    [Public Papers of the Presidents of the United States: George W. Bush (2006, Book II)]
    [July 11, 2006]
    [Pages 1372-1377]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Remarks on the Office of Management and Budget Mid-Session Review
    July 11, 2006

        The President. Thank you. Thanks for coming. The White House is the
    people's house, and I'm here to talk about the people's money. We're
    glad you're here. As you know, every year, my administration produces a
    budget that lays out our priorities and our goals. And every summer, the
    Office of Management and Budget releases a report called the Mid-Session
    Review that tells the American people how much progress we're making
    towards meeting our fiscal goals.
        Today OMB Director Rob Portman
    released the latest review. I'm pleased to report that it's got some
    good news for the American taxpayer. This economy is growing; Federal
    taxes are rising; and we're cutting the Federal deficit faster than we
    expected.
        This good news is no accident. It's the result of the hard work of
    the American people and sound policies in Washington, DC. This morning
    I'm going to discuss the way forward; I'll explain why our progrowth

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    policies are vital to our efforts to reduce the Federal deficit, what my
    administration is doing to work with Congress to eliminate wasteful
    spending, and why we need to confront the unsustainable growth in
    entitlement spending.
        I appreciate our new Secretary of the Treasury, Hank
    Paulson, joining us today. Mr.
    Secretary, you've been on the job one day, and you've got a pretty
    strong record. I'm proud that Rob Portman is here, and he brought his lad with him. [Laughter] I thank the Senate President pro
    tem, Senator Ted Stevens, for joining
    us. Senator, thanks for coming. I'm proud you're here. Thank you for
    your leadership. I also want to thank David Dreier, Conrad Burns--Senator Conrad Burns, excuse me----
        Senator Conrad Burns. That's okay.
    [Laughter]
        The President. ----Congressman Joe Knollenberg, Ander Crenshaw, Marilyn
    Musgrave, thank you all for coming.
    Pence is with us; thanks for coming. I'm proud
    you're here, Mike. Thank you all for taking time to be here to hear this
    good news. You're responsible, in many ways, for creating the conditions
    for the good news we're about to talk about.
        When I came to Washington, taxes were too high and the economy was
    headed into a recession. Some said the answer was to centralize power in
    Washington and let the politicians make the decisions about what to do
    with the people's money. That was one point of view.
        We had a different point of view. I believe that the economy
    prospers when we trust the American people to make their own decisions
    about how to save, spend, and invest. So starting in 2001, my
    administration worked with the United States Congress, and we delivered
    the largest tax relief since Ronald Reagan was in the White House. We
    cut rates for everyone who pays income taxes. We reduced the marriage
    penalty; we doubled the child tax credit; and we cut the death tax. We
    cut the tax paid by most small businesses, because we understand that
    most new jobs are created by small businesses. And we encouraged
    economic expansion by cutting taxes on dividends and capital gains.
        Together, these tax cuts left nearly $1.1 trillion in the hands of
    American workers and families and small-business owners, and they used
    this money to help fuel an economic resurgence that's now in its 18th
    straight quarter of growth. The tax cuts we passed work.
        Last year, our economy grew at 3.5 percent, and in the first quarter
    of this year, it grew at an annual rate of 5.6 percent. Over the past 3
    years, our economy has grown by more than $1.3 trillion, an amount that
    is larger than the size of the entire Canadian or South Korean economy.
        Since August 2003, the U.S. economy has added more than 5.4 million
    new jobs. Our unemployment rate is down to 4.6 percent. People are
    working. Behind these numbers, there are American workers who start each
    day with hope because they have a job to help them build a better life.
    Behind these numbers, there are more families with more money in the
    bank for college tuition or a downpayment on their homes. Behind these
    numbers are small-business owners who are hiring more workers, expanding
    their businesses, and realizing the great promise of our country.
        Our job in Washington is to keep this expansion growing--going and
    to promote progrowth policies that let Americans keep more of their
    hard-earned paychecks and aid us in reducing our fiscal deficit.
        In order to reduce the deficit, you got to set priorities. And in
    working with Congress, we've set clear priorities. And the number-one
    priority of this administration and this Congress is to make sure men
    and women who are defending the security of the United States and
    helping to spread peace through the spread of liberty get all the help
    they need from our Government. We will always fund the troops in harm's
    way.

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        In an age when terrorists have attacked our country and want to hurt
    us again, we will do everything in our power to protect the American
    homeland. Those are the clear priorities of this administration, and the
    clear priorities of the United States Congress.
        Fighting a war on terror and defending the homeland imposes great
    costs, and those costs have helped create budget deficits. Our
    responsibility is to win this war on terror and to keep the economy
    growing. And those are the kind of policies we have in place. Some in
    Washington say we had to choose between cutting taxes and cutting the
    deficit. You might remember those debates. You endured that rhetoric
    hour after hour on the floor of the Senate and the House. Today's
    numbers show that that was a false choice. The economic growth fueled by
    tax relief has helped send our tax revenues soaring. That's what's
    happened.
        When the economy grows, businesses grow, people earn more money,
    profits are higher, and they pay additional taxes on the new income. In
    2005, tax revenues grew by $274 billion, or 14.5 percent; it's the
    largest increase in 24 years. Based on tax collections to date, the
    Treasury projects that tax revenues for this year will grow by $246
    billion, or an 11 percent increase. The increase in tax revenues is much
    better than we had projected, and it's helping us cut the budget
    deficit.
        One of the most important measures of our success in cutting the
    deficit is the size of the deficit in relation to the size of our
    economy. Think of it like a mortgage. When you take out a home loan, the
    most important measure is not how much you borrow; it is how much you
    borrow compared to how much you earn. If your income goes up, your
    mortgage takes up less of your family's budget. Same is true of our
    national economy. When the economy expands, our Nation's income goes up
    and the burden of the deficit shrinks. And that's what's happening
    today. Thanks to economic growth and the rise in tax revenues, this year
    the deficit will shrink to 2.3 percent of GDP. That's about the same as
    the average over the past 40 years.
        Here are some hard numbers: Our regional projection for this year's
    budget deficit was $423 billion. That was a projection. That's what we
    thought was going to happen. That's what we sent up to the Congress:
    ``Here's what we think.'' Today's report from OMB tells us that this
    year's deficit will actually come in at about $296 billion.
        That's what happens when you implement progrowth economic policies.
    We faced difficult economic times. We cut the taxes on the American
    people because we strongly believe that the American people should lead
    us out of recession. Our small businesses flourished, people invested,
    tax revenue is up, and we're way ahead of cutting the deficit--Federal
    deficit in half by 2009.
        As a matter of fact, we're a year ahead of fulfilling a pledge that
    I told the Congress and the American people. I said to the American
    people, give this plan a chance to work. We worked with Congress to
    implement this plan. I said, we can cut the Federal deficit in half by
    2008--or 2009. We're now a full year ahead of schedule. Our policies are
    working, and I thank the Members of Congress for standing with us.
        See, we cannot depend on just a growing economy, though, to keep
    cutting the deficit. That's just one part of the equation. We also got
    to cut out wasteful spending. See, it's okay to create revenue growth;
    that's good. But if we spend all that revenue growth on wasteful
    programs, it's not going to help us meet our objectives. And so the
    second half of the equation is for this administration to continue
    working with the Congress to be wise about how we spend the people's
    money.
        Every year, Congress votes to fund the day-to-day spending of the
    Federal Government. That's called discretionary spending.

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    In other words, the Congress decides how much to spend on these types of
    programs on an annual basis. Every year since I took office, we've
    reduced the growth of discretionary spending that's not related to the
    military or homeland security. I told you, our priorities are our
    military and protecting the homeland. But on other programs, we've
    reduced the growth of that discretionary spending. The last two budgets
    have actually cut this kind of spending.
        The philosophy is clear: Every American family has to set priorities
    and live within its budget, and so does the Federal Government. And I
    thank the Members of Congress for making the tough votes, setting
    priorities, and doing the hard work on behalf of the taxpayers of this
    country.
        We made good progress with the emergency spending bill that Congress
    approved in June. You might remember the debate leading up to that
    supplemental bill. And there was a good, constructive debate. And I
    weighed in. I said that we got to make sure that the emergency funding
    in the bill supported our troops and provided help to citizens that were
    hit by last year's hurricanes and to prepare for the dangers of an
    outbreak of pandemic flu.
        The onset--I also set limits that I thought were acceptable. In
    other words, we came up with our view of what would be a rational
    spending limit for this important piece of legislation. And I made it
    clear to the Congress, they sent me a bill that went over the limit, I'd
    veto it. We got good relations with Congress. People took that threat
    seriously because I meant it. Congress responded by removing nearly $15
    billion in spending that had been added to the bill. By meeting the
    limit I'd set, Congress ensured funding for vital programs and provided
    a good example of fiscal discipline.
        The next test is whether or not we can get a line-item veto out of
    the United States Senate. A line-item veto is an important tool for
    controlling spending. See, it will allow the President to target
    unnecessary spending that sometimes lawmakers put into large bills.
    Today, when a lawmaker loads up a good bill with wasteful spending, I
    don't have any choices. I either sign the bill with the bad spending or
    veto the whole bill that's got good spending in it. And I think it would
    be wise if we're seriously concerned about wasteful spending to enable
    the executive branch to interface effectively with the legislative
    branch to eliminate that kind of wasteful spending.
        And so we've proposed a line-item veto that the House of
    Representatives passed. Under this proposal, the President can approve
    spending that's necessary; redline spending that's not; and send back
    the wasteful, unnecessary spending to the Congress for a prompt up-or-
    down vote. In other words, it's a collaborative effort between the two
    branches of Government, all aimed at making sure we can earn the trust
    of the taxpayers.
        Listen, the line-item veto works. Forty-three Governors of both
    parties have this authority, and they use it effectively to help
    restrain spending in their State budgets. I've talked to some of these
    Governors--used to be a Governor. I know what I'm talking about when it
    comes to line-item veto being an effective tool. The line-item veto
    provides a lot of advantages, and one of them is, it acts as a
    deterrent. See, when legislators think they can slip their individual
    items in a spending bill without notice, they do it.
        If they think that they're going to try to slip something in that
    gets noticed, it means they're less likely to try to do so. We want to
    make sure that the system we have here in Washington is transparent and
    above-board and fair to the people's--taxpayers' money.
        And one way to do so is to make sure that the President can work
    with the Congress through the line-item veto proposal I submitted. I
    strongly urge the United States Senate to take this matter up and pass
    it into law.

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        We're dealing with the short-term deficit, but there's another
    challenge that we face. In the long run, the biggest challenge to our
    Nation's economic health is the unsustainable growth in spending for
    entitlement programs, mandatory programs such as Social Security,
    Medicare, and Medicaid. Millions of our fellow Americans rely on these
    programs for retirement and health care needs. They're important
    programs. But the spending for these programs is growing faster than
    inflation, faster than the economy, and faster than our ability to pay
    for them.
        To solve the problem, we need to cut entitlement spending. We need
    to do something about it, is what we need to do. One reason Secretary
    Paulson agreed to join this
    administration is because he wants to get something done about these
    entitlement programs, and I want to work with him.
        You know it's so much--easy just to shove these problems down the
    road. The easy fix is to say, ``Let somebody else deal with it.'' This
    administration is going to continue trying to work with Congress to deal
    with these issues. That's why I ran for office in the first place, to
    confront big problems and to solve them. That's why Henry
    Paulson made the tough decision to
    leave the comfort of private life to come in and do something good for
    this country. And the United States Congress needs to feel that same
    sense of obligation. The time of playing politics with Social Security
    and Medicare and Medicaid is over. We need to fix this for younger
    generations of Americans to come.
        I'm optimistic about the future of this country because I'm
    optimistic about the--because I understand the nature of the people we
    got here. I mean, we are an entrepreneurial people. We're a hard-
    working, decent group of citizens. And the role of Government is to
    foster the entrepreneurial spirit. It's to encourage people. And one way
    you do that is to keep people's taxes low, let them keep more of their
    own money.
        We've got great faith in the people's ability to spend their money
    wiser than the Federal Government can do. And our faith in the people
    has been proven by the numbers we're talking about today.
        We said we got an economic issue, and we're going to let you have
    more of your own money to help us recover from recession, the stock
    market correction, and terrorist attacks and war and natural disasters.
    And the people haven't let us down, have they? This economy is strong.
        We also said, let's just be patient about solving this Federal
    deficit; we're not going to take money out of your pocket; let's grow
    our way out of it. Let's keep--let's set priorities when it comes to
    spending and keep the people's taxes low, and these revenues will catch
    up into our Treasury. And they have. And we're reducing that Federal
    deficit, through the people's hard work and the wise policies in
    Washington, DC.
        Today is a good day for the American taxpayer. Tax relief is
    working; the economy is growing; revenues are up; the deficit is down;
    and all across this great land, Americans are realizing their dreams and
    building better futures for their families.
        I want to thank you all for supporting our policies. Thank you for
    giving me a chance to come to visit with you. I thank the Members of
    Congress for doing good work. God bless you all.

    Note: The President spoke at 9:45 a.m. in the East Room at the White
    House.

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