[Weekly Compilation of Presidential Documents Volume 43, Number 5 (Monday, February 5, 2007)]
[Pages 99-106]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Remarks on the National Economy in New York City

January 31, 2007

    Thank you all very much. Thanks for coming. Please be seated. Thanks 
for being here. I'm pleased to be back in Federal Hall. You know, I 
drove in, and there stood George Washington. I like to call him George 
W. [Laughter] It's nice to be back here.
    Last week, I delivered my State of the Union. This morning I've come 
to deliver a state of the economy speech, and there's no better place to 
do it than in America's financial capital. More than two centuries ago, 
Alexander Hamilton led the U.S. Treasury Department from this building. 
Today, New York City is headquarters of global corporations; it's a 
center for capital markets; it's the home of three of the world's 
greatest stock exchanges. You have a mayor whose name is a fixture on 
trading floors across the world. [Laughter] And until I took him to 
Washington, you had Hank Paulson--who, by the way, is doing a fabulous 
job.
    As we begin this new year, America's businesses and entrepreneurs 
are creating new jobs every day. Workers are making more money. Their 
paychecks are going further. Consumers are confident; investors are 
optimistic. Just today we learned that America's economy grew at an 
annual rate of 3.5 percent in the fourth quarter of 2006. That means our 
economy grew at 3.4 percent last year, which is up from 3.1 percent in 
2005. Ladies and gentlemen: The state of our economy is strong. And with 
the hard work of the American people and the right policies

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in Washington, we're going to make it even stronger.
    Mr. Mayor, thanks for being here. I appreciate you coming. You're 
doing what people want you to do, and that is to lead this city. I 
appreciate Bill Rudin--thanks for having me, Bill. Good to see you 
again.
    I want to thank Members of the Congress who have joined us--Peter 
King, Vito Fossella, Carolyn Maloney, and Tom Reynolds. Thanks for 
flying down with me today. You want a ride back? [Laughter]
    Mr. Mayor--David Dinkins, thank you for being here. Proud you're 
here. And it's good to see my buddy, Mayor Ed Koch. Mr. Mayor, thank you 
for coming. Appreciate you being here.
    I thank the members of the Association of a Better New York who have 
joined us. I appreciate all the State and local officials who are here.
    Bill mentioned that I was here in October 2001. I recognized then 
that our economy had been hit hard, and there was great uncertainty 
about the future. It was a tough time for the country. Many people were 
out of work. By mid-December, nearly a million jobs had been lost. The 
collapse of the Twin Towers had left dangerous cracks in this building's 
foundations.
    I said that day that I was optimistic that our economy would recover 
from these attacks. But if I'd have told you we would also make the 
recession one of the shortest on record, that we'd have confronted 
corporate scandals, absorb a tripling in the price of oil, fight a 
global war, and help a whole region of our country recover from a 
hurricane, you might have been a little skeptical.
    Yet America's economy has overcome all these things. Federal Hall 
has been fully restored. It's on solid ground. And so is the New York 
economy--as the mayor mentioned, it's booming--with a bond rating at an 
alltime high and unemployment near an alltime low. Across our Nation, 
small businesses and entrepreneurs are creating millions of new jobs. 
Retail sales are up; consumer spending is strong; exports of goods and 
services have jumped by nearly 35 percent. The Dow Jones has set new 
records 26 times in the last 4 months. Productivity is strong, and 
that's translating into higher wages.
    When people across the world look at America's economy, what they 
see is low inflation, low unemployment, and the fastest growth of any 
major industrialized nation. The entrepreneurial spirit is alive and 
well in the United States. There is one undisputed leader in the world 
in terms of economy, and that's the United States of America.
    On Wall Street, you know that America's economic leadership rests on 
strong and flexible capital markets. Capital markets connect 
entrepreneurs with the investment they need to turn their ideas into new 
businesses. America's capital markets are the deepest, the broadest, and 
the most efficient in the world. Yet excessive litigation and 
overregulation threaten to make our financial markets less attractive to 
investors, especially in the face of rising competition from capital 
markets abroad. To keep America's economic leadership, America must be 
the best place in the world to invest capital and to do business.
    One important step we've taken in Washington is to pass litigation 
reform like the Class Action Fairness Act. It's important for people in 
Congress to understand that excessive lawsuits will make it hard for 
America to remain the economic leader that we want to be. Another 
important step we've taken is to strengthen our business institutions by 
passing the Sarbanes-Oxley Act in 2002. This law helped boost investor 
confidence by establishing high standards for transparency and corporate 
governance. The principles of Sarbanes-Oxley are as important today as 
when they were passed. Yet complying with certain aspects of the law, 
such as section 404, has been costly for businesses and may be 
discouraging companies from listing on our stock exchanges.
    We don't need to change the law; we need to change the way the law 
is implemented. America needs a regulatory environment that promotes 
high standards of integrity in our capital markets and encourages growth 
and innovation. And I'm pleased of the progress that Hank Paulson and 
Chairman Chris Cox are making to make sure the regulatory burden is not 
oppressive, and fair, and helps us meet a great national objective--to 
keep the

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United States the economic leader in the world.
    Our economic leadership also depends on sensible, progrowth tax 
policies. To help bring our economy out of a recession and recover from 
September the 11th, we cut taxes on the American people. We cut taxes on 
everybody who pays income taxes. We doubled the child tax credit. We 
reduced the marriage penalty. We cut taxes on small businesses. And we 
cut taxes on dividends and capital gains.
    There's a lot of political debate about these tax cuts. But here are 
some of the facts: Since we enacted major tax relief into law in 2003, 
our economy has created nearly 7.2 million new jobs; our economy has 
expanded by more than 13 percent. That expansion is roughly the size of 
the entire Canadian economy. This economic growth has led to record tax 
revenues, which has helped us cut the deficit in half 3 years ahead of 
schedule. One fact should be clear when you look at the statistics: The 
fastest way to kill a recovery would be to raise taxes on the people who 
created it. Now is not the time for the Federal Government to be raising 
taxes on the American people.
    We must ensure that the money you send to Washington is spent 
wisely. Next Monday, I'm going to submit to Congress a budget that will 
eliminate the deficit by 2012. In order to do so, we need to set 
priorities in Washington. You can't try to be all things to all people 
when it comes to spending your money if you want to keep taxes low, keep 
the economy growing, and balance the budget. And my number-one priority 
is to protect this country. And we're going to make sure our troops have 
all the equipment they need to do the job we've sent them to do and make 
sure our citizens have what it takes to defend this homeland.
    That means we've got to be careful about how we spend money in other 
areas. One thing we can do to show the American people that we're going 
to be smart about how we spend their money is to do something about 
earmarks. It's that system of appropriations where things end up being 
spent even though nobody has voted on them. And I'm going to work with 
Congress to reduce the amount of earmarks and the number of dollars 
spent by earmarks in a significant way to earn the trust of the 
taxpayers of this country, and at the same time, be wise about how we 
spend their money.
    I believe I need a line-item veto to help Congress spend money 
wisely. And so I put forth a plan that says the legislative branch and 
the executive branch will work together to eliminate wasteful and 
unnecessary spending.
    We're about to pass a farm bill that provides a strong safety net, 
while tightening spending and cutting subsidies. We can manage this 
short-term deficit, and I look forward to working with Congress to do 
so. But it's important for Congress to understand, there are unfunded 
liabilities inherent in Social Security and Medicare that we need to do 
something about now.
    And I understand it's tough work, requires political will from both 
the President and the Congress to come together and solve this problem. 
I'm hopeful that we can set aside needless politics and address the 
issues with entitlements in a constructive way. That way people will 
say, ``They came to Washington, and they did the job we expect them to 
do.''
    Our growing economy is also a changing economy. The rise of new 
technologies, new competition, and new markets abroad is bringing 
changes--and these changes are coming faster than ever. There was a time 
when most people expected they'd keep a job for life. Now the average 
American has 10 jobs before the age of 40. It used to be that a 
company's name would stay the same for decades. New companies are now--
now companies are merging and splitting and creating new names and new 
stock symbols. Some of us can still remember when cell phones were the 
size of bricks and considered a luxury. Now they fit in your pocket; 
they take photos; they play music; and every teenager in America has 
one, it seems like.
    By and large, our dynamic and innovative economy has helped 
Americans live better and more comfortable lives. Yet the same dynamism 
that is driving economic growth is also--can be unsettling for people. 
For many Americans, change means having to find a new job or to deal 
with a new boss after a merger or to go back to school to learn new 
skills for a new career. And the question for

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America is whether we treat the changes in our economy as opportunity to 
help improve people's lives or as an excuse to retreat into 
protectionism.
    I believe that the changes present us with historic opportunities. 
America's growing economy allows us to approach them from a position of 
strength. And so today I'm going to discuss actions we should take to 
make America's economy more flexible and dynamic in four areas: trade; 
health; energy; and education.
    First, we can make our economy more flexible and dynamic by 
expanding trade. America has about 5 percent of the world's population. 
And that means 95 percent of our potential customers are abroad. Every 
time we break down barriers to trade and investment, we open up new 
markets for our businesses and our farmers. As we improve free trade, 
consumers get lower prices; there are better American jobs; you see 
increased productivity. Jobs supported by exports of goods pay wages 
that are 13 to 18 percent higher than the average. So one of our top 
priorities has been to remove obstacles to trade everywhere we can.
    When I took office, America had free trade agreements with three 
countries. We have free trade agreements in force now with 13 countries, 
and we have more on the way. These agreements are leading to direct 
benefits for America's businesses and, equally importantly, America's 
workers. Yesterday I went to the Caterpillar plant in Peoria, Illinois. 
That's where they make big bulldozers. [Laughter] The folks there told 
me that Caterpillar now exports more than one-half of the products they 
make. They see immediate results when we have broken down barriers to 
trade. Within 2 years of implementing our free trade agreement with 
Chile, Caterpillar's exports to that country have nearly doubled. The 
opening of this and other export markets has led Cat to add thousands of 
new jobs here in America.
    Manufacturers, farmers, and service providers all across our country 
have similar stories. So we need to continue to level the playing field 
for our goods and services. I strongly believe this: When people around 
the world have a choice, they choose goods that say ``Made in the USA.''
    In this global economy, new competition means that American 
businesses must constantly approve [improve] *. Global competition can 
also lead to hardships for our workers and their families. Government 
has a responsibility to help displaced workers find new jobs or even a 
new career. So my administration has reformed job training programs and 
expanded trade adjustment assistance to help more displaced workers 
learn the new skills they need to succeed. I'm going to work with 
Congress to reauthorize and to improve the trade adjustment assistance 
this year, so we can help Americans take advantage of this growing, 
dynamic economy.
    * White House correction.
    At this moment, the most promising opportunity to expand free and 
fair trade is by concluding the Doha round at the World Trade 
Organization. Global trade talks like Doha have the potential to lower 
trade barriers all around the world. They come around only once every 
decade or so. Successful trade talks will have an enormous impact on 
people around the world. Since World War II, the opening of global trade 
and investment has resulted in income gains of about $9,000 a year for 
the average American household.
    The Doha round is a chance to level the playing field for our goods 
and services--in other words, so we can be treated fairly in foreign 
markets--but it also has a great opportunity to lift millions of people 
out of poverty around the world. And so we're going to work hard to 
complete it. We are dedicated to making sure we have a successful Doha 
round.
    The only way America can complete Doha and make headway on other 
trade agreements is to extent trade promotion authority. This authority 
allows the President to negotiate complicated trade deals for our 
country and then send them to Congress for an up-or-down vote on the 
whole agreement. Presidents of both parties have considered this 
authority essential to completing good trade agreements. Our trading 
partners consider it essential for our success at the negotiating table. 
The authority is set to expire on July 1st, and I ask Congress to renew 
it. I know there's going to be a vigorous debate on

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trade, and bashing trade can make for good sound bites on the evening 
news. But walling off America from world trade would be a disaster for 
our economy. Congress needs to reject protectionism and to keep this 
economy open to the tremendous opportunities that the world has to 
offer.
    Second, we can make our economy more flexible and dynamic by 
reforming our health care system. Across the country, business owners 
tell me that the cost of health care is their biggest problem, and it's 
becoming harder to provide coverage for their workers. American workers 
and their families also find that the health care system is rigid and 
confusing. They end up with medical bills that are impossible to 
understand and spend hours filling out complicated insurance forms. They 
feel locked into jobs because they're worried about losing the health 
insurance if they leave their job. They have no way to measure the 
quality of their doctors and hospitals. They see good doctors being 
driven out of practice because of frivolous lawsuits. All this leads to 
higher medical costs and higher insurance premiums for businesses and 
their families.
    Listen, Federal Government has an important role to play when it 
comes to health care, and that is to help the poor and the disabled and 
the elderly. And we're keeping those obligations. But for all other 
Americans, I believe that private health insurance is the best way for 
them to meet their needs. Many Americans cannot afford private health 
insurance. So we're taking steps to make it more affordable and to give 
patients more choices and more control over their health care decisions.
    We created health savings accounts, which put patients in charge of 
their medical decisions and helps reduce the cost of their coverage. And 
I ask Congress to strengthen health savings accounts. We need to pass 
association health plans, so that small businesses can insure their 
workers by pooling risk at the same discount that big companies are able 
to get.
    We're using information technology. Listen, we're a giant consumer 
of health care at the Federal level. And we're insisting upon new 
technologies to make health care more efficient, and thereby reducing 
costs inherent in an inefficient system and reducing medical errors. We 
believe that the health care industry needs to post price and quality, 
so as consumers have more choice, they're able to make better decisions 
about the health care they get. We understand that a nontransparent 
system where somebody else pays the bills is likely to cause costs to 
continue to rise.
    Congress needs to pass medical liability reform. If you're 
interested in available and affordable health care, we should not have a 
legal system that's running good doctors out of practice and running up 
the cost of your medicine.
    And one of the most promising ways to make private health insurance 
more affordable is to reform the Tax Code. Under current law, workers 
who get health insurance from their companies get a tax benefit. If you 
buy insurance on your own, you do not get the tax benefit. The Tax Code 
is not fair. So in my State of the Union Address, I proposed to end this 
unfair bias in the Tax Code by creating a standard deduction for every 
American who has health insurance, no matter where you get it from.
    This deduction would also apply to payroll taxes, so that those who 
do not pay income taxes would still get a benefit. With this reform, 
more than 100 million men, women, and children who are now covered by 
employer-provided insurance will benefit from lower tax bills. Those who 
now purchase health insurance on their own would save money on their 
taxes. Millions of others who have now no health insurance at all would 
find basic private coverage within their reach.
    As well, we need to do more to help the States and localities deal 
with the uninsured. I think the most innovative programs are developed 
at the State level. And I think it's in our interest to support States 
that make basic private health insurance available to all their 
citizens--to have help from the Federal Government, to help them with 
the poor, to help them with the uninsured. So we're asking Congress to 
join us in setting up Affordable Choices grants to make sure that the 
poor and the sick have private health insurance available to them as 
well.
    All these steps will bring America closer to a health care system 
where patients are

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in charge of their medical decisions. In a reformed system, there will 
be a vibrant individual market, in which health insurance companies 
actually compete for your business. When you leave your job for a better 
opportunity elsewhere, you will be able to take your health care plan 
with you. If people change jobs 10 times before they're 40, we need a 
health care system that is flexible and consumer-oriented. Health care 
providers will have an incentive to improve their service. Your medical 
records would fit on a CD, so you would not have to fill out multiple 
forms every time you visit your doctor. In the end, you would have a 
more flexible health care system that responds to your needs and, at the 
same time, helps us keep our economy flexible and dynamic.
    Third, we can make our economy more flexible and dynamic by 
diversifying our energy supply. Energy is vital to businesses and 
farmers and families all across our Nation. Yet we have a fundamental 
problem: We're too dependent on oil. That creates vulnerabilities. When 
demand for oil goes up in China or India, it affects the price of 
gasoline here in America. If a terrorist were to attack oil 
infrastructure, it affects the supply of energy here in America.
    Dependency on oil means we're not being as good a steward of the 
environment as we should be. The way to overcome these challenges is 
through innovation and technology. I believe it is a good use of your 
money to spend at the Federal level on new technologies to make us less 
dependent on oil, and that's exactly what we've done. We're spending 
money on cellulosic ethanol; that's a fancy word for saying, someday, 
we're going to be able to convert switch grass into energy that powers 
your cars. We're spending money on biodiesel fuels. We're spending money 
on advanced batteries, so someday, you'll be able to plug in your 
automobile and drive the first 40 miles on electricity, and your car is 
not going to look like a golf cart. [Laughter] We're spending money on 
solar and wind energy and clean coal and nuclear power.
    Since 2001, my administration, working with Congress, has invested 
up to more than $10 billion to develop cleaner energy alternatives. And 
this Federal funding has helped America's scientists and engineers make 
tremendous progress toward a goal of becoming less dependent on oil. As 
well, the private sector is responding. You know it better than I do, 
but a lot of people are seeing interesting opportunities available in 
alternative energies. And private money is flowing into these new 
alternatives.
    So we're on the threshold of dramatic technological breakthroughs. 
And now the challenge is to move the technologies from research lab into 
the marketplace. In my State of the Union, I set an ambitious goal of 
reducing gasoline usage in the United States by 20 percent over the next 
10 years. If you want to become less dependent on oil, the quickest way 
to do so is to use less gasoline. Meeting this goal will require 
significant changes in supply and demand. On the demand side, we have 
got to reform our economy--fuel economy standards; that will reduce the 
amount of gasoline that cars and SUVs consume. And on the supply side, I 
have proposed a new mandatory fuel standard that is nearly a fivefold 
increase over the current target for renewable and alternative fuels.
    We'll leave it to the market to decide the mix of fuels that most 
effectively and efficiently meet this goal. But that goal can be 
achieved, and that's why I put it out there. It's a necessary goal for 
our national security and economic security. It's an important goal to 
deal with the issue of climate change. Imagine what these technologies 
will mean for somebody living in New York--the fuel in your car is going 
to come from a cornfield in Iowa or perhaps switch grass out of Texas. 
Hybrid electric taxicabs will be running on new generation lithium ion 
batteries. The financial pages will be filled with new stock symbols for 
a--dynamic American companies in the growing field of alternative fuels.
    This day is coming, but it's not going to happen overnight. If you 
want to be less dependent on foreign oil, we ought to be drilling for 
oil and gas in environmentally friendly ways here in the United States. 
And if you're concerned about a terrorist attack which could disrupt oil 
supplies, it makes sense for Congress to double the Strategic Petroleum 
Reserve.

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    So I hope Congress moves forward on these initiatives, and I'm 
looking forward to working with them. The idea is to diversify our 
energy supply, keep our air clean, and help create new jobs through new 
industries that will meet the demand for alternative sources of energy.
    Fourth, we can make our economy more flexible and dynamic by 
strengthening public education. A strong and vibrant education system is 
vital to maintaining America's competitive edge in the world. A strong 
and vibrant education system will ensure that every citizen can share in 
this Nation's prosperity.
    I know some of our citizens worry about the fact that our dynamic 
economy is leaving working people behind. We have an obligation to help 
ensure that every citizen shares in this country's future. The fact is 
that income inequality is real; it's been rising for more than 25 years. 
The reason is clear: We have an economy that increasingly rewards 
education and skills because of that education. One recent study of male 
earnings showed that someone with a college degree earns about 72 
percent more than someone with a high school diploma. The earnings gap 
is now twice as wide as it was in 1980, and it continues to grow. And 
the question is whether we respond to the income inequality we see with 
policies that help lift people up or tear others down. The key to rising 
in this economy is skills, and the Government's job is to make sure we 
have an education system that delivers them.
    And that's why I think one of the most important economic 
initiatives of my Presidency has been the No Child Left Behind Act. The 
philosophy behind No Child Left Behind says, ``We're going to spend 
Federal money, but we expect you, at the local level, to deliver 
results.'' In other words, we've insisted upon accountability. I 
understand some people don't like accountability, but how can you make 
sure if our kids are getting the foundation for the skills necessary to 
compete in the 21st century unless you measure? And when you measure and 
find failure, correct problems early, before it's too late.
    The No Child Left Behind Act is working. There's an achievement gap 
in America that's not fair, and it's not right, and it's beginning to 
close. You know how I know? Because we're measuring. This good law is 
working, and the Congress needs to reauthorize it.

    The agenda to strengthen education and make America more competitive 
extends beyond the primary grades. And that's why I proposed--and I'm 
working with the Congress to pass--the American Competitiveness 
Initiative. That means we're going to improve math and science education 
in the middle schools and high schools. You can't compete in the 21st 
century unless we're educating young engineers and physicists and 
chemists--unless we have--our kids have the skills necessary to fill the 
jobs of the 21st century.

    I also believe it's a vital role for the Federal Government to spend 
money on basic scientific research. And so I've called upon Congress to 
double the funding for basic scientific research at the National 
Institute of Standards and Technology labs or the Department of Energy's 
Office of Science or the National Science Foundation. In other words, 
there's things we can do in Washington to put good policies in place to 
make sure that we stay on the cutting edge of change, and at the same 
time, educate our kids so they can take advantage of the world we're in.

    I believe--and I appreciate Congress's expanding Pell grants. It's a 
strong initiative I support. Pell grants are a good way to help our poor 
students go to college. And I'm a big believer in the community college 
system here in America. Community colleges work. They're available, and 
they're affordable, and they have the capacity to change curriculum to 
meet the needs of the local workforce. And it makes sense for the 
Federal Government to support community colleges for this reason: It 
doesn't take much additional education to gain a new skill set so you 
can find jobs in this 21st century.

    Now let me give you an example. I went to Anne Arundel Community 
College in Maryland, and I met Jeannetta Smith. She used to work in the 
textile industry. She left to study nursing. She recognized that in 
nursing, she could make a better living for her

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family and herself. And so she went to a community college, and she got 
some low-interest loans to help her, and she became a registered nurse. 
With a little bit of extra education and some help, she went to the 
community college, and she's now making three times what she did in her 
old job. Education enables one to gain new skills necessary to fill the 
jobs that are coming in the 21st century. She said about her new career: 
``It's been very, very good. The opportunities are boundless.'' And 
that's what we want people saying in America, ``I have got the skill set 
to be able to say, the opportunities are boundless.''
    America's businesses have responsibilities here in America. I know 
you know that. A free and vibrant economy depends on public trust. 
Shareholders should know what executive compensation packages look like. 
I appreciate the fact that the SEC has issued new rules to ensure that 
there is transparency when it comes to executive pay packages. The print 
ought to be big and understandable. When people analyze their 
investment, they ought to see loud and clear--they ought to be able to 
see with certainty the nature of the compensation packages for the 
people entrusted to run the companies in which they've got an 
investment.
    Government should not decide the compensation for America's 
corporate executives, but the salaries and bonuses of CEOs should be 
based on their success at improving their companies and bringing value 
to their shareholders. America's corporate boardrooms must step up to 
their responsibilities. You need to pay attention to the executive 
compensation packages that you approve. You need to show the world that 
America's businesses are a model of transparency and good corporate 
governance.
    One New Yorker who understands corporate responsibility is a fellow 
named John Duffy. John Duffy grew up in the Bronx. He became CEO of a 
Manhattan investment and research firm called Keefe, Bruyette, and 
Woods. On September the 11th, KBW had its offices in the South Tower of 
the World Trade Center. That day, the firm lost 67 people, including 
John's 23-year-old son. Many thought KBW was finished, but not John 
Duffy. He moved his company to temporary offices. He paid out $40 
million to the families of the employees the firm lost. He set up a 
charitable trust to help them with medical bills and college expenses. 
And he rebuilt his business. Last year, KBW went public, and now the 
firm has twice as many employees as it did on September the 11th.
    I want the people to listen to what John Duffy said: ``If that day 
was our final day, it would have meant that the bad guys had won. Our 
way to fight back was to keep going.'' It says something about John 
Duffy that the terrorist attacks only made him more determined to 
succeed. It says something about New York that there are countless 
stories like KBW's, of hard-working men and women who picked themselves 
up and rebuilt bigger and better than before. It says something about 
America that we continue to produce citizens who come back from 
adversity and create new opportunity for themselves and for others.
    And this is the true strength of our economy. That's what makes us 
the economic leader of the world. And that's why I'm confident that we 
can remain that economic leader, because we're a nation of dreamers and 
doers and believers--God-fearing, decent, honorable people. And I'm 
proud to be the President of such a nation. God bless.

Note: The President spoke at 11:12 a.m. at Federal Hall. In his remarks, 
he referred to Mayor Michael R. Bloomberg of New York City; William C. 
Rudin, chairman, Association for a Better New York; and former Mayors 
David N. Dinkins and Edward I. Koch of New York City. The Office of the 
Press Secretary also released a Spanish language transcript of these 
remarks.