    [Public Papers of the Presidents of the United States: George W. Bush (2004, Book I)]
    [February 19, 2004]
    [Pages 241-247]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Remarks Following a Discussion on the National Economy
    February 19, 2004

        The President. Thanks for coming. I want to thank the folks who have
    joined me here on the stage. We've just had a chat about their personal
    circumstances, and I'll share some of their stories with you.
        We were talking about our economy and the hopes of families, how to
    keep the entrepreneurial spirit strong in America. I hope I conveyed to
    them my sense of optimism about the future of the country. After all,
    I've seen firsthand what we've been through, and we've been through a
    lot. And in spite of that, our economy is strong, and it's getting
    stronger. There's still room for improvement.
        Let me walk you through right quick of what these families and
    small-business owners and large business and CEOs have dealt with, what
    the country has dealt with in the last 3 years. First, the economy began
    to slow down in March of 2000. The stock market started to go down. That
    affected

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    people's savings. And if you watch your savings accounts go down, it
    tends to have a negative effect on people's attitudes.
        Then the country got into--went into a recession, early of 2001.
    Recession means that people's incomes, at the employer level, are going
    down, basically, relative to costs, people are getting laid off. It's a
    slowdown. It's a time of--it's a tough time for risktakers. It's a very
    tough time for workers. A lot of industries felt like they needed to lay
    off people, which created uncertainty.
        And then on September the 11th, the country got attacked, a vicious
    attack by brutal killers that affected the Nation's psychology. It
    affected how I view the world, by the way. When we see gathering
    threats, the country now must take them very seriously. We can't let
    threats become imminent. We can't trust madmen with the security of the
    American people.
        September the 11th attacks hurt the economy. We began to recover. I
    mean, this is a strong nation. The entrepreneurial spirit is really
    strong. You might remember the attitude after September the 11th: No
    terrorist is going to hold this country down or hold us back. I saw that
    spirit firsthand when I went to New York shortly after the attacks. It
    was just such an uplifting experience in the midst of tragedy and
    horror, to see the will of the American people.
        Then the economy got affected because some of our citizens forgot to
    tell the truth. They assumed positions of responsibility and behaved
    irresponsibly. Corporate CEOs didn't tell the truth to employees or
    shareholders, and that affected the economy. Capitalism is based upon
    trust, open books, honest accounting. And a lot of citizens were
    beginning to wonder what went on. Fortunately, we passed tough laws, and
    those who betrayed the trust are now paying the price for having done
    so. There needs to be serious consequences for people who are--don't
    tell the truth.
        And then, as you know, I made the very difficult decision to deal
    with Saddam Hussein. It's the right decision.
    The country is more secure. The Iraqi people are free from the clutches
    of tyranny.
        The march to war affected our economy. When you turn on your TV
    screen in the summer of 2002 and it says, ``America's March to War,''
    that's not very conducive for investment. Marching for war doesn't
    instill a lot of confidence in the future. It creates uncertainty.
    People who employ people don't like uncertainty. We need certainty in
    order to have a--to have risktakers feel comfortable about taking risk.
        We've been through a lot. But we acted here in Washington. I led. I
    convinced the Congress to cut the taxes on the people, because I felt
    like, during this time of uncertainty and economic slowdown, if people
    had more of their own money, they would demand an additional good or a
    service. And in our marketplace, when that happens, a producer will
    produce that good or a service. And when that happens, the economy gets
    moving; somebody is more likely to find work. And that's what happened.
        We cut the taxes on everybody who pays taxes. I don't think it makes
    sense for tax-cutters to say, ``Okay, you win, and you lose.'' My
    attitude was, if you pay taxes, you ought to get relief. And we cut all
    taxes, and one of the important things about cutting all income taxes is
    we really affect the capacity of small businesses to grow, because many
    small businesses pay tax at the individual income-tax level. A sole
    proprietor pays tax at the individual income tax. The Subchapter S pays
    tax at the individual income-tax level. So when you cut all rates,
    you're not only affecting the purchasing power of families and
    individuals; you're affecting small-business capital formation. And it
    helped, and it worked. And at the same time, I asked Congress to
    increase the limit for deductibility of $100,000 from $25,000 to
    encourage capital investment in the small-business sector.

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        And why did I focus on small businesses, or why did the Congress
    focus with me on small business? And the answer is, most new jobs are
    created by small businesses in America. Some estimates say up to--and if
    you're interested in job creation, why not focus on the job creators? So
    the tax relief was passed not only to help individuals but to help our
    small-business sector. We also increased the child credit to $1,000. We
    reduced the marriage penalty. I like to remind people that the Tax Code
    ought to encourage marriage, not discourage marriage. [Laughter] Seems
    like we want people to stay married, and the Tax Code ought to encourage
    that.
        We helped on dividend and capital gains to encourage investment and
    particularly to help the elderly. We put the death tax on its way to
    extinction. I'm going to talk a little bit about that in regards to one
    of our guests, but the death tax is a bad tax--bad tax.
        Think about all the people who are starting their own businesses,
    who are working hard to realize the American Dream. They're preparing
    their estates to leave something to their--whoever they choose to, a son
    or a daughter. And it becomes awfully difficult to do so because the
    Government is taxing assets twice. They tax you when you earn. They tax
    you when you die. And it's a bad tax. It's bad for farmers. It's bad for
    ranchers. It is particularly bad for small-business owners. Fortunately,
    the Congress heard the call. We've still got a little issue to make sure
    it stays gone forever that I'll talk about here in a minute.
        The tax relief we passed--111 million* taxpayers this year will save
    $1,586* off their taxes. That's a lot of money that will be in
    circulation as a result of individual decisionmaking. See, there's a
    fundamental debate here in Washington. It's who do you want spending
    money? Look, we need money here. There's plenty of money in Washington.
    We need money to fight the war and win the war on terror. We need money
    to protect the homeland. We need money to meet priorities, but I felt it
    was important to let people spend their own money. I think the
    collective decisionmaking of the American people with their own money is
    wiser than the decisionmaking of the Federal Government.
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        *White House correction.
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        Twenty-five million small-business owners will receive an average
    cut of $3,000 this year. That's important. A lot of companies being
    started up in garages--it's kind of the American Dream, isn't it? I
    remember when my friend Michael Dell started his computer company in a
    garage. [Laughter] Who knows where the next Michael Dell will be, but
    perhaps this $3,000 will help that person achieve his or her dream about
    building their own company.
        Nearly 5 million taxpayers will be off the rolls as a result of the
    tax relief this year. What's interesting is that the tax relief lowered
    rates, but the amount withheld from the paycheck was not adjusted until
    summertime last year. And so the Treasury Department estimates Americans
    will receive an additional $50 billion in higher refunds and lower tax
    payments when they file their taxes in April--April 15th of this year.
    That's positive news, to help keep this momentum, this economic
    momentum, alive and well.
        Tax relief is working. Factory orders are up. Housing is strong.
    Unemployment rate is down from 6.3 percent last June to 5.6 percent in
    January. Things are positive.
        But there's more that Congress should do to keep the momentum alive.
    One, we need an energy plan. If you're a manufacturer, you need reliable
    sources of energy. I've talked to a lot of small manufacturers who
    explained what it means to have their power disrupted as a result of an
    antiquated electricity grid. Unreliable supplies of energy creates
    uncertainty for price. There needs to be certainty. We need an energy
    plan. Congress needs to get me a

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    bill. They need to stop talking. They need to get a bill to my desk.
        We need tort reform. Too many small businesses are--like you, I'm
    concerned about the cost of providing decent medical care to your
    employees and yourselves. Medical costs are up. Some practical things we
    can do--health savings accounts are a very practical way for small-
    business owners and employees to deal with increasing costs. I urge you
    to look at those.
        Associated health care plans are vital for small-business owners and
    small-business plans. Medical liability reform at the national level
    will help control health care costs. It's stuck in the Senate, of
    course. There's some special interests here in Washington that simply
    are not interested in seeing reasonable medical liability law passed.
    There are very powerful interests here in Washington that prevent the
    kinds of laws to pass that will help control costs. And I'm going to
    continue working, and I think it's an important issue--I know it's an
    important issue for small-business owners and employees.
        We need to continue to open up markets. Our markets are relatively
    open compared to the rest of the world, and if our markets are open,
    let's open up other markets so people can sell. We're good at things. We
    ought to be selling them to other people around the world. There needs
    to be free trade, and there needs to be a level playing field when we
    trade. There needs to be less regulation in Washington, DC.
        But one thing's for certain, is we need to make the tax cuts
    permanent. Interestingly enough--I don't know if you're aware of this,
    but all the tax cuts we passed are set to expire. But the Congress
    giveth; the Congress taketh away. [Laughter]
        And these tax relief will be--will expire on an irregular basis. In
    other words, they don't all expire at the same time. For example, this
    coming year, the child credit--the tax relief we put in the child credit
    goes away. The penalty in the marriage penalty gets worse. And the
    expanded 10 percent bracket will go away. See, if Congress doesn't do
    anything, there will be tax increases on the American people. That's
    what that means. When you hear, ``We're going to repeal the Bush tax
    cuts,'' that means tax increases. That's what that is. ``I'm going to
    raise your taxes,'' is what they're saying.
        There's a philosophical difference here. Who would you rather
    spending your money, you or the Federal Government? And that's the
    debate I look forward to taking across the country.
        Raising taxes at this point will hurt our economy. When the economy
    is coming out of recession, it's beginning to grow. It makes no sense to
    raise the taxes on the people. If the Congress doesn't act, the tax
    relief would be an increase of about $28 billion on the American people
    for the year 2005. That's $28 billion going into the U.S. Treasury out
    of your pockets--be reducing demand by that amount, be taking capital
    out of small-business coffers if that happens.
        That's part of the debate. ``Let's raise your taxes so we have more
    money to spend on programs in Washington, DC.'' That's the debate, and I
    believe strongly that the tax relief needs to be permanent. You see--
    listen to this story. If you're a family of four earning $40,000, when
    those provisions expire in 2005, it'll be a $915 tax increase for that
    family. That's a lot of money for a family making $40,000. The small-
    business deductions expire in '06. These have been really effective.
    Congress needs to make them permanent.
        And so I talked to some folks up here today about what tax relief
    has meant to them. And maybe the best way I can make my point to the
    tax-raisers and spenders here in Washington is to listen to the stories
    of people like Amy Cofer. She is a mom of two,
    soon to be a mom of three. Amy is right there. Joe
    is a police officer. Joe is out there dedicating his life to the

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    protection of our fellow citizens. They saved $1,700 in taxes in '03.
        That probably doesn't sound like a lot when you're up here, when
    you're dealing with a lot of zeros behind the numbers. It's a lot for
    that family, though. She talked about paying her
    son's preschool tuition with that. She made a choice to send her son to
    a school that she thought was good. That's a whole other subject, by the
    way--parents being--[laughter]--but it helped pay for her son's tuition.
    The money meant something to them. It made life easier by being--that
    money, to help pay for the preschool tuition. It took pressure off of
    their bill paying. If Congress doesn't act, there will be a $1,000 tax
    increase on this family. It's a new family, a new child coming--doesn't
    make sense to have this family pay a thousand dollars. See, Congress has
    got to make the tax cuts permanent. It helps families like the
    Cofers.
        Katie Powers is here as well. Katie and--
    there she is--Katie and David have two
    children, Nicholas and Allison. They had tax relief of $3,500. The tax burden will go
    up by $2,000 if they doesn't make the tax cuts permanent. When you hear
    people say, ``Let's just let the tax cuts expire,'' that's a tax
    increase. It's a code word for, ``I'm raising your taxes to increase the
    amount of money we have to spend here in Washington on new programs, on
    programs that meet a particular political desire of the appropriators.''
    That's what they're telling you.
        Shemetra Washington--Shemetra is a--
    started a new job this month, by the way, at New Technology Management
    in Virginia. [Laughter]
        Audience member. Yeah! [Laughter]
        The President. About time you hired her. [Laughter] She's got the toughest job in America.
    She's a single mom. She's raising Raegan
    and Lauryn. She is going to grad school, a
    human resource person who's going to get a master's degree. She's been
    taking--she's working, raising her family, and going to grad school to
    upgrade her skills so she can make more money. She got a tax cut of
    $1,700 in 2003. She said it went to help pay for her education, helped
    her upgrade her skills so she becomes a more productive person, which
    means she'll get better pay as time goes on.
        Again, if they don't make the tax cuts permanent, she has to pay $1,000 more in taxes. I don't think we
    want Shemetra paying $1,000 more in taxes--[laughter]--when she's
    struggling with her family, raising that family.
        See, there's a human dimension to all the talk about numbers, and
    it's important for the people here in Washington to think about the
    people whose lives will be affected if they don't act--they don't act--
    they don't act to make it easier for families to raise their children
    and to realize their dreams.
        Guy Donaldson is with us. He's got an
    interesting story. He is a fruit orchard man out of Pennsylvania,
    apples, cherries, and peaches. [Laughter] I was lobbying for some of
    them to be sent over here for breakfast. [Laughter] See, he is--he, by
    the way, is a partnership, so his entity is taxed at the individual
    income-tax rate level. But he's more concerned about the death tax. His
    dream is to keep this farm in his family. It's been in his family now
    for the fourth generation. That's part of his dream. That's what he has
    decided that he would like to do with his assets, and he wants to leave
    the orchard to his kids.
        I said, ``Are they here today?'' He said,
    ``No, they're pruning trees.'' [Laughter] But the problem is, is that
    when you're asset-heavy in your small business or on your farm, it's
    really hard to leave it to your--the death tax makes it nearly
    impossible to leave to a family without having to mortgage the future so
    heavily or to sell off parts of the farm in order to pay the Government
    again.
        The death tax is an unfair tax to farmers and ranchers and small-
    business people.

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    The Congress put it on its way to extinction. However, it comes back to
    life in 2011. It's hard to explain the rules of the Senate that allow
    that to happen, but it does. It just doesn't make sense. It doesn't make
    sense, as Guy was talking about, for him to
    have such uncertainty about an asset he loves and uncertainty about his
    family. And yet because Congress won't act, there is uncertainty. And
    that's not right, and it's not fair. They need to put the stake in the
    heart of the death tax forever, and get rid of it.
        Rex Hammock is with us--last stander--from
    Nashville, Tennessee. He started his own company. I love the
    entrepreneurial spirit. Don't you love to be in a country where people
    feel comfortable about--where people feel comfortable and free to start
    their own business? And by the way, Government's role is to create an
    environment where the entrepreneurial spirit is strong, where people
    feel free and comfortable doing that.
        And he did, and he's got what is called a
    Subchapter S corporation. Many of you know what that means, but for
    those who don't, it means that you get taxed at the individual income-
    tax level. So when we cut the rates on everybody, not just a few, it
    helped Rex, made him a little more comfortable in his ability to plan.
        But more importantly, by raising the level of deductibility for
    small businesses to $100,000, it provided incentive for him to invest. And so this year, he told me, he's going to
    spend $100,000 on computers, scanners, and software to help his
    employees in his publishing business become more productive. It means
    they're more competitive. When you're more competitive, you've got a
    more productive workforce, and when you're competitive, it means you're
    more likely to stay in business. And it means you're more likely--your
    workforce is more likely to have steady work. And if you really get
    productive and can compete, it means you add employees. And he added two
    last year, and he plans on adding five this year.
        Now, there's a lot of Rexes in the country, and you put two on here
    and five on there, and all of a sudden, there's a lot of people
    beginning to find jobs. And that's important. That's how jobs grow,
    through the individual decisionmaking of thousands of entrepreneurs and
    employers around the country.
        He wants to invest in '05 and '06, same
    amounts. But as I told you, this aspect of the tax relief package will
    expire unless Congress acts. He said it's really hard--and he's right,
    by the way--really hard to be a planner with--in the face of tax
    uncertainty. How can you plan if you're not certain about what the Tax
    Code looks like? And there are entrepreneurs all over the country who
    are uncertain about what the Tax Code will look like after '06 because
    the tax relief plan has got uncertainties built into it. And an
    important aspect of the tax relief plan is the deductibility for small
    businesses. Then it goes away. Congress needs to make all aspects of the
    Tax Code permanent so people can plan their businesses and their lives.
        And so it's time for them to step up on Capitol Hill. I'm ready to
    continue to lead on tax relief. They need to follow. They need to listen
    to the voices not just of me but of the people here on the stage. It's a
    time for action. It's a time to make the tax relief permanent. It's a
    time to listen to the voices of the hard-working families in America.
    It's a time to listen to the entrepreneurs of this country. It's a time
    to keep this recovery strong by doing what's right with the Tax Code.
        I want to thank you all for coming today to give me a chance to
    spell out a practical way to make life a more hopeful place for America
    and small-business owners. Congress needs to act.
        Thanks for coming.

    Note: The President spoke at 3:09 p.m. in Room 450 in the Dwight D.
    Eisenhower Executive Office Building. In his remarks, he

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    referred to former President Saddam Hussein of Iraq; Amy Cofer,
    homemaker, and her husband, Joe, U.S. Supreme Court police officer;
    Katie Powers, senior staff accountant, and Shemetra Washington, human
    resource administrator, New Technology Management, Inc.; Guy Donaldson,
    fruit grower, Orrtanna, PA; and Rex Hammock, president, Hammock
    Publishing.