[Public Papers of the Presidents of the United States: George W. Bush (2006, Book I)]
[February 8, 2006]
[Pages 211-214]
[From the U.S. Government Publishing Office www.gpo.gov]



Remarks on Signing the Deficit Reduction Act of 2005
February 8, 2006

    Please be seated. Thanks for coming. Welcome to the White House. In 
a few moments, I will sign the Deficit Reduction Act of 2005. This 
important piece of legislation restrains Federal spending, and it will 
leave more money in the pockets of those who know how to use it best, 
the American people.

[[Page 212]]

    I appreciate the Vice President being here. 
Mr. Speaker, welcome, Leader Frist--
thank you all for coming. Senator 
McConnell; Senator 
Santorum; Senator Judd Gregg, chairman of the Senate Budget Committee; Congressman John 
Boehner, the House majority leader; Roy 
Blunt, the House Majority Whip; Congressman 
Nussle, chairman of the House Budget 
Committee--I want to thank you all for coming. I appreciate the members 
of the Cabinet who are here, as well as all the Members of the United 
States Congress and the Senate who have come for this important bill 
signing.
    Our economy is strong, and it's getting stronger. We're now entering 
our fifth year of uninterrupted economic growth, and last year, our 
economy grew at a healthy 3.5 percent. Real after-tax income is up 
nearly 8 percent per American since 2001. Productivity growth is high. 
Small businesses are thriving. America has added 4.7 million new jobs 
over the last 2\1/2\ years. The unemployment rate is down to 4.7 
percent, the lowest level since July 2001.
    Our economy leads the world, yet we cannot be complacent. To keep 
our economic momentum, we need to look at the challenges down the road 
and respond with wise policies now. And one of the most important 
policies we need to pursue is spending restraint in Washington, DC.
    Earlier this week, I sent Congress a disciplined Federal budget for 
2007, and this morning I traveled to New Hampshire with Chairman 
Gregg, Senator Sununu, Congressman Bass, and 
Congressman Bradley to discuss the new budget 
proposal in detail. The budget strategy begins with keeping taxes low so 
that Americans can spend, save, and invest more of their own money--and 
that will help keep our economy growing and creating jobs. My budget 
funds our priorities, starting with funding the United States military, 
promoting alternative sources of energy, investing in math and science 
education and basic research, and helping to care for the poor and the 
elderly.
    At the same time, my budget tightens the belt on Government 
spending. Every American family has to set priorities and live within a 
budget, and the American people expect us to do the same right here in 
Washington, DC.
    The Federal budget has two types of spending, discretionary spending 
and mandatory spending. Discretionary spending is the kind of spending 
Congress votes on every year. Last year, Congress met my request and 
passed bills that cut discretionary spending not related to defense or 
homeland security. And this year, my budget again proposes to cut this 
spending. My budget also proposes again to keep the growth in overall 
discretionary spending below the rate of inflation, so we can stay on 
track to cut the deficit in half by 2009.
    In the long run, the biggest challenge to our budget is mandatory 
spending, or entitlement programs like Medicare and Medicaid and Social 
Security. Entitlement spending is determined by a specific formula, and 
it rises automatically, year after year, unless the Congress intervenes. 
Together, Medicare, Medicaid, and Social Security are now growing faster 
than the economy, faster than the population, and nearly three times the 
rate of inflation. And the retirement of baby boom generation will put 
even more strains on these programs. By 2030, spending for Medicare, 
Medicaid, and Social Security alone will be almost 60 percent of the 
entire Federal budget. And that will leave future generations with 
impossible choices: staggering tax increases, immense deficits, or deep 
cuts in every category of spending.
    Bringing entitlement spending under control is a critical priority 
of our Government. We need to slow the annual growth of entitlement 
programs to levels that we can afford; we do not need to cut these 
programs. There is an important distinction; it is the difference 
between slowing your car down to the speed limit or putting your

[[Page 213]]

car into reverse. By making wise reforms that will reduce the annual 
growth of mandatory spending, the Deficit Reduction Act will save 
taxpayers nearly $40 billion over the next 5 years; that's about $300 
per taxpayer.
    The Deficit Reduction Act is estimated to slow the pace of spending 
growth in both Medicare and Medicaid. Medicare is a Federal program that 
provides health care for older Americans. Medicaid is a program 
administered in conjunction with the States that provides health care 
for low-income Americans, family with children, and some seniors. These 
programs are providing vital services to millions of Americans in need, 
yet the costs of Medicare and Medicaid are straining budgets at both the 
State and Federal level. The bill I sign today restrains spending for 
entitlement programs, while ensuring that Americans who rely on Medicare 
and Medicaid continue to get the care they need.
    The Deficit Reduction Act is estimated to reduce the growth in 
Medicare spending by more than $6 billion over the next 5 years. The 
bill, together with the Medicare act of 2003, requires wealthier 
citizens to pay higher premiums for their Medicare coverage. The savings 
created by this reform and others will make it possible to increase 
Federal funding for important areas like kidney dialysis and rural 
hospitals. With this bill, we're showing that we can keep the promise of 
Medicare and be good stewards of the taxpayers' money at the same time.
    The Deficit Reduction Act will also reduce the growth in Medicaid 
spending by nearly $5 billion over the next 5 years. This bill helps 
restrain Medicaid spending by reducing Federal overpayment for 
prescription drugs. Taxpayers should not have to pay inflated markups 
for the medicine that the people on Medicaid depend. The bill gives 
Governors more flexibility to design Medicaid benefits that meet the 
needs of their States efficiently and affordably. The bill tightens the 
loopholes that allowed people to game the system by transferring assets 
to their children so they can qualify for Medicaid benefits. Along with 
Governors of both parties, we are sending a clear message: Medicaid will 
always provide help for those in need, but we will never tolerate waste, 
fraud, or abuse.
    The Deficit Reduction Act's reforms in Medicare and Medicaid are a 
step on the road to long-term stability for these important programs. 
Now, we need to continue finding ways to make Medicare and Medicaid more 
efficient. My budget next year proposes another $36 billion in savings 
on Medicare and more than a billion in savings on Medicaid. Budget 
proposals will slow the annual growth in Medicare over the next 5 years 
from 8.1 percent to 7.7 percent. That seems reasonable. And together 
with the bill I sign today, my budget will slow the average annual 
growth of Medicaid over the next 5 years from 6.9 percent a year to 6.6 
percent a year. This is progress in the right direction, but these 
growth rates are still unsustainable.
    In the long run, ensuring the stability of Medicare and Medicaid 
requires structural reform. So I have proposed a bipartisan commission 
to examine the full impact of baby boomer retirements on Medicare and 
Medicaid as well as Social Security. The commission will include Members 
of Congress from both political parties. It will recommend long-term 
solutions that will keep the promise of these vital programs while 
addressing their growing costs. I look forward to working with Congress 
to get this problem solved for generations to come.
    As the Deficit Reduction Act delivers savings in mandatory spending, 
it also shows the compassion of America. This bill provides new 
resources for programs that serve some of our citizens with the greatest 
needs, including hurricane victims, children, and low-income families 
struggling to pay their heating bills.
    The Deficit Reduction Act makes important improvements to Federal 
student loan

[[Page 214]]

programs. The bill cuts excess Government subsidies to lenders and makes 
other reforms that will help us reduce overall student loan costs by 
about $22 billion. With that money, we will save the taxpayers $12 
billion--because we intend to increase student aid by 10 additional 
billion dollars. What I'm telling you is, the students are getting the 
money, and we're making the program a lot more efficient for the 
taxpayers.
    The Deficit Reduction Act also reauthorizes welfare reform for 
another 5 years. Welfare reform has proved a tremendous success over the 
past decade. By insisting on programs that require work and self-
sufficiency in return for Federal aid, we've helped cut welfare cases by 
more than half since 1996. Now we're building on that progress by 
renewing welfare reform with a billion-dollar increase in child care 
funding and new grants to support healthy marriage and responsible 
fatherhood programs.
    One of the reasons for the success of welfare reform is a policy 
called charitable choice, which allows faith-based groups that provide 
social services to receive Federal funding without changing the way they 
hire. Ten years ago, Congress made welfare the first Federal program to 
include charitable choice. The bill I sign today will extend charitable 
choice for another 5 years and expand it to the new healthy marriage and 
responsible fatherhood programs. Appreciate the hard work of all who 
supported the extension of charitable choice, including the good-hearted 
men and women of the faith-based community who are here today. By 
reauthorizing welfare reform with charitable choice, we will help 
millions more Americans move from welfare to work and find independence 
and dignity and hope.
    The message of the bill I sign today is straightforward: By setting 
priorities and making sure tax dollars are spent wisely, America can be 
compassionate and responsible at the same time. Spending restraint 
demands difficult choices, yet making those choices is what the American 
people sent us to Washington to do. One of our most important 
responsibilities is to keep this economy strong and vibrant and secure 
for our children and our grandchildren. We can be proud that we're 
helping to meet that responsibility today.
    Now I ask the Members of the Congress to join me as I sign the 
Deficit Reduction Act of 2005.

Note: The President spoke at 3:31 p.m. in the East Room at the White 
House. S. 1932, approved February 8, was assigned Public Law No. 109-
171.