    [Public Papers of the Presidents of the United States: George W. Bush (2007, Book II)]
    [December 17, 2007]
    [Pages 1555-1569]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Remarks on the National Economy and a Question-and-Answer Session in
    Fredericksburg, Virginia
    December 17, 2007

        The President. Thank you, all. Please be seated. Ralph, thanks for the invitation. Thanks for the gift; it was
    planted by the first George W. [Laughter] I'm glad to be here at the
    Rotary Club. I have spent some quality times at rotary clubs, whether it
    was asking for votes or selling baseball tickets. [Laughter] I could
    never get admitted to any of the clubs in Texas cause my voice wasn't
    good enough. [Laughter] But I'm proud to be with you. Thanks for letting
    me come by and share some thoughts with you about our economy, what's
    happening in Washington. And if time permits, I'll be glad to answer
    some questions, if you have any.
        I also want to thank the chamber for having me as well. Appreciate
    what you'redoing. People say--they're probably wondering why would--old
    George W. has got something important to say; why would he bother to
    come to a place out in the country? And the answer is, because this is
    where jobs are created; this is where dreams are lived; this is where
    values are upheld. And so I'm proud to be with you. It kind of reminds
    me of being in Texas, to come to a place where there's just down-to-
    earth people that are trying to do what's best for their families and
    their communities. And so I'm honored to be with you. I appreciate you
    letting me come by.
        Ralph, thanks for the invitation. I also
    want to thank Bob Hagin. And I'm proud to be
    here with Congressman Eric Cantor from Richmond,
    Virginia, as well as newly

    [[Page 1556]]

    elected Congressman Rob Wittman.
    Appreciate you being here. Good luck. I'm looking forward to working
    with you. I want to thank the speaker of the House of Delegates--you call them delegates, right? Yes. Bill
    Howell, a good man; good to see you, Mr. Speaker. Appreciate you being
    here. Senator-elect Richard Stuart, is that
    right? Yes, appreciate you, Richard. Thanks for coming as well. John
    [James]* Lacy, past president of Rotary
    International has bothered to come over. Mr. Lacy, thank you for
    serving.
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        *White House correction.
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        You know, I tell the people of our country every time I can that the
    great strength of America is not our military--although I intend to keep
    it strong--or the size of our wallets. But the great strength of America
    are the hearts and souls of our fellow citizens who take time out of
    their everyday lives to love a neighbor like they would like to be loved
    themselves. That's what rotaries mean to me.
        People are saying, ``Well, how can we best foster the well-being of
    the community in which we live? What can we do, as loving human beings,
    to work with our youth like you do at this--here at this rotary club?''
    And so I want to thank you for what you're doing. I thank you for adding
    to the great compassion of our country. Societies change one heart and
    one soul at a time. And I hope you have found what others have found,
    that if you're part of that helping somebody's life improve, it improves
    your own.
        Laura sends her very best. She's doing just
    fine. She's a fabulous wife, great mother, and a wonderful First Lady.
    And she is--she and I are having the great joy of welcoming people to
    the White House during the holiday season. It's a pretty spectacular
    place when you see the trees and all the great garlands. And they do a
    fine job of decorating the White House. I just put on the lights on the
    trees. [Laughter] But we're having a joyous time.
        I want to talk a little bit about our economy and some of the
    challenges we face and then answer some questions. First of all, I put
    forth what some would consider a controversial proposal--that's in
    Washington, DC; at least those in Washington consider it controversial--
    and that is, cutting taxes on people helps the economy. There's quite an
    appetite for your money in Washington. People can figure out all kinds
    of ways to spend the taxpayers' money. My attitude was, particularly in
    the face of recession and after a terrorist attack, that the best way to
    help this economy recover was to let people keep more of their own
    money.
        And so I worked with the Congress to cut taxes on everybody who pays
    taxes. Now, sometimes in the Nation's Capital, they'll say, ``Well, some
    people get tax cuts and others don't.'' That's not my attitude. My
    attitude was, if you're paying taxes, you ought to get tax relief, and
    so we cut taxes. And I mean we cut them on everybody. And when you cut
    them on individuals, it turns out you also are cutting taxes on small-
    business owners. Most small businesses in America are subchapter S
    corporations, or limited liability partnerships, which means that the
    owners of the companies pay individual taxes. In other words, the
    company is subject to the individual tax rates. And so cutting
    individual taxes not only helps consumers and families, but it also
    helps small businesses.
        And the plan worked. If you think about where we were coming out of
    2001 and where we are today, you can't help but say the plan worked.
    Cutting taxes helped stimulate economic growth. Why? Because most new
    jobs are created by small-business owners. And if you let a small-
    business owner have more money to save or invest or spend, it means he
    or she is more likely to hire somebody. And so we've had a pretty good
    economic run here in the country, 6 years of growth. We've had 51
    straight months of increased job employment. It's

    [[Page 1557]]

    the largest--longest period of uninterrupted job growth in the Nation's
    history. People are working; productivity is high. In other words, our
    economy is becoming more productive as a result of the advent of new
    technologies. And that means people are more likely to get paid more.
        And yet there are some challenges. There's a credit issue and a
    housing issue. In other words, what I'm about to tell you is, is that
    the Congress cannot take economic vitality for granted. There are some
    positive things Congress can do to make sure that the economy continues
    to grow and people are working and realizing dreams, and there's some
    negative things they can do. And the most negative thing the Congress
    can do in the face of some economic uncertainty is to raise taxes on the
    American people. If you want to figure out a way to slow this economy
    down, just start taking money out of people's pockets or making it
    harder for small businesses to grow and invest.
        So one thing I want to share with you today is, I'll veto any tax
    increase. I don't think Congress needs more money. I think they need to
    learn how to set better priorities.
        And that's what you're watching play out here in Washington. The
    President submits a budget, and then the Congress can either accept it,
    run over it, ignore it. And then the Congress--or the Constitution
    wisely gives a President veto power in order to make sure the President
    stays involved in the process. And I'm pleased to report that we're
    making some pretty good progress toward coming up with a fiscally sound
    budget, one that meets priorities, helps on some emergencies, and
    enables us to say that we've been fiscally sound with the people's
    money.
        The next couple of days will be interesting to watch. As I say, I'm
    hopeful, and I appreciate those on Capitol Hill are working hard to come
    up with a good appropriations package. And that appropriations package,
    by the way, must also include funding for our troops in harm's way.
        Now, I understand people in Washington and people around the country
    may not have agreed with my decisions on how to protect America. I know
    that, and that's fair. That's what democracy should be all about. When
    people have a difference of opinion with the President, they ought to
    feel comfortable expressing that difference. And it turns out, quite a
    few citizens are willing to do that. [Laughter]
        But there should be no difference of opinion when it comes to making
    sure our troops have the funding they need, and there should be no
    difference of opinion about whether our commanders on the ground ought
    to be those who decide or those who recommend to the President and the
    Congress the best way to proceed.
        And so we'll be watching very carefully as the Congress works
    through how to spend your money coming down the stretch here before
    Christmas. They can't have any gimmicks--accounting gimmicks in there,
    or, you know, sometimes they'll use the appropriations process to pass
    law that otherwise didn't make it to the floor of the House or the
    Senate. I'm sure that doesn't happen, Mr. Speaker, in--[laughter]. Sometimes it happens in Washington,
    though. [Laughter]
        And so I'm looking forward to working with them to come up with a
    good bill. But they need to fund these troops. And they don't need to be
    putting artificial timetable for withdrawal on the money that we're
    asking to make sure the men and women who courageously serve the United
    States of America have what it takes to do the job they've been asked to
    do.
        If the Congress can't get the job done--in other words, those jet
    fumes will start to be moving out pretty here--pretty soon here, later
    on this week--if they can't get the job done, then I've got a suggestion
    for them: And just pass a 1-year continuing resolution. That's all they
    got to do. If they can't get the job done--like I'm hopeful

    [[Page 1558]]

    they will--then all they got to do is just take what's called a
    continuing resolution, get the people's business done that way, and go
    on home. They got to make sure they fund the troops, though, on the way
    out of town.
        There's another issue that's coming down I want to bring your
    attention to--and by the way, the House looks like they're coming up
    with a reasonable plan, Eric and Rob. So we're watching very carefully. I don't know if
    you ever heard of the Alternative Minimum Tax--[laughter]--well, this
    was aimed at super-rich years ago, but the plan wasn't indexed for
    inflation. And all of a sudden, middle class citizens are fixing to be
    stuck with this bill. And Congress needs to fix the AMT, and they need
    to do it quickly.
        And the Senate, by the way, passed a good version of an AMT fix, so
    you're not going to get stuck with a higher tax bill. And by the way,
    it's just not individuals. Again, if you're incorporated through a
    limited partnership or subchapter S, you'll end up paying higher taxes
    as well. But they need to move quickly on this piece of legislation
    because the longer they delay, the more likely it is that there's $75
    billion of refund checks that will be late. People are going to be
    wondering why they didn't get their refund check on time. And the answer
    is, it's because there's been a delay in the AMT fix. Now, the positive
    news is the Senate passed a good bill, and the House of Representatives
    needs to get it done quickly.
        People are concerned around this country about housing. Here's my
    attitude on housing: One, the Government should never bail out lenders;
    two, some people bought a house that they shouldn't have been in the
    market; three, there are speculators who thought they could get--buy
    nice--one of these reset mortgages, and flip it, make some money. I'm
    sure none of them are in the Chamber, but nevertheless--[laughter]--
    that's what happened. But there are some people that are creditworthy
    that should be encouraged to stay in their homes.
        And the issue--the housing issue has changed. I can remember the
    first home I bought in Midland, Texas. I remember going down to the
    savings and loan and sitting down with the savings and loan officer and
    negotiating with the savings and loan officer. Well, this day and age,
    you know, these mortgages have been bundled. So the savings and loan
    doesn't own the mortgage anymore, or the bank doesn't loan the mortgage
    anymore. The local lending institute doesn't loan the mortgage anymore;
    it's owned by some international group, perhaps, or it's been bundled
    into an asset. And so there's hardly anybody to negotiate with. And so
    some lenders aren't sure where to turn. They have creditworthiness; they
    may get pinched as their interest rates reset.
        But it seems like to me it's in our interests to help people stay in
    their homes. And there's--we've got a couple of ways to do so. One is
    through the FHASecure. It's a way for the--Alphonso Jackson and his Department, which is HUD, to help
    creditworthy people renegotiate and stay in their homes. Congress needs
    to get a bill to my desk that will make it easier for FHA to continue to
    help people stay in their homes. We're not bailing people out; we're
    helping them refinance their money. We're helping them, you know, own--
    we're helping them stay in a part of the American Dream is what we're
    doing, and it's worthwhile to do that.
        And the other is what's called HOPE NOW, and this is the Treasury
    Department bringing the private sector together--lenders, investors,
    mortgage counselors--to help people renegotiate, to help people
    understand what is possible when it comes to finance and recourse and
    stay in your house.
        And so I am concerned; I know you're concerned about the housing
    industry. We all should be. We've been building a lot of homes, and all
    of a sudden, fewer buyers

    [[Page 1559]]

    are showing up. And it's going to take a while to work through the
    housing bubble. But we can mitigate some of the issues, and I'm
    concerned about people who are creditworthy enough to live in their
    homes not being able to deal with the resets. And so I just want to let
    you know we got a strategy.
        And Congress can help. They can pass the FHA modernization bill,
    which will help us. And the other issue that they can pass that would
    really help the homeowner is that when you renegotiate, if you happen to
    have a mortgage and--that you're going to have trouble meeting, you can
    find somebody to renegotiate with, and you do. And part of that loan may
    be forgiven for tax purpose, you actually have to pay tax. It doesn't
    make any sense if somebody is struggling to stay in their house and the
    Tax Code says you get to pay more tax after you've renegotiated your
    loan. So we need to fix the Tax Code, and the Senate bipartisan way is
    passing a good piece of legislation. I hope the House takes it up.
        Two other issues, and then I'll answer some questions. One, I know
    if you're a small-business owner, you're concerned about health care,
    and you should be. And the fundamental question facing the country is,
    what can the Government do to make health care more affordable and more
    available? And there's a classic philosophical divide in Washington. On
    the one hand, there are those who believe that government is the fix,
    that government can best decide the allocation of resources in health
    care. And then there are those of us who believe that we ought to push
    for more consumer--a consumer-driven health care system.
        Part of the problem in health care is that there is no consumerism.
    I shouldn't say ``no consumerism.'' Obviously, that's a--there is some
    consumerism. But when a third party pays your bill, you tend not to
    worry about price. If somebody else pays your bill, you're not really an
    active consumer. And therefore, the question is--part of the issue with
    price is, how do you encourage consumerism? And here's one way: change
    the Tax Code. The Tax Code now says if you work for corporate America--
    big company--you get a tax benefit, but if you're a small-business owner
    or you're out on your own, you have to buy health care with after-tax
    dollars.
        And therefore, there's a disincentive for people to be purchasing
    health care on the individual market, and therefore, the individual
    market hasn't grown. So I propose to Congress that we allow families,
    everybody, regardless of your employment status, to be able to deduct
    $15,000 off your income taxes, or $7,500 as an individual, all aimed at
    level the playing field so that an individual market begins to grow. So
    step one to consumerism is for individuals to have more options in the
    marketplace so they can become involved directly in buying better
    insurance for their families.
        Step two is for there to be transparency in pricing and quality, and
    the Federal Government can help. We're a huge health care consumer. And
    one of the things that Secretary Leavitt
    is doing is saying that if you're interfacing with the Federal
    Government, then you got to post your price. I don't know how many of
    you ever go to your doctor and say, ``What are you charging, you know,
    compared to your neighbor?'' I suspect you do that when it comes an
    automobile, but you don't when it comes to buying--to purchasing health
    care. I never have, frankly. I don't remember asking my buddies in
    Midland, who are my doctors, ``How much are you charging relative to the
    person down the street?''
        So--but the Government can help with pricing transparency. So we're
    now getting people to--providers to not only post a price, but also,
    we're developing a qualitative index so that people are able to compare
    price and quality. Now, that--this is a novel concept, I readily
    concede. But if you're interested in more consumerism, then there has to
    be transparency in the health care industry.

    [[Page 1560]]

        Third, there needs to be products like health savings accounts
    expanded. If you're a small-business owner, I strongly urge you to look
    at a health savings account for a way to help your employees or yourself
    save for everyday expenses--medical expenses on a tax-free basis and
    coupled with a catastrophic health plan. The whole purpose is--there is
    to give you more decisionmaking in your health care--with your health
    care and portability.
        Because one of the issues facing America, particularly if you're a
    youngster, is, can you take your health care plans with you? It turns
    out, most young Americans have changed jobs, like, seven or eight times
    by the time they're 35 years old. And the inability to carry a good
    health care plan with you, a plan that you own, a plan of which the
    dollars inside your plan are earning tax free, creates frustrations for
    people. This economy is changing. And therefore, the health care
    industry needs to change with it and provide flexibility for our
    workers.
        Fourth, small businesses ought to be allowed to pool risk across
    jurisdictional boundaries. Well, that means if you're a restaurant owner
    here, you ought to be able to pool your employees with a restaurant
    owner in Texas so that you can go into the market and buy insurance at
    the same discounts that larger companies get.
        Fifth, health care needs to be better at incorporating information
    technologies. I don't know, I mean, I suspect you'll find some of your
    docs still writing files by hand. That's a little antiquated these days.
    The trouble is, most doctors aren't very good writers to begin with.
    [Laughter] And so we're using Government leverage to help information
    technology take hold so that there is higher productivity increases in
    health care, less inefficiency and waste. My dream is for all of us to
    have a medical electronics record within a decade. My only caveat is, I
    want to make sure that your material is private and that nobody can
    access it; it's your material alone. But nevertheless, it makes sense
    for all your medical records to be on a single chip, which will help
    take the inefficiencies out of health care and help keep the pressure
    off cost.
        Finally, if you're truly interested in making sure health care is
    available and affordable, then you need to join the outcry on these
    frivolous and junk lawsuits. There are too many lawsuits running too
    many doctors out of practice. We have an ob-gyn crisis in America, in
    some States, because junk lawsuits are making it impossible for people
    to practice their skills. And they just--they get sick of it and say,
    ``I'm out of here. I don't want to practice anymore.'' And plus, every
    time there's a lawsuit, it drives up the cost of medicine. That means
    you have to pay more. Because why? Because many doctors practice
    defensive medicine. They say, ``Well, if I'm fixing to get sued, I want
    to make sure I administer as many tests as possible, so that my practice
    and my techniques can stand up in a court of law,'' which runs up the
    cost of medicine.
        Now, obviously, there ought to be--needs to be recourse for
    malpractice. Nobody wants to deny anybody their right to have a claim in
    the court of law. That's one of the great things about America, is if
    you've got a claim, you ought to be able to take it to the court of law.
    But we can--and we can pass law that protects somebody's right to go to
    the court of law and do something about these junk lawsuits. And you
    know, it's tough. Boy, the trial lawyers are tough in Washington. In all
    due respect to the trial lawyers here, you're very powerful politically.
    We kept--we got the bill out of the House of Representatives. Time and
    time again, it got blocked in the United States Senate.
        So here's a commonsense way to move forward to help small businesses
    and individuals deal with health care costs. And that stands in contrast
    to those who really believe the Federal Government can run it better
    than the individual consumer. And I'm not saying those are bad people
    who

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    articulate that position, I'm just telling you I think it's wrong for
    America.
        Finally, energy, we're too dependent on oil from overseas. That
    sounds strange for a Texas guy to say, I know. But dependency on oil
    creates economic security issues and national security issues and
    environmental issues. And so I proposed a bill that would encourage--let
    me just--most oil is consumed through automobile usage. So I want to
    talk to you about automobile usage and electricity, and then I'll answer
    some questions.
        I have proposed a bill--and I'm hopeful it will get a pass by the
    Congress--that increases CAFE standards, which is the fuel economy
    standards, in a reasonable way without sacrificing automobile safety.
    And I've also proposed that we reduce gasoline usage by 20 percent over
    the next 10 years by using alternative fuels. Now, I wouldn't have done
    that if I didn't think it was practical and possible.
        If you're a hog grower--which I suspect there's not too many around
    here--but you're a little concerned about the use of ethanol with corn
    at its base because the price of corn is high. Ethanol is beginning to
    spread in the Midwest, and it's causing the price of corn to go up.
        But that's going to be relieved as a result of research and
    development. One of these days, the scientists tell me--and I believe--
    that we'll be able to manufacture fuel for your automobiles from
    switchgrass or biomass or wood chips. And then all of a sudden, if you
    really think about it and are optimistic about America's capacity to use
    technology to change our way of life, then all of a sudden, you begin to
    see the rationale for saying that we can reduce gasoline usage by 20
    percent over the next 10 years. I believe it's coming, I really do.
        I also believe that a part of that mix is going to be new battery
    technologies that will enable you to drive the first 40 miles on
    electricity. And for those of you who are worried about the size of the
    vehicle, it won't look like a golf cart. [Laughter] It will be a normal
    size vehicle.
        On electricity, there's a lot of talk about electricity. I
    understand that, and there should be. If America wants to solve its
    dependency on foreign sources or wants to solve its environmental--deal
    with environmental concerns, we need to aggressively spread nuclear
    power. If you're generally an environmentalist, if you're worried about
    greenhouse gases, then you need to be in the forefront of supporting
    nuclear powerplants. If you're worried about whether or not we can
    continue to have the electricity necessary to foster economic growth and
    vitality, you ought to be for nuclear power. I know that's not
    necessarily politically correct in some circles, but I believe the
    engineering is safe, and I know we can come up with ways to dispose of
    the waste in a safe way.
        And so those are some of my thoughts, other than I hope you all have
    a great holiday season. I'd be glad to--I hope you can tell I'm an
    optimistic fellow. We've been through a lot over the last 7 years; we
    really have. But I'm absolutely convinced this country is strong and
    vibrant. We're in the lead when it comes to the freedom agenda. I
    believe the decisions that have been made over the last 7 years are
    going to lead peace. Sometimes I know it's hard for you to tell it. But
    I'm convinced that when people look back at this era, they're going to
    say,``Thank goodness the United States of America never abandoned its
    belief that freedom is universal.''
        I happen to believe there is an Almighty, and a gift of that
    Almighty to every man, woman, and child is freedom. And I believe it's
    in our Nation's interest to act upon that belief. And so I come to you
    today as a man honored to serve a great country, with some ideas on how
    we can stay strong economically, and a great faith in the capacity of
    freedom to bring the peace we want.
        And with that, I'll be glad to answer any questions, from anybody
    other than the

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    press corps. [Laughter] If I wanted to have a press conference, I'd call
    a press conference. Right, Herman [Ken Herman,
    Cox News]?
        Mr. Herman. [Inaudible]--Mr. President.
        The President. I can't hear you. He's from Texas, forgive him.
    [Laughter]
        Yes, ma'am.

    Oil Industry

        Q. I'm from that county outside Texas called Oklahoma.
        The President. There you go. We love Oklahoma in Texas, except when
    you come down and beat our football teams. [Laughter]
        Q. That is a bad thing.
        They seem to be closing a lot of the refineries and capping off
    different oil wells, et cetera. Are they saving our oil, or what are
    they doing?
        The President. What happens, you know, an oilfield plays out. And
    many of the fields you're referring to in Oklahoma or parts of Texas are
    just old, and there's little to recover.
        One of the interesting things that is taking place around the
    country, though, is that the higher price of oil has caused people to
    invest in new technologies, and the new technologies are enabled--
    enabling some to be able to get more of the reserves out of the
    reservoirs. But when a person caps off an oil well, plugs an oil well,
    at this price it pretty well means it's played out; there's not left.
        Now, refineries is a different issue. We haven't built any new
    refineries. Now, we've expanded some refineries. We're not building new
    refineries, and it makes no sense not to increase the supply of
    gasoline. And I mean, if you're concerned about the price of gasoline,
    one way to deal with it is to encourage the expansion of refineries.
        And so one of the proposals I put forth to the Congress was, as we
    shut down bases through the BRAC process, why don't we provide land on
    those old bases for refineries and to encourage the expansion of
    refineries here in the United States. And it's just--anyway, it's--there
    are some who--I don't know why they wouldn't be for something as
    commonsensical as that.
        I'll tell you another thing we ought to be doing, is we ought to be
    exploring for oil and gas in the Arctic--up in Alaska. You can't believe
    the technologies that are now available. You can drill a--on a small
    pad, without creating much of an impact on the environment, and explore
    laterally, in order to develop a field. And they tend to drill in the
    winter, on ice, and they move the rig off in the summer during the melt.
    And so we've got the technologies capable of finding oil and gas
    reserves and hardly leaving a scratch on the environment up there. But
    it's become a cause celebre with a lot of the special interests in
    Washington, DC.
        So I can't tell you why people aren't for refinery expansion. I'm
    just telling you they ought to be. And there are some examples where
    refineries are expanding, like down there in Mississippi, for example,
    in the--Pascagoula. A big refinery has gotten permits on its current
    footprint to expand its capacity, and that's going to be good for the
    country. It's going to take a while. I mean, we will be using oil and
    gas for a while. And it's going to take a while to diversify. And
    therefore, for the sake of our consumers and our economy, we need to
    make sure we got reliable supplies as we develop new technologies. And
    new technologies are coming. It's going to be an exciting era, in my
    judgment.
        Thank you. Yes, sir.

    President's Domestic Agenda

        Q.  [Inaudible]--a commercial lender here in Fredericksburg.
        The President. Yes. How do you like the mortgage plan? [Laughter]
    Becaause I don't know----
        Q. Well, the mortgage plan is a little bit tough. And I'm a
    commercial lender as well, so it's great to hear from the President.
    Just two issues that we're looking at

    [[Page 1563]]

    against valuating--evaluating financial statements, daily on the income
    statements, health care expenses, fuel expenses--what about my big
    customers that are driving diesel-powered equipment? What if fuel goes
    to 3.25 a gallon to $5.00----
        The President. Yes.
        Q. ----while at the same time that you're having an escalated health
    care expenses. So it's great to see you here today and preaching that
    message, because, again, revenues aren't necessarily expanding in this
    soft economy we're in.
        The President. Right.
        Q. So what happens in '08 and '09 when the----
        The President. No, I appreciate that. That's why I'm against raising
    the gasoline tax. In other words, ``We need to raise the gasoline tax.''
    It comes up about every year in Congress. I'm against it for precisely
    that reason, and--is somebody for it over there? [Laughter] I said, the
    Federal gasoline tax. [Laughter] Mr. Speaker, I wasn't talking about the State gasoline tax. [Laughter]
    But it's--yes, look, that's the concern, and I fully understand the
    pinch some of your folks are going to feel.
        And having said that, this economy is pretty good. There are some--
    there's definitely some storm clouds and concerns, but the underpinning
    is good, and we'll work our way through this period. But I couldn't
    agree with you more that there's--your people have got some concerns.
    There's just some fundamental questions that we're going to have to make
    on issues like health care. The quick fix, at least what sounds like a
    quick fix, is going to be, don't worry, we'll handle it for you at the
    Federal Government.
        And to me that would mean that the greatest health care system in
    the world would head toward mediocrity quite rapidly. We don't want
    rationing, people standing in lines. We want the great innovation and
    the private medicine to flourish. And so my only caution is, is that
    people see the health care rising; I hope they don't leap to what sounds
    like a simple solution that would lead to a long-term problem for the
    country.
        Yes, sir.

    Transportation Infrastructure/Fuel Efficiency Standards

        Q. You may have noticed that transportation is an issue for us in
    this area, and----
        The President. Actually, the helicopter didn't get stuck in any
    traffic. [Laughter]
        Q. Okay. And I was wondering----
        The President. Yes. What traffic jam? [Laughter] Anyway, yes, it is,
    it's a huge issue.
        Q. Yes, sir. And Homeland Security is moving more people in our area
    here, especially up on 610, and moving a lot of their offices. I was
    wondering if the Federal Government would be able to help us with our
    transportation problem, so that we could better facilitate Homeland
    facility--Homeland Security's problem.
        The President. Yes. You're not looking for that special earmark, are
    you? [Laughter]
        Q. No, no, no, sir.
        The President. Yes, you are--at least you're honest. [Laughter]
    Look, here's the thing about highway funds, a couple of points. First of
    all, I don't know if you know this or not, but the Public Works
    Committee, I guess, is the largest in the House. Is that right,
    Eric? Yes. And the way they get the bills out of
    the House onto the floor is everybody gets a special project. And so
    it's the largest committee, and then everybody gets them a special
    project, and then the bill moves, and then the funding formulas kick in.
    The way it ought to be done is they ought to adjust the funding formulas
    based upon rational measures and then pass these bills without earmarks,
    without special projects. That's just the way it works. A lot of the
    money is spent before it even--the highway bill makes it to the floor,
    and it's just not a good system.

    [[Page 1564]]

        Secondly--and so therefore, they need to change the system. This
    isn't going to answer your question specifically. And it's not an
    intentional dodge, by the way; it's a slight dodge--[laughter]--because
    I--you know, you don't want your President walking around promising this
    project to this person or this project to that person. That's just not
    a--that's not what the President's job is to do. The President's job is
    to think strategically for the country and help get fiscal sanity into
    the process.
        Secondly, no question that we're going to have to rethink for the
    long term how to fund highways. Right now the highways are funded as a
    result of gasoline taxes, as you know. Not all of the money from the
    gasoline tax, by the way, goes to highway projects. There's a lot of
    mass transit money spent; there's other things that the money is spent
    on. I'm not making a qualitative judgment; I'm just telling you that not
    every dime collected from the highway tax--for the highway tax goes to
    highways.
        Automobile--I just told you that we're going to become more
    efficient with our automobile; we're raising our fuel efficiency
    standards. In other words, cars and new technology and electricity are
    going to change how often people go to the pump. And so the source of
    revenues that had been kind of the staple of the interstate highway
    system since the fifties is going to change a lot. And so how--what's a
    rational way forward? I talked to Secretary Peters about this, and I have instructed her to think about
    alternative methods of financing highway growth, such as user fees in
    lieu of, or in combination with, current tax structure.
        Now why would you do that? Well, if your automobiles are going to
    get less miles per gallon, then you're going to have to figure out--and
    you need additional highways, you're going to have to figure out a way
    to raise the money. And the user fee is a good way to do it. And if you
    happen to go to a user fee system, one of the interesting things that
    are being used is differential pricing. In other words, you pay a
    different price depending upon the day you drive; in other words, a
    market-oriented system. If one of the things you're concerned about is
    massive traffic jams on your highways, in and out of your community,
    then it may make sense to say to somebody, if you're going to ride
    between 9 and 4, you pay a higher fee than somebody riding before 9 or
    after 4. It's congestion pricing. It's worked in some parts of the
    world. I definitely think we ought to look at it.
        In other words, what I'm telling you is, the funding system is
    antiquated relative to the challenges we're going to be facing. And so
    Secretary Peters is a good, smart soul who is
    looking through different alternatives. It's going to be a tough issue,
    as you found out locally, and it's going to be a tough issue. It's hard
    to get Washington to change sometimes, but we will do our part.
        She's, by the way, very much engaged in
    making sure that the air transportation system is more modern. One thing
    we did over Thanksgiving, and we'll again do for Christmas, is take away
    some of the military flight lanes and provide them for commercial
    airlines. But the truth of the matter is, we need a more rational way of
    allocating gates amongst airlines, so that there is rational--a market-
    driven system in place. Anyway, I'm not going to answer your question on
    the special deal. [Laughter] Yes, sir. I'll leave that to your
    Congressman. [Laughter]

    Fannie Mae and Freddie Mac Corporations

        Q.  [Inaudible]--Fredericksburg and Stafford area is a high cost of
    living area, and all the proposals for FHA, VA, and conventional loans
    are tied to the Fannie Mae and Freddie Mac limit of 417,000.
        The President. Yes.
        Q. And in this area, that works for some folks, but the interest
    rate on jumbo loans is now 1 percent higher than conforming

    [[Page 1565]]

    loans. Has there been some effort to try to increase Fannie Mae or
    Freddie Mac?
        The President. There has, in lieu--in conjunction with reforming of
    the two institutions to make sure that they stay focused. The reform
    would make sure they stay focused on their core missions. But there has
    been--and Secretary Paulson has been
    working with Congressman Frank in the House on
    this very issue, which is to raise the limit on jumbos in conjunction
    with reforms. I don't know if it's going to pass this time or not. I
    should have checked before I came. But it definitely is a part of the
    reform agenda that we're working with the House on.
        Yes, sir.

    Iran

        Q. Mr. President, my name is Mike West. I'm a Stafford resident
    here. It's a pleasure to have----
        The President. How long have you been living here, Mike?
        Q. Seven years.
        The President. There you go.
        Q. We moved from Charleston, West Virginia.
        My question is, I have three children in the school system here, and
    I'm very concerned about their well-being, living in this country. And
    you've done a wonderful job of protecting our Nation, but I'm concerned
    about the nations like Iraq, who now have nuclear weapons----
        The President. Iran.
        Q. Iran and Iraq both.
        The President. Not Iraq. [Laughter]
        Q. But my question would be about Iran. How is the diplomatic
    channels coming through there, as far as----
        The President. No, I appreciate that, thanks. You all read a report
    the other day that said that Iran had, but halted, a covert military
    nuclear weapons program. I said in my press conference that that report
    came out--that that report says to me, when you read it carefully, Iran
    was a threat, Iran is a threat to peace, and Iran will be a threat to
    peace if we don't stop their enrichment facilities because--I said that
    because there are three components to a nuclear weapons program. The
    first component is having the materials necessary to make a bomb. And
    you can either purchase materials that have already been processed, or
    you can learn how to process yourself. That's the enrichment component.
        That program is still active, in spite of the fact that most of the
    world has said to the Iranians, stop your enrichment. And that's where
    you're watching the diplomacy play out. The ability to weaponize that
    material, in other words, to make it into something that explodes is
    that part of the program is what the intelligence people thought was
    ongoing at one time and suspended.
        And finally, in order to be in a position to say you're a nuclear
    weapon power, you've got to be able to deliver the weapon by missiles.
    And they've spent a lot of time testing their missiles. So two of the
    three components in order to become a power--a nuclear power with a
    weapons system is--they're active. Now, what I told the people, first of
    all, I think Iran is a danger to peace. And I believe that for a variety
    of reasons. I believe with a weapon they would be very destabilizing. I
    believe with a weapon we need to take their threats seriously about what
    they have said about one of our allies, Israel. And therefore, my
    attitude hasn't changed toward Iran. If somebody had them a weapons
    program, what's to say they couldn't start it up tomorrow? Since they
    tried to hide their program before, how would we know?
        And so my point on the Iranian issue is this: They owe an
    explanation to the world. They need to tell the world why they had a
    program that they didn't report. They need to make it clear to the
    international organization, the IAEA, what that program was all about,
    and why they hid it from the world. And so Iran is a danger, and we will
    continue to work with friends and allies to convince them that it is in

    [[Page 1566]]

    their interests to suspend their enrichment programs. And if they do,
    there's a way forward for them that is different from the way that--the
    path they're headed down now. They're heading down a path of isolation
    right now and economic sanctions. We passed two resolutions out of the
    U.N., and Condi Rice is working on a third.
        And my message to the Iranian people is, one, we respect your
    history and traditions. It's your Government that is isolating you from
    the world. It's the decisions that your Government has made that is
    making it more difficult for you to put food on the table, making it
    more difficult for your family to realize their dreams. And there's a
    better way forward for the Iranian people than to have a Government that
    is nontransparent, that's hidden a program, and that refuses to listen
    to the demands of the--of most of the civilized world, which is, give up
    your--suspend your program.
        Interestingly enough, today Russia sent some enriched--or is in the
    process of sending enriched uranium to Iran to help on their civilian
    nuclear reactor. If that's the case, if the Russians are willing to do
    that, which I support, then the Iranians do not need to learn how to
    enrich. If the Iranians accept that uranium for a civilian nuclear
    powerplant, then there's no need for them to learn how to enrich. And so
    I appreciate your question.
        Yes, sir.

    Care for Wounded Military Personnel

        Q. I'm Jeff Davis. I'm a retired marine Vietnam veteran, and I want
    to be assured that our wounded warriors are getting the health care that
    they deserve.
        The President. Yes. I appreciate you saying that. I want to be
    assured of that too, Mr. Davis. First of all,
    thank you for serving. I feel a particular sense of obligation to make
    sure that the man or woman I send into combat gets the very best care
    possible. I will tell you, sir, that the doctors and nurses providing
    our military health care are fabulous. And the health care these troops
    are getting is excellent, no ands, ifs, or buts about it.
        The bureaucracy, however, needed to be reviewed and fixed. You're
    taking these kids, unlike Vietnam, that are getting wounded in Iraq,
    they're coming straight off the battlefield, getting fine care there. If
    need be, they're in Germany getting intensive care. And they're here in
    the United States of America. Laura and I are going to Bethesda and
    Walter Reed on Wednesday and Thursday. Two reasons: One, to tell those
    troops we love them; and two, to tell those docs and nurses who are
    working overtime to give them fabulous care this country appreciates
    what they're doing.
        Now, as you read, the Walter Reed deal, that was a bureaucratic
    foulup. Secretary Gates moved on it very
    quickly. It should show you our intensity in making sure that our troops
    get the very best care. The veterans system, in our judgment, can be
    fixed and improved. And that's why I asked Bob Dole and Donna Shalala to come
    together to make sure that veterans' benefits match the needs of these
    troops coming out of combat in Iraq and Afghanistan.
        We've got to make sure that--here's what happens. You get
    transferred from the Department of Defense into the Veterans
    Administration, and sometimes that transfer isn't too smooth. So we
    believe there ought to be a seamless system. There needs to be health
    information technology for our troops. Our families need to have a case
    study--a case worker with them all the time.
        So we're making good improvements, and we've addressed the
    bureaucratic shortfalls. We'll probably find others. But you need to
    know, sir, that I am absolutely convinced I can look the parents of
    our--and loved ones of the troops in our eyes and say, your kid is going
    to get fabulous health care, and they deserve it.
        Yes, sir.

    [[Page 1567]]

    Alternative Fuel Sources

        Q. Thank you, Mr. President. With regards to research and
    development into mileage in cars--and I'm a hybrid owner myself----
        The President. There you go.
        Q. ----is there anything that is being done to--I understand the
    issue with the ethanol plants is there's no outlet for ethanol, other
    than 10 percent over at Exxon. Is there anything being done with that
    respect?
        The President. Yes. Listen, a couple points there. First of all, the
    first hurdle to the use of ethanol is to have automobiles that are
    capable of using ethanol. And most automobiles are flex-fuel vehicles.
    You've probably--you've got one, and you just don't know it. Meaning,
    you use gasoline or ethanol and the engine works either way.
        Secondly, the fuel blends probably in this area are 10 percent, but
    out in the Midwest, they're up to 90 percent. And the reason why is this
    market is going to develop regionally. And by that I mean, if--
    obviously--what's interesting is that the most significant penetration
    of high-concentrated ethanol is in the Midwest, where there's corn. And
    if this area doesn't have the fuel stocks necessary to make ethanol,
    it's the--there's not a pipeline system that will enable a lot of
    ethanol to get here. And so what you're going to have is local
    production or regional production to fuel the capacity of you to be able
    to have more ethanol available at the pump.
        The issue is the manufacturing of the product in the region as
    opposed to once the product is here in the region, that you're capable
    of finding an outlet that will deliver it to you. And that's why this
    research into different raw materials for ethanol is going to be very
    important. So you can envision, if you can start using wood chips--you
    got you some wood around here--and all of a sudden, it becomes a viable
    source of input into an ethanol plant.
        But out in Midwest, I repeat to you--I think they call it E-90, or
    something like that, which is 90 percent ethanol--is now available in a
    lot of pumps. And one of the concerns about the folks who live out there
    is, how do you get more of it available? And the marketplace tends to
    work. People start showing up demanding ethanol, and all of a sudden,
    somebody figures out how to supply it.
        But it's making pretty good market penetration in the Midwest. It's
    an interesting map to look at, and I believe the reason why is because
    since corn is now the main source of ethanol, that's where you get to
    get your corn. But hopefully, this research and development in a
    relatively quick period will come up with different alternative sources
    for ethanol. And I think it will, I really do, otherwise I wouldn't have
    put the 20-10 initiative.
        Alrighty. Yes, sir.

    Health Care Reform

        Q. I'm a physician, and I happen to agree with your attitude about
    health care. And I think that the consumerism aspect of it needs to be
    emphasized. I think we're going to have too many options out there to
    offer to the American public, and we won't be able to afford all of
    them. We can't hardly afford it now. But do you have new legislation out
    that you may propose for next year that would try to implement some of
    the ideas that you have, other than the health savings account?
        The President. AHPs, we'll run it again, associated health plans.
    That's the plan that enables small businesses to pool across
    jurisdictional boundaries. And again, that's economies of scale,
    economies of spreading risk, which to me is a rational plan. It's
    opposed by different groups, by the way. It sounds logical and sounds
    rational, but evidently such a plan gets crossways with some of the
    interests in Washington, otherwise it would have passed.
        Secondly, we'll run the tax deductibility again, which would be a
    significant change

    [[Page 1568]]

    in enabling your patients to be treated just like the patient that works
    for a large corporation. And that's going to be a vital part, doc, of
    making sure that people stay--making sure that we have a consumer-driven
    system.
        We may run tort reform again; I'll see what it looks like. As I say,
    we passed it out of the House twice, if I'm not mistaken; went nowhere
    in the Senate. So there's three alternatives for you right there.
        How's your practice?
        Q. Doing well, thank you.
        The President. That's good. I'm going to tell you something: We have
    fabulous health care in America, just so you know. I think it's very
    important--before people start griping about the health care system
    here--and of course, there's always grounds for complaint--just to
    compare it with other systems around the world. And one of the reasons
    our system is expensive is because some of the new technologies that are
    coming on line, they happen to be saving lives. And can we become more
    efficient deliverers of health care? You bet. Are there things we can
    do? Absolutely. But whatever we do, we don't want to undermine the fact
    that we got great health care. I'm very proud of our docs, nurses,
    researchers. There's some just fabulous research going on in our
    country. And to me, that's in our national interest that we spend money
    on medical research, so that we can stay on the leading edge of change.
        One more, and then I've got to get home. Yes, ma'am.

    Stock Market

        Q. Hi, Mr. President, I'm Kate Hopper, and I wanted to extend my
    holiday wishes to you and your family from all of our family.
        The President. Thank you, thank you. I'm fired up about the
    holidays.
        Q. I wanted to ask you--I'm a financial adviser here in
    Fredericksburg, and I wanted to ask you what your thoughts are on the
    market going forward for '08, and if any of your policies would make any
    difference?
        The President. No, I appreciate that. Was it Kate?
        Q. Yes.
        The President. No. [Laughter] I'm not going to answer your question.
    If I were an investor, I would be looking at the basic fundamentals of
    the economy. And early on in my Presidency, somebody asked me about the
    stock market, and I thought I was a financial genius, and it was a
    mistake. [Laughter] The fundamentals of our--of this Nation are strong.
        One of the interesting developments has been the role of exports in
    overall GDP growth. When you open up markets for goods and services, and
    we're treated fairly, we can compete just about with anybody, anywhere.
    And exports have been an integral part, at least of the 3d quarter
    growth. But far be it for me--I apologize--for not being in the position
    to answer your question. But I don't think you want your President
    opining on whether the Dow Jones is going to be--[laughter]--going up or
    down.
        I appreciate you giving me a chance to come by. In the old days, the
    entourage wasn't quite as big, but we're glad that you were--you
    welcomed us all. I really do hope your families have a blessed Christmas
    and a holiday season. May God bless you all, and may God continue to
    bless our country. Thank you very much.

    Note: The President spoke at 11:25 a.m. in Yak-a-Doo's restaurant at the
    Holiday Inn--North. In his remarks, he referred to Ralph Sutton,
    president, Stafford Rotary Club; Robert Hagin, former executive
    director, Morgan Stanley Investment Mgmt.; and former Sen. Robert J.
    Dole and former Secretary of Health and Human Services Donna E. Shalala,
    Cochairs, President's Commission on Care for America's Returning Wounded
    Warriors.

    [[Page 1569]]