sure a future generation is not strapped
with a budgetary system that is unaffordable.

And I assured -- I assured Hank that I was deeply
committed to working to solve Social Security, because
I believe the call for those of us who are blessed to
be in public service is to confront problems now. It's
so much easier to quit and just say, let's let another
Congress deal with it. The problem is, is that the
longer we wait, the more costly it becomes for future
Congresses. And so now is the time. Now is the time.
And Hank and I are going to -- after these elections
come and go, we're going to work with the leaders, and
to say, we're all responsible for getting something
done. My hope is, in the last two years of this
administration, we can set aside needless politics and
focus on what's right for the United States of America
and solve these entitlement programs once and for all.

I hope you're optimistic about this country's future,
because I sure am. I am -- I am optimistic because I
have great faith in American ingenuity and I know how
hard our people work. I am optimistic because we're an
innovative society, and there's a lot of really
capable, smart people continuing to make sure we
remain innovative. I'm optimistic because the public
sector and private sector encourages important
research and development to make sure America is on
the leading edge of change. I'm optimistic that we
have put good policy in place that will encourage the
entrepreneurial spirit. And I firmly believe, so long
as this is an entrepreneurial-oriented country,
America will remain the economic leader we want her to

I want to thank you all for coming to hear this
proclamation of good news. (Laughter.) God bless.


2:29 P.M. EDT


Note 1: Sept. 30



/© 2006 U.S. Newswire 202-347-2770/


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