President Bush Delivers State of the Economy Report

Federal Hall

New York, New York







11:12 A.M. EST



THE PRESIDENT: Thanks for coming. Please be seated. Thanks for being here. I'm pleased to be back in Federal Hall. You know, I drove in, and there stood George Washington. I like to call him George W. (Laughter.) It's nice to be back here.



Last week, I delivered my State of the Union. This morning, I've come to deliver a State of the Economy speech -- and there's no better place to do it than in America's financial capital. More than two centuries ago, Alexander Hamilton led the U.S. Treasury Department from this building. Today, New York City is headquarters of global corporations, it's a center for capital markets, it's the home of three of the world's greatest stock exchanges. You have a Mayor whose name is a fixture on trading floors across the world. And until I took him to Washington, you had Hank Paulson -- who, by the way, is doing a fabulous job.



As we begin this New Year, America's businesses and entrepreneurs are creating new jobs every day. Workers are making more money -- their paychecks are going further. Consumers are confident, investors are optimistic. Just today, we learned that America's economy grew at an annual rate of 3.5 percent in the fourth quarter of 2006. That means our economy grew at 3.4 percent last year, which is up from 3.1 percent in 2005. Ladies and gentlemen: The state of our economy is strong. (Applause.) And with the hard work of the American people and the right policies in Washington, we're going to make it even stronger.



Mr. Mayor, thanks for being here. I appreciate you coming. You're doing what people want you to do, and that is to lead this city.



I appreciate Bill Rudin -- thanks for having me, Bill. Good to see you again. I want to thank members of the Congress who have joined us -- Pete King, Vito Fossella, Carolyn Maloney, and Tom Reynolds. Thanks for flying down with me today. Do you want a ride back? (Laughter.)



Mr. Mayor -- David Dinkins, thank you for being here. Proud you're here. And it's good to see my buddy, Mayor Ed Koch. Mr. Mayor, thank you for coming. Appreciate you being here. (Applause.)



I thank the members of the Association of a Better New York who have joined us. I appreciate all the state and local officials who are here.



Bill mentioned that I was here in October 2001. I recognized then our economy had been hit hard and there was great certainty" title="n.不可靠；不确定的事">uncertainty about the future. It was a tough time for the country. Many people were out of work. By mid-December, nearly a million jobs had been lost. The collapse of the Twin Towers had left dangerous cracks in this building's foundations.



I said that day that I was optimistic that our economy would recover from these attacks. But if I'd have told you that we would also make the recession one of the shortest on record, that we'd have confronted corporate scandals, absorb a tripling in the price of oil, fight a global war, and help a whole region of our country recover from a hurricane, you might have been a little skeptical.



Yet America's economy has overcome all these things. Federal Hall has been fully restored. It's on solid ground. And so is the New York City economy -- as the Mayor mentioned, it's booming -- with a bond rating at an all-time high, and unemployment near an all-time low. Across our nation, small businesses and entrepreneurs are creating millions of new jobs. Retail sales are up, consumer spending is strong, exports of goods and services have jumped by nearly 35 percent. The Dow Jones has set new records 26 times in the last four months. Productivity is strong, and that's translating into higher wages.



When people across the world look at America's economy what they see is low inflation, low unemployment, and the fastest growth of any major industrialized nation. The entrepreneurial spirit is alive and well in the United States. There is one undisputed leader in the world in terms of economy, and that's the United States of America. (Applause.)



On Wall Street, you know that America's economic leadership rests on strong and flexible capital markets. Capital markets connect entrepreneurs with the investment they need to turn their ideas into new businesses. America's capital markets are the deepest, the broadest, and the most efficient in the world. Yet excessive litigation and over-regulation threaten to make our financial markets less attractive to investors, especially in the face of rising competition from capital markets abroad. To keep America's economic leadership, America must be the best place in the world to invest capital and to do business.



One important step we've taken in Washington is to pass litigation reform like the Class Action Fairness Act. It's important for people in Congress to understand that excessive lawsuits will make it hard for America to remain the economic leader that we want to be. Another important step we've taken is to strengthen our business institutions by passing the Sarbanes-Oxley Act in 2002. This law helped boost investor confidence by establishing high standards for transparency and corporate governance. The principles of Sarbanes-Oxley are as important today as when they were passed. Yet complying with certain aspects of the law, such as Section 404, has been costly for businesses and may be discouraging companies from listing on our stock exchanges.



We don't need to change the law. We need to change the way the law is implemented. America needs a regulatory environment that promotes high standards of integrity in our capital markets, and encourages growth and innovation. And I'm pleased of the progress that Hank Paulson and Chairman Chris Cox are making to make sure the regulatory burden is not oppressive, and fair, and helps us meet a great national objective to keep the United States the economic leader in the world.



Our economic leadership also depends on sensible, pro-growth tax policies. To help bring our economy out of a recession and recover from September the 11th, we cut taxes on the American people. We cut taxes on everybody who pays income taxes. We doubled the child tax credit. We reduced the marriage penalty. We cut taxes on small businesses. And we cut taxes on dividends and capital gains.



There's a lot of political debate about these tax cuts. But here are some of the facts: Since we enacted major tax relief into law in 2003, our economy has created nearly 7.2 million new jobs. Our economy has expanded by more than 13 percent. That expansion is roughly the size of the entire Canadian economy. This economic growth has led to record tax revenues, which has helped us cut the deficit in half three years ahead of schedule. One fact should be clear when you look at the statistics: The fastest way to kill a recovery would be to raise taxes on the people who created it. Now is not the time for the federal government to be raising taxes on the American people. (Applause.)



We must ensure that the money you send to Washington is spent wisely. Next Monday, I'm going to submit to Congress a budget that will eliminate the deficit by 2012. In order to do so, we need to set priorities in Washington. You can't try to be all things to all people when it comes to spending your money if you want to keep taxes low, keep the economy growing, and balance the budget. And my number one priority is to protect this country. And we're going to make sure our troops have all the equipment they need to do the job we've sent them to do -- (applause) -- and make sure our citizens have what it takes to defend this homeland.



That means we've got to be careful about how we spend money in other areas. One thing we can do to show the American people that we're going to be smart about how we spend their money is to do something about earmarks -- it's that system of appropriations where things end up being spent even though nobody has voted on them. And I'm going to work with Congress to reduce the amount of earmarks and the number of dollars spent by earmarks in a significant way to earn the trust of the taxpayers of this country, and at the same time, be wise about how we spend their money.



I believe I need a line-item veto to help Congress spend money wisely. And so I put forth a plan that says the legislative branch and the executive branch will work together to eliminatewasteful and unnecessary spending.



We're about to pass a farm bill that provides a strong safety net, while tightening spending and cutting subsidies. We can manage this short-term deficit -- and I look forward to working with Congress to do so. But it's important for Congress to understand there are unfunded liabilities inherent in Social Security and Medicare that we need to do something about now.



And I understand it's tough work that requires political will from both the President and the Congress to come together and solve this problem. I'm hopeful that we can set aside needless politics and address the issues with entitlements in a constructive way. That way people will say, they came to Washington and they did the job we expect them to do.



Our growing economy is also a changing economy. The rise of new technologies, new competition, and new markets abroad is bringing changes -- and these changes are coming faster than ever. There was a time when most people expected they'd keep a job for life. Now the average American has 10 jobs before the age of 40. It used to be that a company's name would stay the same for decades. New companies are now -- now companies are merging and splitting, and creating new names and new stock symbols. Some of us can still remember when cell phones were the size of bricks and considered a luxury. Now they fit in your pocket, they take photos, they play music, and every teenager in America has one, it seems like.



By and large, our dynamic and innovative economy has helped Americans live better and more comfortable lives. Yet the same dynamism that is driving economic growth is also -- can be unsettling for people. For many Americans, change means having to find a new job, or to deal with a new boss after a merger, or to go back to school to learn new skills for a new career. And the question for America is whether we treat the changes in our economy as opportunity to help improve people's lives, or as an excuse to retreat into protectionism.



I believe that the changes present us with historic opportunities -- America's growing economy allows us to approach them from a position of strength. And so today, I'm going to discuss actions we should take to make America's economy more flexible and dynamic in four areas -- trade, health, energy and education.



First, we can make our economy more flexible and dynamic by expanding trade. America has about 5 percent of the world's population. That means 95 percent of our potential customers are abroad. Every time we break down barriers to trade and investment, we open up new markets for our businesses and our farmers. As we improve free trade, consumers get lower prices. There are better American jobs. You see increased productivity. Jobs supported by exports of goods pay wages that are 13 to 18 percent higher than the average. So one of our top priorities has been to remove obstacles to trade everywhere we can.



When I took office, America had free trade agreements with three countries. We have free trade agreements in force now with 13 countries -- and we have more on the way. These agreements are leading to direct benefits for America's businesses and, equally importantly, America's workers. Yesterday, I went to the Caterpillar plant in Peoria, Illinois



-- that's where they make big bulldozers. The folks there told me that Caterpillar now exports more than one-half of the products they make. They see immediate results when we have broken down barriers to trade. Within two years of implementing our free trade agreement with Chile, Caterpillar's exports to that country have nearly doubled. The opening of this and other export markets has led Cat to add thousands of new jobs here in America.



Manufacturers, farmers, and service providers all across our country have similar stories. So we need to continue to level the playing field for our goods and services. I strongly believe this: When people around the world have a choice, they choose goods that say "Made in the USA."



In this global economy, new competition means that American businesses must constantly approve [sic]*. Global competition can also lead to hardships for our workers and their families. Government has a responsibility to help displaced workers find new jobs, or even a new career. So my administration has reformed job training programs and expanded Trade Adjustment Assistance to help more displaced workers learn the new skills they need to succeed. I'm going to work with Congress to reauthorize and to improve the Trade Adjustment Assistance this year, so we can help Americans take advantage of this growing, dynamic economy.



At this moment, the most promising opportunity to expand free and fair trade is by concluding the Doha Round at the World Trade Organization. Global trade talks like Doha have the potential to lower trade barriers all around the world. They come around only once every decade or so. Successful trade talks will have an enormous impact on people around the world. Since World War II, the opening of global trade and investment has resulted in income gains of about $9,000 a year for the average American household.



The Doha Round is a chance to level the playing field for our goods and services -- in other words, so we can be treated fairly in foreign markets -- but it also is a great opportunity to lift millions of people out of poverty around the world. And so we're going to work hard to complete it. We are dedicated to making sure we have a successful Doha Round.



The only way America can complete Doha and make headway on other trade agreements is to extent Trade Promotion Authority. This authority allows the President to negotiate complicated trade deals for our country, and then send them to Congress for an up or down vote on the whole agreement. Presidents of both parties have considered this authority essential to completing good trade agreements. Our trading partners consider it essential for our success at the negotiating table. The authority is set to expire on July 1st -- and I ask Congress to renew it. I know there's going to be a vigorous debate on trade, and bashing trade can make for good sound bites on the evening news. But walling off America from world trade would be a disaster for our economy. Congress needs to reject protectionism, and to keep this economy open to the tremendous opportunities that the world has to offer.



Second, we can make our economy more flexible and dynamic by reforming our health care system. Across the country, business owners tell me that the cost of health care is their biggest problem, and it's becoming harder to provide coverage for their workers. American workers and their families also find that the health care system is rigid and confusing. They end up with medical bills that are impossible to understand, and spend hours filling out complicated insurance forms. They feel locked into jobs because they're worried about losing the health insurance if they leave their job. They have no way to measure the quality of their doctors and hospitals. They see good doctors being driven out of practice because of frivolous lawsuits. All this leads to higher medical costs, and higher insurance premiums for businesses and their families.



Listen, federal government has an important role to play when it comes to health care, and that is to help the poor and the disabled and the elderly. And we're keeping those obligations. But for all other Americans, I believe that private health insurance is the best way for them to meet their needs. Many Americans cannot afford private health insurance. So we're taking steps to make it more affordable and to give patients more choices and more control over their health care decisions.



We created health savings accounts, which put patients in charge of their medical decisions and helps reduce the cost of their coverage. And I ask Congress to strengthen health savings accounts. We need to pass Association Health Plans, so that small businesses can insure their workers by pooling risk at the same discount that big companies are able to get.