    [Public Papers of the Presidents of the United States: George W. Bush (2006, Book II)]
    [October 11, 2006]
    [Pages 1829-1833]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Remarks on the National Economy and the Federal Budget
    October 11, 2006

        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 5 years. Today I'm pleased to report
    that we have achieved this goal, and we've done it 3 years ahead of
    schedule.
        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
    [September 30th].* 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 progrowth 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.
    ---------------------------------------------------------------------------
        *White House correction.
    ---------------------------------------------------------------------------
        Today I'm going to talk about the progrowth 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 2
    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. And the Director of the Office of
    Management and Budget, affectionately known as OMB, Rob Portman--thanks for coming, Rob. I thank Steve
    Preston, who is the Administrator of the
    U.S. Small Business Administration. Thanks for being here, Steve.
        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 subchapter 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

    [[Page 1830]]

    who pay income taxes, you're cutting tax on small businesses.
        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
    owners. 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 progrowth 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 grows.
        You know, last week, I went to a FedEx facility here in DC. 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 Purdue--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 China.
        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

    [[Page 1831]]

    by making the tax cuts we passed permanent.
        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 Treasury.
        Tax revenues grew by $253 billion in 2006. That's an increase of
    11.8 percent. Over the last 2 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 increase.
        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 2 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. 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.
        The last two budgets have actually cut nondefense, nonhomeland
    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

    [[Page 1832]]

    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, redline 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,
    DC, 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, DC.
        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, DC, 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 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

    [[Page 1833]]

    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 2 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 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 be.
        I want to thank you all for coming to hear this proclamation of good
    news. [Laughter] God bless.

    Note: The President spoke at 2:10 p.m. in Room 450 of the Dwight D.
    Eisenhower Executive Office Building. In his remarks, he referred to
    H.R. 4890, the ``Legislative Line Item Veto Act of 2006.''