    [Public Papers of the Presidents of the United States: George W. Bush (2008, Book I)]
    [March 14, 2008]
    [Pages 371-380]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Remarks to the Economic Club of New York and a Question-and-Answer
    Session in New York City
    March 14, 2008

        The President. Glenn, thanks for the
    kind introduction. Thanks for giving me a chance to speak to the
    Economic Club of New York. It seems like I showed up in a interesting
    moment--[laughter]--during an interesting time. I appreciate the fact
    that you've assembled to give me a chance to just share some ideas with
    you. I also appreciate the fact that as leaders of the business and
    financial community, you've helped make this city a great place, and
    you've helped make our country really, in many ways, the economic envy
    of the world.
        First of all, in a free market, there's going to be good times and
    bad times. That's how markets work. There will be ups and downs. And
    after 52 consecutive months of job growth, which is a record, our
    economy obviously is going through a tough time. It's going through a
    tough time in the housing market, and it's going

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    through a tough time in the financial markets.
        And I want to spend a little time talking about that. But I want to
    remind you, this is not the first time since I've been the President
    that we have faced economic challenges. We inherited a recession. And
    then there was the attacks of September the 11th, 2001, which many of
    you saw firsthand, and you know full well how that affected our economy.
    And then we had corporate scandals. And I made the difficult decisions
    to confront the terrorists and extremists in two major fronts,
    Afghanistan and Iraq. And then we had devastating natural disasters. And
    the interesting thing: Every time, this economy has bounced back better
    and stronger than before.
        So I'm coming to you as an optimistic fellow. I've seen what happens
    when America deals with difficulty. I believe that we're a resilient
    economy, and I believe that the ingenuity and resolve of the American
    people is what helps us deal with these issues. And it's going to happen
    again.
        Our job in Washington is to foster enterprise and ingenuity, so we
    can ensure our economy is flexible enough to adjust to adversity and
    strong enough to attract capital. And the challenge is not to do
    anything foolish in the meantime. In the long run, I'm confident that
    our economy will continue to grow because the foundation is solid.
        Unemployment is low at 4.8 percent. Wages have risen; productivity
    has been strong. Exports are at an alltime high, and the Federal deficit
    as a percentage of our total economy is well below the historic average.
    But as Glenn mentioned, these are tough
    times. Growth fell to 0.6 percent in the fourth quarter of last year;
    it's clearly slow. The economy shed more than 80,000 jobs in 2 months.
    Prices are up at the gas pump and in the supermarket. Housing values are
    down. Hard-working Americans are concerned. They're concerned about
    their families, and they're concerned about making their bills.
        Fortunately, we recognized the slowdown early and took action. And
    it was decisive action in the form of policies that will spur growth. We
    worked with the Congress. I know that may sound incongruous to you, but
    I do congratulate the Speaker and Leader
    Reid, as well as Boehner and Mitch McConnell and Secretary Paulson, for anticipating a problem and passing a robust package
    quickly.
        This package is temporary, and it has two key elements. First, the
    growth package provides incentives for businesses to make investments in
    new equipment this year. As more businesses take advantage, investment
    will pick up, and then job creation will follow. The purpose was to
    stimulate investment. And the signal is clear: Once I signed the bill,
    the signal to--folks in businesses large and small know that there's
    some certainty in the Tax Code for the remainder of this year.
        Secondly, the package will provide tax rebates to more than 130
    million households. And the purpose is to boost consumer spending. The
    purpose is to try to offset the loss of wealth if the value of your home
    has gone down. The purpose is to buoy the consumer.
        The rebates haven't been put in the mail yet. In other words, this
    aspect of the plan hasn't taken to effect. There's a lot of Americans
    who've heard about the plan; a lot of them are a little skeptical about
    this ``check's in the mail'' stuff that the Federal Government talks
    about. [Laughter] But it's coming, and those checks, the
    Secretary assures me, will be mailed
    by the second week of May.
        And so what are the folks, the experts--guys like Hubbard--anticipate to happen? I'm not so sure he is
    one now, but the people that have told me that they expect this consumer
    spending to have an effect in the second quarter and a greater effect in
    the third quarter. That's what the experts say.
        The Federal Reserve has taken action to bolster the economy. I
    respect Ben

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    Bernanke. I think he's doing a good job
    under tough circumstances. The Fed has cut interest rates several times.
    And this week the Fed--and by the way, we also hold dear this notion of
    the Fed being independent from White House policy. They act
    independently from the politicians, and they should. It's good for our
    country to have that kind of independence.
        This week, the Fed also announced a major move to ease stress in the
    credit markets by adding liquidity. It was strong action by the Fed, and
    they did so because some financial institutions that borrowed money to
    buy securities in the housing industry must now repair their balance
    sheets before they can make further loans. The housing issue has dried
    up some of the sources of credit that businesses need in our economy to
    help it grow. That's why the Fed is reacting the way they are. We
    believe the actions by the Fed will help financial institutions continue
    to make more credit available.
        This morning the Federal Reserve, with support of the Treasury
    Department, took additional actions to mitigate disruptions to our
    financial markets. Today's events are fast moving, but the
    Chairman of the Federal Reserve and the
    Secretary of the Treasury are on top
    of them and will take the appropriate steps to promote stability in our
    markets.
        Now, a root cause of the economic slowdown has been the downturn in
    the housing market, and I want to talk a little bit about that today.
    After years of steady increases, home values in some parts of the
    country have declined. At the same time, many homeowners with adjustable
    rate mortgages have seen their monthly payments increase faster than
    their ability to pay. As a result, a growing number of people are facing
    the prospect of foreclosure.
        Foreclosure places a terrible burden on our families. Foreclosure
    disrupts communities. And so the question is, what do you do about it in
    a way that allows the market to work and, at the same times, helps
    people? Before I get to that, though, I do want to tell you that we
    fully understand that the mounting concern over housing has shaken the
    broader market; that it's spread uncertainty to global financial
    markets; and that it has tightened the credit, which makes it harder for
    people to get mortgages in the first place.
        The temptation is for people, in their attempt to limit the number
    of foreclosures, is to put bad law in place. And so I want to talk about
    some of that. First of all, the temptation of Washington is to say that
    anything short of a massive Government intervention in the housing
    market amounts to inaction. I strongly disagree with that sentiment. I
    believe there ought to be action, but I'm deeply concerned about law and
    regulation that will make it harder for the markets to recover, and when
    they recover, make it harder for this economy to be robust. And so we
    got to be careful and mindful that any time the Government intervenes in
    the market, it must do so with clear purpose and great care. Government
    actions are--have far-reaching and unintended consequences.
        I want to talk to you about a couple of ideas that I strongly
    reject. First, one bill in Congress would provide $4 billion for State
    and local governments to buy up abandoned and foreclosed homes. You
    know, I guess this sounds like a good idea to some, but if your goal is
    to help Americans keep their homes, it doesn't make any sense to spend
    billions of dollars buying up homes that are already empty. As a matter
    of fact, when you buy up empty homes, you're only helping the lenders or
    the speculators. The purpose of government ought to be to help the
    individuals, not those who, like--who speculated in homes. This bill
    sends the wrong signal to the market.
        Secondly, some have suggested we change the bankruptcy courts, the
    bankruptcy code, to give bankruptcy judges the authority to reduce
    mortgage debts by judicial decree. I think that sends the wrong message.
    It would be unfair to millions of

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    homeowners who have made the hard spending choices necessary to pay
    their mortgages on time. It would further rattle credit markets. It
    would actually cause interest rates to go up. If banks think that judges
    might step in and write down the value of home loans, they're going to
    charge higher interest rates to cover that risk. This idea would make it
    harder for responsible first-time homebuyers to be able to afford a
    home.
        There are some in Washington who say we ought to artificially prop
    up home prices. You know, it sounds reasonable in a speech, I guess, but
    it's not going to help first-time homebuyers, for example. A lot of
    people have been priced out of the market right now because of decisions
    made by others. The market is in the process of correcting itself;
    markets must have time to correct. Delaying that correction would only
    prolong the problem.
        And so that's why we oppose those proposals, and I want to talk
    about what we're for. We're obviously for sending out over $150 billion
    into the marketplace in the form of checks that will be reaching the
    mailboxes by the second week of May. We're for that. We're also for
    helping a targeted group of homeowners, namely those who have made
    responsible buying decisions, avoid foreclosure with some help.
        We've taken three key steps. First, we launched a new program at the
    Federal Housing Administration called FHASecure. It's a program that's
    given FHA greater flexibility to offer refinancing for struggling
    homeowners with otherwise good credit. In other words, we're saying to
    people: We want to help you refinance your notes. Over the past 6
    months, this program has helped about 120,000 families stay in their
    homes by refinancing about $17 billion worth of mortgages. And by the
    end of the year, we expect this program to have reached 300,000
    families.
        You know the issue like I do, though. I'm old enough to remember
    savings and loans, and remember who my savings and loan officer was who
    loaned me my first money to buy a house. And had I got in a bind, I
    could have walked across the street in Midland, Texas, and say: I need a
    little help. Can you help me readjust my note so I can stay in my house?
    There are no such things as that type of deal anymore. As a matter of
    fact, the paper--you know, had this been a modern era, the paper that
    had--you know, my paper, my mortgage, could be owned by somebody in a
    foreign country, which makes it hard to renegotiate the note.
        So we're dealing in a difficult environment--to get the word to
    people, there's help for you to refinance your homes. And so Hank
    Paulson put together what's called the
    HOPE NOW Alliance to try to bring some reality to the situation, to
    focus our help on helping creditworthy people refinance, rather than
    pass law that will make it harder for the market to adjust. This HOPE
    NOW Alliance is made up of industry--is made up of investors and service
    managers and mortgage counselors and lenders. And they set industry-wide
    standards to streamline the process for refinancing and modifying
    certain mortgages.
        Last month, HOPE NOW created a new program. They take a look--they
    took a look at the risks, and they created a program called Project
    Lifeline, which offers some homeowners facing imminent foreclosure a 30-
    day extension. The whole purpose is to help people stay in their houses.
    During this time they can work with their lender. And this grace period
    has made a difference to a lot of folks.
        An interesting statistic that has just been released: Members of the
    Alliance report that the number of homeowners working out their
    mortgages is now rising faster than the number entering foreclosure. The
    program is beginning to work; it's beginning to help. The problem we
    have is a lot of folks aren't responding to over a million letters sent
    out to offer them assistance and mortgage counseling. And so one of the
    tasks we have is to continue to urge

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    our citizens to respond to the help, to pay attention to the notices
    they get describing how they can find help in refinancing their homes.
    We got toll-free numbers and web sites and mailings, and it's just
    really important for our citizens to understand that this help is
    available for them.
        We've also taken some other steps that will bring some credibility
    and confidence to the market. Alphonso Jackson, Secretary of HUD, is proposing a rule that require lenders
    to provide a standard, easy-to-read summary statements explaining the
    key elements of mortgage agreements. These mortgage agreements can be
    pretty frightening to people; I mean, there's a lot of tiny print. And I
    don't know how many people understood they were buying resets or not.
    But one thing is for certain: There needs to be complete transparency.
    And to the extent that these contracts are too complex and people made
    decisions that they just weren't sure they were making, we need to do
    something about it. We need better confidence amongst those who are
    purchasing loans.
        And secondly, yesterday Hank Paulson announced new recommendations to strengthen oversight of
    the mortgage industry and improve the way the credit ratings are
    determined for securities and ensure proper risk management at financial
    institutions. In other words, we've got an active plan to help us get
    through this rough period. We're always open for new ideas, but there
    are certain principles that we won't violate. And one of the principles
    is overreacting by Federal law and Federal regulation that will have
    long-term negative effects on our economy.
        There are some further things we can do, by the way, on the housing
    market, that I call upon Congress to do. By the way, Congress did pass a
    good bill that creates a 3-year window for American families to
    refinance their homes without paying taxes on any debt forgiveness they
    receive. The Tax Code created disincentives for people to refinance
    their homes, and we took care of that for a 3-year period. And they need
    to move forward with reforms on Fannie Mae and Freddie Mac. They need to
    continue to modernize the FHA, as well as allow State housing agencies
    to issue tax-free bonds to homeowners to refinance their mortgages.
        Congress can also take other steps to help us during a period of
    uncertainty, and these are uncertain times. A major source of
    uncertainty is that the tax relief we passed in 2001 and 2003 is set to
    expire. If Congress doesn't act, 116 million American households will
    see their taxes rise by an average of $1,800. If Congress doesn't act,
    capital gains and dividends are going to be taxed at a higher rate. If
    Congress doesn't make the tax relief permanent, they will create
    additional uncertainty during uncertain times.
        A lot of folks are waiting to see what Congress intends to do. One
    thing it's certain that Congress will do is waste some of your money. So
    I've challenged Members of Congress to cut the number of--cost of
    earmarks in half. I issued an Executive order that directs Federal
    agencies to ignore any future earmark that is not voted on by the
    Congress. In other words, Congress has got this habit of just sticking
    these deals into bills without a vote; no transparency, no light of day,
    they just put them in. And by the way, this Executive order extends
    beyond my Presidency, so the next President gets to make a decision as
    to whether or not that Executive order stays in effect.
        I sent Congress a budget that meets our priorities. There is no
    greater priority than to make sure our troops in harm way have all they
    need to do their job. That has been a priority ever since I made the
    difficult commitment to put those troops in harm's way, and it should be
    a priority of any President and any Congress. And beyond that, we've
    held spending at below rates of inflation; on nonsecurity spending,
    discretionary spending, we've held the line. And that's why I can tell
    you that we've

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    submitted a budget that's in balance by 2012, without raising your
    taxes.
        If the Congress truly wants to send a message that will calm
    people's nerves, they'll adopt the budget I submitted to them and make
    it clear they're not going to run up the taxes on the working people,
    and on small businesses, and on capital gains, and on dividends, and on
    the estate tax.
        Now, one powerful force for economic growth that is under--is being
    questioned right now in Washington is whether or not this country is
    confident enough to open up markets overseas, whether or not we believe
    in trade. I believe strongly it's in our Nation's interest to open up
    markets for U.S. goods and services. I believe strongly that NAFTA has
    been positive for the United States of America, like it's been positive
    for our trading partners in Mexico and Canada. I believe it is dangerous
    for this country to become isolationist and protectionist. I believe it
    shows a lack of confidence in our capacity to compete. And I know it
    would harm our economic future if we allow the--those who believe that
    walling off America from trade to have their way in Congress.
        And so I made it clear that we expect for Congress to move forward
    on the Colombia free trade agreement. And this is an important
    agreement. It's important for our national security interests, and it's
    important for our economic interests. Most Americans don't understand
    that most goods and services from Colombia come into the United States
    duty free; most of our goods and services are taxed at about a 35-
    percent rate heading into Colombia. Doesn't it make sense to have our
    goods and services treated like those from Colombia? I think it does. I
    think our farmers and ranchers and small-business owners must understand
    that with the Government finding new markets for them, it'll help them
    prosper.
        But if Congress were to reject the Colombia free trade agreement, it
    would also send a terrible signal in our own neighborhood. It would
    bolster the voices of false populism. It would say to young democracies:
    America's word can't be trusted. It would be devastating for our
    national security interests if this United States Congress turns its
    back on Colombia and a free trade agreement with Colombia.
        I intend to work the issue hard. I'm going to speak my mind on the
    issue because I feel strongly about it. And then once they pass the
    Colombia, they can pass Panama and South Korea as well.
        Let me talk about another aspect of keeping markets open. A
    confident nation accepts capital from overseas. We can protect our
    people against investments that jeopardize our national security, but it
    makes no sense to deny capital, including sovereign wealth funds, from
    access to the U.S. markets. It's our money to begin with. [Laughter] It
    seems like we ought to let it back.
        So there's some of the things that are on my mind, and I appreciate
    you letting me get a chance to come by to speak to you. I'm--you know, I
    guess the best to describe Government policy is like a person trying to
    drive a car on a rough patch. If you ever get stuck in a situation like
    that, you know full well it's important not to overcorrect, because when
    you overcorrect, you end up in the ditch. And so it's important to be
    steady and to keep your eyes on the horizon.
        We're going to deal with the issues as we see them. We're not afraid
    to make decisions. This administration is not afraid to act. We saw a
    problem coming, and we acted quickly with the help of Democrats and
    Republicans in the Congress. We're not afraid to take on issues. But we
    will do so in a way that respects the ingenuity of the American people,
    that bolsters the entrepreneurial spirit, and that ensures when we make
    it through this rough patch, our driving is going to be more smooth.

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        Thank you, Glenn, for giving me a
    chance to come. And I'll answer some questions.
        Chairman of the Economic Club of New York R. Glenn Hubbard. Thank you very much, Mr. President.
        As is the Club's tradition, we do have two questioners: On my left,
    Gail Fosler, the president and chief economist of the Conference Board;
    on my right, literally and metaphorically, Paul Gigot--[laughter]--the
    editorial page editor of the Wall Street Journal.
        Gail, the first question for the President is yours.
        Gail Fosler. Thank you, very much.
        The President. Who picked Gigot? I mean,
    why does he--[laughter]. All right. Excuse me. [Laughter]
        Ms. Fosler. I'm glad you don't know me,
    Mr. President.
        The President. Yeah, well--[laughter]. I'd be more polite, trust me.
    [Laughter] My mother might be watching.
    [Laughter]

    Education/Trade/U.S. Foreign Policy

        Ms. Fosler. I would like to probe your
    thoughts on trade. You raised trade in your speech very passionately.
    And the Conference Board is made up of 2,000 businesses around the
    world; about a third of them are outside of the United States. And they
    look at the move toward protectionism in the United States with great
    alarm, even the shift in the Republican Party toward protectionism. And
    you mention that a confident nation opens its borders, and there does
    seem to be a lack of confidence in this country. And I wonder if you
    would give us a diagnosis of why we find ourselves in the situation we
    do today?
        The President. First of all, a lot of folks are worried about their
    neighbors losing work. In other words, they fear jobs moving overseas.
    And the best way to address that is to recognize that sometimes people
    lose work because of trade. And when that happens, the best way to deal
    with it is to provide educational opportunities so somebody can get the
    skills necessary to fill the higher paying jobs here in the United
    States.
        And I think, for example, of what happened to the textile industry
    in North Carolina. And stories like these really do affect how people
    think about trade. You know, some companies because of mismanagement,
    some companies because of trade couldn't survive. And it created a
    wholesale displacement of workers throughout North Carolina. And what
    the State of North Carolina did was, they wisely used their community
    college system to be able to fit needs and skills.
        In other words, a community college system--the interesting thing
    about it, it's probably the most market-driven education system in the
    United States. Unlike some higher education institutions that are either
    unwilling or sometimes incapable of adjusting curriculum, the community
    college system is capable of doing that.
        And North Carolina recognized they had a great opportunity to become
    a magnet for the health care industry. And a lot of their textile
    workers--with Government help, called trade adjustment assistance--went
    to community colleges to gain new skills. And it turns out that when you
    analyze what happened, just the added value, just kind of the increase
    in productivity and the relevancy of the job training, made the wages
    higher for those than they were in the textile industry. There's a
    classic example of how to respond, rather than throwing up trade
    barriers.
        Secondly, a lot of people don't understand this fact: that by having
    our markets open, it's good for consumers. The more consumers get to
    choose, the more choice there is on the shelves, the less likely it is
    there will be inflation. And one of the great things about open markets
    is that markets respond to the collective wisdom of consumers. And so
    therefore, it makes sense to have more choice, more opportunities. And
    yet when you read ``made from another country'' on the shelves of our

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    stores, people automatically assume that jobs are fragile. And so we've
    got to do a better job of educating people about the benefits of trade.
        Third, it's--sometimes, when times are tough, it's easy to--it's
    much easier to find a--somebody else to blame. And sometimes that
    somebody else that's easier to blame is somebody in a distant land.
        And so those are some of the fact--and plus it's easy politics. It's
    easy to go around and hammer away on trade. It's--and I guess if you're
    the kind of person that followed polls and focus groups, that's what
    your tendency to be. I'm the kind of person who doesn't give a darn
    about polls and focus groups, and I do what I think is right. And what
    is right is making sure that--[applause]. And sometimes if you're going
    to lead this country, you have to stand in the face of what appears to
    be a political headwind.
        So those are some of the dynamics that makes it hard. And I'm
    troubled by isolationism and protectionism. As a matter of fact, I
    dedicated part of my State of the Union Address a couple of years ago to
    this very theme. And what concerns me is, is that the United States of
    America will become fatigued when it comes to fighting off tyrants, or
    say it's too hard to spread liberty, or use the excuse that just because
    freedom hadn't flourished in parts of the world, therefore it's not
    worth trying. And that, as a result, we kind of retrench and lose
    confidence in our--the values that have made us a great nation in the
    first place.
        But these aren't American values; they're universal values. And the
    danger of getting tired during this world is any retreat by the
    America--by America was going to be to the benefit of those who want to
    do us harm. Now, I understand that since September the 11th, the great
    tendency is to say we're no longer in danger. Well, that's false; that's
    false hope. It's either disingenuous or naive, and either one of those
    attitudes is unrealistic.
        And the biggest job we've got is to protect the American people from
    harm. I don't want to get in another issue, but that's why we better
    figure out what the enemy is saying on their telephones, if we want to
    protect you. Notice how I've deftly taken a trade issue and working in
    all my other issues. [Laughter]
        But I'm serious about this business about America retreating. And
    I've got great faith in the transformative power of liberty, and that's
    what I believe is going to happen in the Middle East. And I understand
    it undermines the argument of the stability-ites, people who say, you
    just got to worry about stability. And I'm saying, we better worry about
    the conditions that caused 19 kids to kill us in the first place.
        And the best way to deal with hopelessness is to fight disease, like
    we're doing in Africa, and fight forms of government that suppress
    people's rights, like we're doing around the world. And a retreat from
    that attitude is going to make America less secure and the world more
    dangerous, just like a loss of confidence in trade.
        And yet the two run side by side, isolationism and protectionism. I
    might throw another ``ism,'' and that's nativism. And that's what
    happened throughout our history. And probably the most grim reminder of
    what can happen to America during periods of isolationism and
    protectionism is what happened in the late--in the thirties, when we had
    this America first policy and Smoot-Hawley. And look where it got us.
        And so I guess to answer your question: There needs to be political
    courage, in the face of what may appear to be a difficult headwind, in
    order to speak clearly about the effects of retreat and the benefits of
    trade. And so I appreciate you giving me a chance to opine. [Laughter]
        Mr. Hubbard. Thank you, Mr. President.
    The second and final----
        The President. Never bashful, never short of opinions. Okay, go
    ahead. [Laughter] Just like my mother.
    [Laughter]

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        Mr. Hubbard. The second and final
    question for the President is from Paul Gigot.

    Monetary Policy/Energy

        Paul Gigot. Welcome to New York, Mr.
    President. And I want to ask you about something you didn't--an issue
    you didn't address, which is prices.
        The President. Which is what?
        Mr. Gigot. Prices. Gasoline is selling for
    $4 a gallon in some parts of the country, but food prices are also
    rising very fast: grain prices, meat prices, health care prices. And the
    dollar is weak around the world, hitting a record low this week against
    the Euro. The price of gold is now about $1,000 an ounce. Many observers
    say all of this means that we have an inflation problem. Do you agree
    with them, and what can be done about it?
        The President. I agree that the Fed needs to be independent and make
    considered judgments and balance growth versus inflation. And let me
    address some of those issues one by one.
        We believe in a strong dollar. I recognize economies go up and down,
    but it's important for us to put policy in place that sends a signal
    that our economy is going to be strong and open for business, which
    will--you know, which supports the strong dollar policy, such as not
    doing something foolish during this economic period that will cause--
    make it harder to grow; such as rejecting--shutting down capital from
    coming into this country; such as announcing that--or articulating the
    belief that making the tax cuts permanent takes uncertainty out of the
    system.
        Energy, our energy policy has not been very wise. You can't build a
    refinery in the United States; you can't expand a refinery in the United
    States. The Congress believes we shouldn't be drilling for oil and gas
    in a productive part of our country like ANWR because it will destroy
    the environment, which, in fact, it won't. Technology is such that will
    enable us to find more oil and gas. And so as a result of us not having,
    you know, been robust in exploring for oil and gas at home, we're
    dependent on other countries. That creates an economics issue,
    obviously, and it creates a national security issue.
        And, look, I'm very--I'm an alternatives fuel guy; I believe that's
    important. As a matter of fact, we've expanded--mightily expanded the
    use of ethanol--a slight consequence if you rely upon corn to grow your
    hogs. But nevertheless, it's a--it is a policy that basically says that
    we got to diversify. But diversification does not happen overnight. You
    know, I firmly believe people in New York City are going to be driving
    automobiles on battery relatively quickly. And it's not going to be like
    a golf cart, it'll be a regular-sized vehicle that you'll be driving in.
    [Laughter] And I think it's coming. I think this technology is on its
    way.
        But there's a transition period, and we, frankly, have got policies
    that make it harder for us to become less dependent on oil. You talk
    about the price of oil--yeah, it's high. It's high because demand is
    greater than supply, is why it's high. It's high because there's new
    factors in demand on the international market, namely China and India.
    It's also high because some nations have not done a very good job of
    maintaining their oil reserves, some of it because of bureaucracy, some
    of it because of state-owned enterprise. And it's a difficult period for
    our folks at the pump, and there's no quick fix.
        You know, when I was overseas in the Middle East, people said, ``Did
    you talk to the King of Saudi about oil prices?'' Of course I did. I reminded him two
    things: One, you better be careful about affecting markets--reminding
    him that oil is fungible; even though we get most of our oil, by the
    way, from Canada and Mexico, oil is fungible. And secondly, the higher
    the price of oil, the more capital is going to come into alternative
    sources of energy.

    [[Page 380]]

    And so we've got a plan that calls for diversification, but it's--our
    energy policy hasn't been very wise up to now.
        Anyway, I'm going to dodge the rest of your question. [Laughter]
    Thank you for your time.

    Note: The President spoke at 11:20 a.m. at the Hilton New York. In his
    remarks, he referred to King Abdallah bin Abd al-Aziz Al Saud of Saudi
    Arabia. The Office of the Press Secretary also released a Spanish
    language transcript of these remarks.