[Weekly Compilation of Presidential Documents Volume 42, Number 28 (Monday, July 17, 2006)]
[Pages 1315-1319]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Remarks on the Office of Management and Budget Mid-Session Review

July 11, 2006

    The President. Thank you. Thanks for coming. The White House is the 
people's house, and I'm here to talk about the people's money. We're 
glad you're here. As you know, every year, my administration produces a 
budget that lays out our priorities and our goals. And every summer, the 
Office of Management and Budget releases a report called the Mid-Session 
Review that tells the American people how much progress we're making 
towards meeting our fiscal goals.
    Today OMB Director Rob Portman released the latest review. I'm 
pleased to report that it's got some good news for the American 
taxpayer. This economy is growing; Federal taxes are rising; and we're 
cutting the Federal deficit faster than we expected.
    This good news is no accident. It's the result of the hard work of 
the American people and sound policies in Washington, DC. This morning 
I'm going to discuss the way forward; I'll explain why our progrowth 
policies are vital to our efforts to reduce the Federal deficit, what my 
administration is doing to work with Congress to eliminate wasteful 
spending, and why we need to confront the unsustainable growth in 
entitlement spending.
    I appreciate our new Secretary of the Treasury, Hank Paulson, 
joining us today. Mr. Secretary, you've been on the job one day, and 
you've got a pretty strong record. I'm proud that Rob Portman is here, 
and he brought his lad with him. [Laughter] I thank the Senate President 
pro tem, Senator Ted Stevens, for joining us. Senator, thanks for 
coming. I'm proud you're here. Thank you for your leadership. I also 
want to thank David Dreier, Conrad Burns--Senator Conrad Burns, excuse 
me----
    Senator Burns. That's okay. [Laughter]

[[Page 1316]]

    The President. ----Congressman Joe Knollenberg, Ander Crenshaw, 
Marilyn Musgrave, thank you all for coming. Pence is with us; thanks for 
coming. I'm proud you're here, Mike. Thank you all for taking time to be 
here to hear this good news. You're responsible, in many ways, for 
creating the conditions for the good news we're about to talk about.
    When I came to Washington, taxes were too high and the economy was 
headed into a recession. Some said the answer was to centralize power in 
Washington and let the politicians make the decisions about what to do 
with the people's money. That was one point of view.
    We had a different point of view. I believe that the economy 
prospers when we trust the American people to make their own decisions 
about how to save, spend, and invest. So starting in 2001, my 
administration worked with the United States Congress, and we delivered 
the largest tax relief since Ronald Reagan was in the White House. We 
cut rates for everyone who pays income taxes. We reduced the marriage 
penalty; we doubled the child tax credit; and we cut the death tax. We 
cut the tax paid by most small businesses, because we understand that 
most new jobs are created by small businesses. And we encouraged 
economic expansion by cutting taxes on dividends and capital gains.
    Together, these tax cuts left nearly $1.1 trillion in the hands of 
American workers and families and small-business owners, and they used 
this money to help fuel an economic resurgence that's now in its 18th 
straight quarter of growth. The tax cuts we passed work.
    Last year, our economy grew at 3.5 percent, and in the first quarter 
of this year, it grew at an annual rate of 5.6 percent. Over the past 3 
years, our economy has grown by more than $1.3 trillion, an amount that 
is larger than the size of the entire Canadian or South Korean economy.
    Since August 2003, the U.S. economy has added more than 5.4 million 
new jobs. Our unemployment rate is down to 4.6 percent. People are 
working. Behind these numbers, there are American workers who start each 
day with hope because they have a job to help them build a better life. 
Behind these numbers, there are more families with more money in the 
bank for college tuition or a downpayment on their homes. Behind these 
numbers are small-business owners who are hiring more workers, expanding 
their businesses, and realizing the great promise of our country.
    Our job in Washington is to keep this expansion growing--going and 
to promote progrowth policies that let Americans keep more of their 
hard-earned paychecks and aid us in reducing our fiscal deficit.
    In order to reduce the deficit, you got to set priorities. And in 
working with Congress, we've set clear priorities. And the number-one 
priority of this administration and this Congress is to make sure men 
and women who are defending the security of the United States and 
helping to spread peace through the spread of liberty get all the help 
they need from our Government. We will always fund the troops in harm's 
way.
    In an age when terrorists have attacked our country and want to hurt 
us again, we will do everything in our power to protect the American 
homeland. Those are the clear priorities of this administration, and the 
clear priorities of the United States Congress.
    Fighting a war on terror and defending the homeland imposes great 
costs, and those costs have helped create budget deficits. Our 
responsibility is to win this war on terror and to keep the economy 
growing. And those are the kind of policies we have in place. Some in 
Washington say we had to choose between cutting taxes and cutting the 
deficit. You might remember those debates. You endured that rhetoric 
hour after hour on the floor of the Senate and the House. Today's 
numbers show that that was a false choice. The economic growth fueled by 
tax relief has helped send our tax revenues soaring. That's what's 
happened.
    When the economy grows, businesses grow; people earn more money; 
profits are higher; and they pay additional taxes on the new income. In 
2005, tax revenues grew by $274 billion, or 14.5 percent; it's the 
largest increase in 24 years. Based on tax collections to date, the 
Treasury projects that tax revenues for this year will grow by $246 
billion, or an 11 percent increase. The increase in

[[Page 1317]]

tax revenues is much better than we had projected, and it's helping us 
cut the budget deficit.
    One of the most important measures of our success in cutting the 
deficit is the size of the deficit in relation to the size of our 
economy. Think of it like a mortgage. When you take out a home loan, the 
most important measure is not how much you borrow; it is how much you 
borrow compared to how much you earn. If your income goes up, your 
mortgage takes up less of your family's budget. Same is true of our 
national economy. When the economy expands, our Nation's income goes up 
and the burden of the deficit shrinks. And that's what's happening 
today. Thanks to economic growth and the rise in tax revenues, this year 
the deficit will shrink to 2.3 percent of GDP. That's about the same as 
the average over the past 40 years.
    Here are some hard numbers: Our regional projection for this year's 
budget deficit was $423 billion. That was a projection. That's what we 
thought was going to happen. That's what we sent up to the Congress: 
``Here's what we think.'' Today's report from OMB tells us that this 
year's deficit will actually come in at about $296 billion.
    That's what happens when you implement progrowth economic policies. 
We faced difficult economic times. We cut the taxes on the American 
people because we strongly believe that the American people should lead 
us out of recession. Our small businesses flourished; people invested; 
tax revenue is up; and we're way ahead of cutting the deficit--Federal 
deficit in half by 2009.
    As a matter of fact, we're a year ahead of fulfilling a pledge that 
I told the Congress and the American people. I said to the American 
people, give this plan a chance to work. We worked with Congress to 
implement this plan. I said, we can cut the Federal deficit in half by 
2008--or 2009. We're now a full year ahead of schedule. Our policies are 
working, and I thank the Members of Congress for standing with us.
    See, we cannot depend on just a growing economy, though, to keep 
cutting the deficit. That's just one part of the equation. We also got 
to cut out wasteful spending. See, it's okay to create revenue growth; 
that's good. But if we spend all that revenue growth on wasteful 
programs, it's not going to help us meet our objectives. And so the 
second half of the equation is for this administration to continue 
working with the Congress to be wise about how we spend the people's 
money.
    Every year, Congress votes to fund the day-to-day spending of the 
Federal Government. That's called discretionary spending. In other 
words, the Congress decides how much to spend on these types of programs 
on an annual basis. Every year since I took office, we've reduced the 
growth of discretionary spending that's not related to the military or 
homeland security. I told you, our priorities are our military and 
protecting the homeland. But on other programs, we've reduced the growth 
of that discretionary spending. The last two budgets have actually cut 
this kind of spending.
    The philosophy is clear: Every American family has to set priorities 
and live within its budget, and so does the Federal Government. And I 
thank the Members of Congress for making the tough votes, setting 
priorities, and doing the hard work on behalf of the taxpayers of this 
country.
    We made good progress with the emergency spending bill that Congress 
approved in June. You might remember the debate leading up to that 
supplemental bill. And there was a good, constructive debate. And I 
weighed in. I said that we got to make sure that the emergency funding 
in the bill supported our troops and provided help to citizens that were 
hit by last year's hurricanes and to prepare for the dangers of an 
outbreak of pandemic flu.
    The onset--I also set limits that I thought were acceptable. In 
other words, we came up with our view of what would be a rational 
spending limit for this important piece of legislation. And I made it 
clear to the Congress, they sent me a bill that went over the limit, I'd 
veto it. We got good relations with Congress. People took that threat 
seriously because I meant it. Congress responded by removing nearly $15 
billion in spending that had been added to the bill. By meeting the 
limit I'd set, Congress ensured funding for vital programs and provided 
a good example of fiscal discipline.

[[Page 1318]]

    The next test is whether or not we can get a line-item veto out of 
the United States Senate. A line-item veto is an important tool for 
controlling spending. See, it will allow the President to target 
unnecessary spending that sometimes lawmakers put into large bills. 
Today, when a lawmaker loads up a good bill with wasteful spending, I 
don't have any choices. I either sign the bill with the bad spending or 
veto the whole bill that's got good spending in it. And I think it would 
be wise if we're seriously concerned about wasteful spending to enable 
the executive branch to interface effectively with the legislative 
branch to eliminate that kind of wasteful spending.
    And so we've proposed a line-item veto that the House of 
Representatives passed. Under this proposal, the President can approve 
spending that's necessary; redline spending that's not; and send back 
the wasteful, unnecessary spending to the Congress for a prompt up-or-
down vote. In other words, it's a collaborative effort between the two 
branches of Government, all aimed at making sure we can earn the trust 
of the taxpayers.
    Listen, the line-item veto works. Forty-three Governors of both 
parties have this authority, and they use it effectively to help 
restrain spending in their State budgets. I've talked to some of these 
Governors--used to be a Governor. I know what I'm talking about when it 
comes to line-item veto being an effective tool. The line-item veto 
provides a lot of advantages, and one of them is, it acts as a 
deterrent. See, when legislators think they can slip their individual 
items in a spending bill without notice, they do it.
    If they think that they're going to try to slip something in that 
gets noticed, it means they're less likely to try to do so. We want to 
make sure that the system we have here in Washington is transparent and 
above-board and fair to the people's--taxpayers' money.
    And one way to do so is to make sure that the President can work 
with the Congress through the line-item veto proposal I submitted. I 
strongly urge the United States Senate to take this matter up and pass 
it into law.
    We're dealing with the short-term deficit, but there's another 
challenge that we face. In the long run, the biggest challenge to our 
Nation's economic health is the unsustainable growth in spending for 
entitlement programs, mandatory programs such as Social Security, 
Medicare, and Medicaid. Millions of our fellow Americans rely on these 
programs for retirement and health care needs. They're important 
programs. But the spending for these programs is growing faster than 
inflation, faster than the economy, and faster than our ability to pay 
for them.
    To solve the problem, we need to cut entitlement spending. We need 
to do something about it, is what we need to do. One reason Secretary 
Paulson agreed to join this administration is because he wants to get 
something done about these entitlement programs, and I want to work with 
him.
    You know it's so much--easy just to shove these problems down the 
road. The easy fix is to say, ``Let somebody else deal with it.'' This 
administration is going to continue trying to work with Congress to deal 
with these issues. That's why I ran for office in the first place, to 
confront big problems and to solve them. That's why Henry Paulson made 
the tough decision to leave the comfort of private life to come in and 
do something good for this country. And the United States Congress needs 
to feel that same sense of obligation. The time of playing politics with 
Social Security and Medicare and Medicaid is over. We need to fix this 
for younger generations of Americans to come.
    I'm optimistic about the future of this country, because I'm 
optimistic about the--because I understand the nature of the people we 
got here. I mean, we are an entrepreneurial people. We're a hard-
working, decent group of citizens. And the role of Government is to 
foster the entrepreneurial spirit. It's to encourage people. And one way 
you do that is to keep people's taxes low, let them keep more of their 
own money.
    We've got great faith in the people's ability to spend their money 
wiser than the Federal Government can do. And our faith in the people 
has been proven by the numbers we're talking about today.
    We said we got an economic issue, and we're going to let you have 
more of your own

[[Page 1319]]

money to help us recover from recession, the stock market correction, 
and terrorist attacks and war and natural disasters. And the people 
haven't let us down, have they? This economy is strong.
    We also said, let's just be patient about solving this Federal 
deficit; we're not going to take money out of your pocket; let's grow 
our way out of it. Let's keep--let's set priorities when it comes to 
spending and keep the people's taxes low, and these revenues will catch 
up into our Treasury. And they have. And we're reducing that Federal 
deficit, through the people's hard work and the wise policies in 
Washington, DC.
    Today is a good day for the American taxpayer. Tax relief is 
working; the economy is growing; revenues are up; the deficit is down; 
and all across this great land, Americans are realizing their dreams and 
building better futures for their families.
    I want to thank you all for supporting our policies. Thank you for 
giving me a chance to come to visit with you. I thank the Members of 
Congress for doing good work. God bless you all.

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