[Weekly Compilation of Presidential Documents Volume 40, Number 8 (Monday, February 23, 2004)]
[Pages 254-259]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Remarks Following a Discussion on the National Economy

February 19, 2004

    The President. Thanks for coming. I want to thank the folks who have 
joined me here on the stage. We've just had a chat about their personal 
circumstances, and I'll share some of their stories with you.
    We were talking about our economy and the hopes of families, how to 
keep the entrepreneurial spirit strong in America. I hope I conveyed to 
them my sense of optimism about the future of the country. After all, 
I've seen firsthand what we've been through, and we've been through a 
lot. And in spite of that, our economy is strong, and it's getting 
stronger. There's still room for improvement.
    Let me walk you through right quick of what these families and 
small-business owners and large business and CEOs have dealt with, what 
the country has dealt with in the last 3 years. First, the economy began 
to slow down in March of 2000. The stock market started to go down. That 
affected people's savings. And if you watch your savings accounts go 
down, it tends to have a negative effect on people's attitudes.
    Then the country got into--went into a recession, early of 2001. 
Recession means that people's incomes, at the employer level, are going 
down, basically, relative to costs, people are getting laid off. It's a 
slowdown. It's a time of--it's a tough time for risktakers. It's a very 
tough time for workers. A lot of industries felt like they needed to lay 
off people, which created uncertainty.
    And then on September the 11th, the country got attacked, a vicious 
attack by brutal killers that affected the Nation's psychology. It 
affected how I view the world, by the way. When we see gathering 
threats, the country now must take them very seriously. We can't let 
threats become imminent. We can't trust madmen with the security of the 
American people.
    September the 11th attacks hurt the economy. We began to recover. I 
mean, this is a strong nation. The entrepreneurial spirit is really 
strong. You might remember the attitude after September the 11th: No 
terrorist is going to hold this country down or hold us back. I saw that 
spirit firsthand when I

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went to New York shortly after the attacks. It was just such an 
uplifting experience in the midst of tragedy and horror, to see the will 
of the American people.
    Then the economy got affected because some of our citizens forgot to 
tell the truth. They assumed positions of responsibility and behaved 
irresponsibly. Corporate CEOs didn't tell the truth to employees or 
shareholders, and that affected the economy. Capitalism is based upon 
trust, open books, honest accounting. And a lot of citizens were 
beginning to wonder what went on. Fortunately, we passed tough laws, and 
those who betrayed the trust are now paying the price for having done 
so. There needs to be serious consequences for people who are--don't 
tell the truth.
    And then, as you know, I made the very difficult decision to deal 
with Saddam Hussein. It's the right decision. The country is more 
secure. The Iraqi people are free from the clutches of tyranny.
    The march to war affected our economy. When you turn on your TV 
screen in the summer of 2002 and it says, ``America's March to War,'' 
that's not very conducive for investment. Marching for war doesn't 
instill a lot of confidence in the future. It creates uncertainty. 
People who employ people don't like uncertainty. We need certainty in 
order to have a--to have risktakers feel comfortable about taking risk.
    We've been through a lot. But we acted here in Washington. I led. I 
convinced the Congress to cut the taxes on the people, because I felt 
like, during this time of uncertainty and economic slowdown, if people 
had more of their own money, they would demand an additional good or a 
service. And in our marketplace, when that happens, a producer will 
produce that good or a service. And when that happens, the economy gets 
moving; somebody is more likely to find work. And that's what happened.
    We cut the taxes on everybody who pays taxes. I don't think it makes 
sense for tax-cutters to say, ``Okay, you win, and you lose.'' My 
attitude was, if you pay taxes, you ought to get relief. And we cut all 
taxes, and one of the important things about cutting all income taxes is 
we really affect the capacity of small businesses to grow, because many 
small businesses pay tax at the individual income tax level. A sole 
proprietor pays tax at the individual income tax. The Subchapter S pays 
tax at the individual income tax level. So when you cut all rates, 
you're not only affecting the purchasing power of families and 
individuals; you're affecting small-business capital formation. And it 
helped, and it worked. And at the same time, I asked Congress to 
increase the limit for deductibility of $100,000 from $25,000 to 
encourage capital investment in the small-business sector.
    And why did I focus on small businesses, or why did the Congress 
focus with me on small business? And the answer is, most new jobs are 
created by small businesses in America. Some estimates say up to--and if 
you're interested in job creation, why not focus on the job creators? So 
the tax relief was passed not only to help individuals but to help our 
small-business sector. We also increased the child credit to $1,000. We 
reduced the marriage penalty. I like to remind people that the Tax Code 
ought to encourage marriage, not discourage marriage. [Laughter] Seems 
like we want people to stay married, and the Tax Code ought to encourage 
that.
    We helped on dividend and capital gains to encourage investment and 
particularly to help the elderly. We put the death tax on its way to 
extinction. I'm going to talk a little bit about that in regards to one 
of our guests, but the death tax is a bad tax--bad tax.
    Think about all the people who are starting their own businesses, 
who are working hard to realize the American Dream. They're preparing 
their estates to leave something to their--whoever they chose to, a son 
or a daughter. And it becomes awfully difficult to do so because the 
Government is taxing assets twice. They tax you when you earn. They tax 
you when you die, and it's a bad tax. It's bad for farmers. It's bad for 
ranchers. It is particularly bad for small-business owners. Fortunately, 
the Congress heard the call. We've still got a little issue to make sure 
it stays gone forever that I'll talk about here in a minute.
    The tax relief we passed--111 million * taxpayers this year will 
save $1,586 * off their

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taxes. That's a lot of money that will be in circulation as a result of 
individual decisionmaking. See, there's a fundamental debate here in 
Washington. It's who do you want spending money? Look, we need money 
here. There's plenty of money in Washington. We need money to fight the 
war and win the war on terror. We need money to protect the homeland. We 
need money to meet priorities, but I felt it was important to let people 
spend their own money. I think the collective decisionmaking of the 
American people with their own money is wiser than the decisionmaking of 
the Federal Government.
    * White House correction.
    Twenty-five million small-business owners will receive an average 
cut of $3,000 this year. That's important. A lot of companies being 
started up in garages--it's kind of the American Dream, isn't it? I 
remember when my friend Michael Dell started his computer company in a 
garage. [Laughter] Who knows where the next Michael Dell will be, but 
perhaps this $3,000 will help that person achieve his or her dream about 
building their own company.
    Nearly 5 million taxpayers will be off the rolls as a result of the 
tax relief this year. What's interesting is that the tax relief lowered 
rates, but the amount withheld from the paycheck was not adjusted until 
summertime last year. And so the Treasury Department estimates Americans 
will receive an additional $50 billion in higher refunds and lower tax 
payments when they file their taxes in April--April 15th of this year. 
That's positive news, to help keep this momentum, this economic 
momentum, alive and well.
    Tax relief is working. Factory orders are up. Housing is strong. 
Unemployment rate is down from 6.3 percent last June to 5.6 percent in 
January. Things are positive.
    But there's more that Congress should do to keep the momentum alive. 
One, we need an energy plan. If you're a manufacturer, you need reliable 
sources of energy. I've talked to a lot of small manufacturers who 
explained what it means to have their power disrupted as a result of an 
antiquated electricity grid. Unreliable supplies of energy creates 
uncertainty for price. There needs to be certainty. We need an energy 
plan. Congress needs to get me a bill. They need to stop talking. They 
need to get a bill to my desk.
    We need tort reform. Too many small businesses are--like you, I'm 
concerned about the cost of providing decent medical care to your 
employees and yourselves. Medical costs are up. Some practical things we 
can do--health savings accounts are a very practical way for small-
business owners and employees to deal with increasing costs. I urge you 
to look at those.
    Associated health care plans are vital for small-business owners and 
small-business plans. Medical liability reform at the national level 
will help control health care costs. It's stuck in the Senate, of 
course. There's some special interests here in Washington that simply 
are not interested in seeing reasonable medical liability law passed. 
There are very powerful interests here in Washington that prevent the 
kinds of laws to pass that will help control costs. And I'm going to 
continue working, and I think it's an important issue--I know it's an 
important issue for small-business owners and employees.
    We need to continue to open up markets. Our markets are relatively 
open compared to the rest of the world, and if our markets are open, 
let's open up other markets so people can sell. We're good at things. We 
ought to be selling them to other people around the world. There needs 
to be free trade, and there needs to be a level playing field when we 
trade. There needs to be less regulation in Washington, DC.
    But one thing's for certain, is we need to make the tax cuts 
permanent. Interestingly enough--I don't know if you're aware of this, 
but all the tax cuts we passed are set to expire. But the Congress 
giveth; the Congress taketh away. [Laughter]
    And these tax relief will be--will expire on an irregular basis. In 
other words, they don't all expire at the same time. For example, this 
coming year, the child credit--the tax relief we put in the child credit 
goes away. The penalty in the marriage penalty gets worse. And the 
expanded 10 percent bracket will go away. See, if Congress doesn't do 
anything, there will be tax increases on the American people. That's 
what that means. When you hear, ``We're going to repeal the Bush tax 
cuts,'' that means tax increases.

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That's what that is. ``I'm going to raise your taxes,'' is what they're 
saying.
    There's a philosophical difference here. Who would you rather 
spending your money, you or the Federal Government? And that's the 
debate I look forward to taking across the country.
    Raising taxes at this point will hurt our economy. When the economy 
is coming out of recession, it's beginning to grow. It makes no sense to 
raise the taxes on the people. If the Congress doesn't act, the tax 
relief would be an increase of about $28 billion on the American people 
for the year 2005. That's $28 billion going into the U.S. Treasury out 
of your pockets--be reducing demand by that amount, be taking capital 
out of small-business coffers if that happens.
    That's part of the debate. ``Let's raise your taxes so we have more 
money to spend on programs in Washington, DC.'' That's the debate, and I 
believe strongly that the tax relief needs to be permanent. You see--
listen to this story, if you're a family of four earning $40,000, when 
those provisions expire in 2005, it'll be a $915 tax increase for that 
family. That's a lot of money for a family making $40,000. The small-
business deductions expire in '06. These have been really effective. 
Congress needs to make them permanent.
    And so I talked to some folks up here today about what tax relief 
has meant to them. And maybe the best way I can make my point to the 
tax-raisers and spenders here in Washington is to listen to the stories 
of people like Amy Cofer. She is a mom of two, soon to be a mom of 
three. Amy is right there. Joe is a police officer. Joe is out there 
dedicating his life to the protection of our fellow citizens. They saved 
$1,700 in taxes in '03.
    That probably doesn't sound like a lot when you're up here, when 
you're dealing with a lot of zeroes behind the numbers. It's a lot for 
that family, though. She talked about paying her son's preschool tuition 
with that. She made a choice to send her son to a school that she 
thought was good. That's a whole other subject, by the way--parents 
being --[laughter]--but it helped pay for her son's tuition. The money 
meant something to them. It made life easier by being--that money, to 
help pay for the preschool tuition. It took pressure off of their bill 
paying. If Congress doesn't act, there will be a $1,000 tax increase on 
this family. It's a new family, a new child coming, doesn't make sense 
to have this family pay a thousand dollars. See, Congress has got to 
make the tax cuts permanent. It helps families like the Cofers.
    Katie Powers is here as well. Katie and--there she is--Katie and 
David have two children, Nicholas and Allison. They had tax relief of 
$3,500. The tax burden will go up by $2,000 if they doesn't make the tax 
cuts permanent. When you hear people say, ``Let's just let the tax cuts 
expire,'' that's a tax increase. It's a code word for, ``I'm raising 
your taxes to increase the amount of money we have to spend here in 
Washington on new programs, on programs that meet a particular political 
desire of the appropriators.'' That's what they're telling you.
    Shemetra Washington--Shemetra is a--started a new job this month, by 
the way, at New Technology Management in Virginia. [Laughter]
    Audience member. Yea! [Laughter]
    The President. About time you hired her. [Laughter] She's got the 
toughest job in America. She's a single mom. She's raising Raegan and 
Lauryn. She is going to grad school, a human resource person who's going 
to get a master's degree. She's been taking--she's working, raising her 
family, and going to grad school to upgrade her skills so she can make 
more money. She got a tax cut of $1,700 in 2003. She said it went to 
help pay for her education, helped her upgrade her skills so she becomes 
a more productive person, which means she'll get better pay as time goes 
on.
    Again, if they don't make the tax cuts permanent, she has to pay 
$1,000 more in taxes. I don't think we want Shemetra paying $1,000 more 
in taxes--[laughter]--when she's struggling with her family, raising 
that family.
    See, there's a human dimension to all the talk about numbers, and 
it's important for the people here in Washington to think about the 
people whose lives will be affected if they don't act--they don't act--
they don't act to make it easier for families to raise their children 
and to realize their dreams.
    Guy Donaldson is with us. He's got an interesting story. He is a 
fruit orchard man out

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of Pennsylvania, apples, cherries, and peaches. [Laughter] I was 
lobbying for some of them to be sent over here for breakfast. [Laughter] 
See, he is--he, by the way, is a partnership, so his entity is taxed at 
the individual income tax rate level. But he's more concerned about the 
death tax. His dream is to keep this farm in his family. It's been in 
his family now for the fourth generation. That's part of his dream. 
That's what he has decided that he would like to do with his assets, and 
he wants to leave the orchard to his kids.
    I said, ``Are they here today?'' He said, ``No, they're pruning 
trees.'' [Laughter] But the problem is, is that when you're asset-heavy 
in your small business or on your farm, it's really hard to leave it to 
your--the death tax makes it nearly impossible to leave to a family 
without having to mortgage the future so heavily or to sell off parts of 
the farm in order to pay the Government again.
    The death tax is an unfair tax to farmers and ranchers and small-
business people. The Congress put it on its way to extinction. However, 
it comes back to life in 2011. It's hard to explain the rules of the 
Senate that allow that to happen, but it does. It just doesn't make 
sense. It doesn't make sense, as Guy was talking about, for him to have 
such uncertainty about an asset he loves and uncertainty about his 
family. And yet because Congress won't act, there is uncertainty. And 
that's not right, and it's not fair. They need to put the stake in the 
heart of the death tax forever, and get rid of it.
    Rex Hammock is with us--last stander--from Nashville, Tennessee. He 
started his own company. I love the entrepreneurial spirit. Don't you 
love to be in a country where people feel comfortable about--where 
people feel comfortable and free to start their own business? And by the 
way, Government's role is to create an environment where the 
entrepreneurial spirit is strong, where people feel free and comfortable 
doing that.
    And he did, and he's got what is called a Subchapter S corporation. 
Many of you know what that means, but for those who don't, it means that 
you get taxed at the individual income tax level. So when we cut the 
rates on everybody, not just a few, it helped Rex, made him a little 
more comfortable in his ability to plan.
    But more importantly, by raising the level of deductibility for 
small businesses to $100,000, it provided incentive for him to invest. 
And so this year, he told me, he's going to spend $100,000 on computers, 
scanners, and software to help his employees in his publishing business 
become more productive. It means they're more competitive. When you're 
more competitive, you've got a more productive workforce, and when 
you're competitive, it means you're more likely to stay in business. And 
it means you're more likely--your workforce is more likely to have 
steady work. And if you really get productive and can compete, it means 
you add employees. And he added two last year, and he plans on adding 
five this year.
    Now, there's a lot of Rexes in the country, and you put two on here 
and five on there, and all of a sudden, there's a lot of people 
beginning to find jobs. And that's important. That's how jobs grow, 
through the individual decisionmaking of thousands of entrepreneurs and 
employers around the country.
    He wants to invest in '05 and '06, same amounts. But as I told you, 
this aspect of the tax relief package will expire unless Congress acts. 
He said it's really hard--and he's right, by the way--really hard to be 
a planner with--in the face of tax uncertainty. How can you plan if 
you're not certain about what the Tax Code looks like? And there are 
entrepreneurs all over the country who are uncertain about what the Tax 
Code will look like after '06 because the tax relief plan has got 
uncertainties built into it. And an important aspect of the tax relief 
plan is the deductibility for small businesses. Then it goes away. 
Congress needs to make all aspects of the Tax Code permanent so people 
can plan their businesses and their lives.
    And so it's time for them to step up on Capitol Hill. I'm ready to 
continue to lead on tax relief. They need to follow. They need to listen 
to the voices, not just of me but of the people here on the stage. It's 
a time for action. It's a time to make the tax relief permanent. It's a 
time to listen to the voices of the hard-working families in America. 
It's a time to listen to the entrepreneurs of this country. It's a time 
to keep this recovery

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strong by doing what's right with the Tax Code.
    I want to thank you all for coming today to give me a chance to 
spell out a practical way to make life a more hopeful place for America 
and small-business owners. Congress needs to act.
    Thanks for coming.

Note: The President spoke at 3:09 p.m. in Room 450 in the Dwight D. 
Eisenhower Executive Office Building. In his remarks, he referred to 
former President Saddam Hussein of Iraq; Amy Cofer, homemaker, and her 
husband, Joe, U.S. Supreme Court police officer; Katie Powers, senior 
staff accountant, and Shemetra Washington, human resource administrator, 
New Technology Management, Inc.; Guy Donaldson, fruit grower, Orrtanna, 
PA; and Rex Hammock, president, Hammock Publishing.