National Association of Manufacturers
February 28, 2001
Remarks by the Vice President to the National Association of Manufacturers
9:00 A.M. EST
THE VICE PRESIDENT: Thank you. Thank you very much. Thank you, Jerry, and let me thank all of you for that warm welcome. That's a great way to start the day.
Of course, we're delighted to be here and to have an opportunity to share a few thoughts with you this morning. I thought the events last night were remarkable. I thought the President did a hell of a job. (Applause.)
You know, there's a lot of ritual and tradition that goes with a State of the Union or a Joint Session of Congress, such as we had last night.
At one point, about 8:20 p.m., I had to leave the House side, where we had had dinner with the Cabinet, go over to the Senate side, and round up the Senators and lead the Senators from the Senate side back to the House. That's because many people think the Senate can't find the House side without leadership. (Laughter.)
But it was really peculiar, because it's one of those special evenings. You know, you're up there on the podium, Speaker Hastert and I were, in those chairs right behind the President, and you're on television all the time, or you think you're going to be on television all the time, and we were a little worried that the events would be overwhelmed by our charisma. (Laughter.) But fortunately, they had a close-up of the President, and you didn't see that much, actually, of Speaker Hastert and myself. (Laughter.)
But it was a very special evening for those of us who have worked long and hard to get the Bush administration up and running. (Applause.) What I'd like to do this morning is take a few minutes and talk a little bit about that last night, and I hope try to put some of this in perspective.
We're already hearing from some of our critics that are complaining about the program we put up there, and as often happens, it's very important during the course of these debates to keep them focused on the facts. So we may have a difference of opinion about what the policies ought to be, but there shouldn't be any disagreement about basic, fundamental facts, and I hope to set that straight this morning.
First of all, with respect to the transition, I've been involved in five of them now, this one has gone more smoothly than any of the other five. I think it's because the President came to town and he's done exactly what he said he was going to do -- campaign on the basis of tax policy and education and Social Security and Medicare reform, and rebuilding the military; and came to Washington, and lo and behold, that's exactly what we're working on, in terms of our priorities.
He's put together a great Cabinet. We've got some old-timers, some pros like General Powell at State, Rumsfeld at Defense, Paul O'Neill at Treasury. We've got a lot of new talent, like Rod Paige at Education; Ann Veneman, for example, at Agriculture; Tommy Thompson in from Wisconsin at HHS. So it's a fascinating group. He's also put together a very good White House staff.
As I say, I've watched enough of these over the years to know all about sharp elbows and battles for floor space in the West Wing and how that whole process unfolds, and there hasn't been any of that in this administration. In fact, people like Karl Rove and Karen Hughes, Josh Bolten, Andy Card have moved in and taken hold and really done a superb job.
What we saw last night, of course, was the President laying out his priorities and the basic, fundamental legislative program that we want to pursue over the course of the next few years. There are, I think, sort of key points to keep in mind that I wanted to focus on this morning.
First of all, of course, he does fund certain key priorities, and he laid those out in his speech, in terms of education, and the emphasis on education, and rebuilding our military forces, and the efforts he wants to make in a number of other areas.
If you look at the discretionary budget, it grows by 4 percent. I've heard one of our friends from the other party this morning on television, turned on, made the statement, he said: after the tax cuts, there is no room for anything else in the budget.
Wrong, factually untrue. He must not have listened to the same speech I listened to last night, because, of course, there is 4 percent growth in discretionary spending. The overall increase in federal spending, when you add in the entitlements next year, is $100 billion. Nobody can suggest that increased spending of $100 billion is being too tight, if you will, with respect to federal spending. We are, in fact, spending money on important priorities.
We are moving in some areas to tighten up. We think that's appropriate. We think there are areas where we can reform. We think that needs to be done. But the discretionary spending goes up 4 percent and, as I say, the overall budget up by $100 billion.
Now, the reason I think some of our friends in Congress have a problem with that is because last year discretionary spending went up 8 percent; and since we got into the surplus mode around here over the last couple of years, we've had a total of three years where, frankly, Congress and the last administration, in my view, overdid it with respect to discretionary spending.
And we'd see the President go up with his request, the Congress oftentimes afraid that we would end up with some kind of government shutdown if they didn't approve the President's budget request. Then they would add on their own, or we would end up with so-called urgent supplementals outside the normal budget process.
All told, what it led to was an 8 percent increase in discretionary spending last year. At that rate, the federal budget would double in about eight years. That's unacceptable. So we've slowed the rate of increase, but there is, obviously, money in there for some new priorities.
We also pay down debt. Now, you're going to hear this argument about whether or not we're aggressively enough addressing the problem of paying down debt.
The fact is, over the next 10 years, the President's budget will pay down $2 trillion in debt. That's all the debt that matures over the next 10 years. The only way you can pay down more debt is to pay a premium to have people turn in their bonds earlier, their treasuries earlier than they're due.
I don't know anybody who thinks it would be a good idea for us to use the taxpayers' money to pay a premium to those people who hold federal debt to get them to cash in earlier than the time called for, the regular maturity on those securities. Makes no sense at all. All the debt that comes due over the next 10 years will be retired, some $2 trillion. So the suggestion that we're not paying down debt -- wrong, not true.
If we look at the taxes, of course, the President's tax proposal is in there, $1.6 trillion, exactly the tax cut that we ran on. We went through the process of a campaign, we had a lot of people say, gee, you shouldn't go for $1.6 trillion. You ought to back off your tax cut.
We had a close election, and a lot of the talking heads here in Washington said, boy, you're going to have to back off that tax cut, close election -- obviously, you're going to want to give up the cornerstone of your policy.
And the President said, no, I'm not going to do that. I ran on $1.6 trillion. That's what I think the country needs. That's what I'm going to recommend to ho Congress. I'm not going to back off. And lo and behold, that's exactly what we've sent forward to the Congress.
And it's the right package for the country. It will do exactly what we think needs to be done by collapsing five brackets into four, reducing rates, by repealing the death tax and the marriage penalty, providing for increase in the child credit, et cetera. So we think it's the right way to go, and the President made those arguments last night, I thought, very effectively.
Let me say just a word or two in an area that hasn't really been talked upon very much over the last couple of days, and that's this whole notion of do we need a trigger, do we somehow have a flawed set of assumptions here, is this a high-wire act with respect to the estimates here with respect to the overall size of the budget and whether or not there's room in it for a tax cut. And let me make a few points that I hope you'll keep in mind as you talk to members of Congress and debate this back home, as well.
First of all, our economic growth forecast upon which this is based is very conservative. It's actually below the blue chip forecast in terms of economic growth for the next few years. The blue chip forecast over the next 10 years is about 3.3 percent; we base this on 3.1 percent. That's almost unheard of in this town, to be that conservative in our economic forecast with respect to the future.
Secondly, we assume that revenue grows more slowly than the economy does, another conservative bias, if you will, built into the system with respect to how big the surpluses are likely to be.
Third, the budget and the forecast assumes no increase in productivity in the federal government over the next 10 years. Productivity in the private sector is increasing about 3 percent a year. The federal government ought to be able to get some productivity increase over the next 10 years, but we don't assume any productivity increase in the operations of the federal government in connection with this budget -- another very conservative bias, if you will, built into our estimates.
Fourth, we used a static revenue analysis. That is to say, we don't assume any feedback into the economy as a result of the tax cuts. We know there will be some. We know it will add significantly, possibly stimulate additional revenue. None of that's in there. We used a static analysis in estimating the impact of the revenue.
Fifth point, the baseline from which we calculate the surplus assumes growth in entitlements. You can estimate how big the Medicare population is going to be 10 years down the road. All of that's factored in there. It assumes inflation in terms of the discretionary accounts, so that, in fact, the baseline itself is adjusted upwards over time.
And it also, sixth point, includes all the President's new spending initiatives. That's built into the baseline that we forecast last night before we calculate what the surplus is.
Having done all that, we then set aside about an $800 billion contingency fund, as well, that will be used for what we can anticipate will be there. There will, after the strategic review is done, probably be requirements for some additional defense spending. There's likely to be needs, perhaps, for agriculture, additional Medicare expenses, but we've got funds in the budget set aside for that purpose.
So this notion that somehow this is a fly-by-night or shaky set of assumptions or that we're straining here to come up with an economic justification for the package simply isn't true.
My first State of the Union message that I watched from the floor of the House was 32 years ago, in 1969. I have never seen, in 32 years, as conservative a set of assumptions as we used in putting this budget together. So don't let the opposition or those who are opposed to our tax proposal, for example, suggest that somehow we're playing fast and loose with the numbers here. We aren't. We've been very conservative. There's every reason to expect that the surplus will, in fact, actually be bigger than the current forecast.
Finally, let me touch just on two other points, then I'll stop and be happy to answer a couple of questions.
One of the things that comes with having been around town as long as I have is I have my memory of historic events, and every once in a while, again, I like to, if not set the record straight, at least put my views out there.
One of the things that some of our friends on the other side are saying, are talking about the, "bad old days of the Reagan era." That bugs the heck out of me. (Laughter.)
What I remember about when Ronald Reagan came to town was an economy that was absolutely in the tank, the Cold War raging, a defense establishment that was in a terrible state -- we weren't even able to mount a rescue operation to get our people out of the embassy in Iran, where they were being held against their will -- a top income tax rate of 70 percent, an economy that was absolutely on the skids.
As a result of what we did in the early Reagan years, we rebuilt America's defenses, which let us win the Cold War; which let us then take our defense spending as a percentage of GDP, instead of the 6 percent we were spending on the Cold War, down to about 2.5 percent, where it is today, which is one of the main reasons we've got a surplus today, because we won the Cold War, and we won the Cold War because we made those investments in the early '80s.
Of course, that economic prosperity that we've enjoyed over the course of the last 20 years has a lot to do with the fact that we fundamentally reformed the tax code back in the early Reagan years, and we got off the kick of a 70 percent top rate and took it down to 28 percent, and laid the groundwork for the fundamental expansion of economic activity and the creation of capital and creation of wealth and creation of incentives for people to work and save and earn more than ever before in our history.
So when I hear somebody on the other side talk about the "bad old days" of the Reagan era, I like to remind them, the bad old days were what happened before Ronald Reagan came to town, not after.
The second key point that I think needs to be made, too, is that I think President Bush deserves a great deal of credit for being willing to take on two very, very tough -- actually, three -- very tough issues that our predecessors would not touch: Medicare reform, Social Security reform and the development of a comprehensive national energy policy. (Applause.)
I'm not here today to advocate a particular course on any of those, but we've set the process in motion.
One of the key things I thought he did during the campaign was to lay on the table the notion of reforming Social Security; the idea, for example, of individual retirement accounts for the younger generation, so that they can, in fact, own and manage some of their own resources in Social Security and get a higher return than would otherwise be the case; the willingness to take the work that's been done by Senators Breaux and Frist and Congressman Thomas, with respect to Medicare reform; and the need now to move on aggressively with respect to developing a national energy policy, because we haven't had a national energy policy for a long time, and if's there's a storm cloud on the horizon out there with respect to our long-term economic prosperity, a significant part of it is focused on the lack of a coherent national energy policy, so those are areas we're going to work on, as well.
Anyway, I thought it was a good evening. The debate is about to be joined. That's as it should be. There will be strong arguments on both sides. The President made it clear we want to work with those who disagree with us and those in the other party to try to put together a good package for America.
I think we're off to a great start. I'm delighted to be here this morning, and I would be happy to take a question or two. (Applause.) Yes.
Q Mr. Vice President, good morning, and thanks for being here today. Is there a temptation, since you came from the Department of Defense, to have a greater role as Vice President in what's going on at the Pentagon, since the QDR and all that is going on?
THE VICE PRESIDENT: You mean am I going to poach on Rumsfeld's turf? (Laughter.) Well, I very much enjoyed my time in the Pentagon; it's one of the best jobs that certainly I've ever had. I also know Don very well. I worked for him for five years back in the Nixon and the Ford days and thought he's a great choice for Secretary of Defense.
We give him a hard time. He was the youngest man ever to serve as Secretary of Defense, and now he's the oldest. (Laughter.) This is the second time around, and we tell him he's going to have to keep doing it until he gets it right. (Laughter.)
But, no, I will do everything I can to help him, but you can only have one Defense Secretary at a time. My role in the national security arena really is very much as an advisor.
One of the things we do is, every Wednesday -- in fact, we'll do it today -- is Secretary Powell, Secretary Rumsfeld, Condoleezza Rice and myself get together, just the four of us, for lunch. And it's a great opportunity for us to talk about the issues of the day. General Powell is just back from the Middle East, he got back last night about 30 minutes before the speech, so he's got a lot to report on. This is a mechanism, it's patterned after something we did back during the Bush administration, '89 through '93, when Secretary Baker and myself and General Scowcroft used to meet at least once a week. It's an informal forum, but it helps you keep everything tied together and stay focused on important issues.
And it's done in a way where you can exchange views and have thorough and frank discussions about policy options, advice we want to give the President or recommendations we want to make, and it never leaks, and that's a very important consideration.
But Don Rumsfeld is running the Defense Department and he would not be happy if I suggested anything else. (Laughter.)
Q Good morning. I applaud the President's willingness to take on the Medicare debate. That's one that's obviously been around. It's a tough issue, and it's exciting that he's going to take that on and, obviously, work with Congress in that.
I hope as part of that one of the things that does get addressed is the fact that it takes, right now, 15 months and then upwards of five to seven years to get new medical technologies that have been approved by FDA through HCFA.
So while I understand your point about the productivity of the federal government and not assuming any growth there, I'm hoping there will be some productivity improvements there and some improvements in that area.
THE VICE PRESIDENT: True. You know, you've hit on a key item. I think one of the strongest arguments for reforming Medicare is that it is as inefficient as it's gotten.
The whole practice of medicine has changed so dramatically over the years. The extent to which prescription drugs now really are at the heart of our medical care system, contrast the role they play there, as contrasted with 30 or 35 years ago when Medicare was set up, and yet Medicare, of course, doesn't cover prescription drugs.
The bureaucracy, the red tape, the forms, the paperwork has, in fact, gotten enormous, and the system does need thoroughgoing reform, and that's exactly what we want to do.
HCFA is, it's a tough job. I think we're going to have a really top-notch person to administer it. Tommy Thompson will do a good job as the Secretary of HHS, overseeing that whole area for us. But one of the prime reasons we need to reform Medicare is because, in fact, it's not doing the job effectively and it's got to be made more efficient than it currently is.
Q Mr. Vice President, we welcome, and I know Spence Abraham welcomes your approach on energy policy, and we very much appreciate your remarks and the President's remarks last night about how important and serious this is.
I wonder if you can tell us a little bit about the workings of your Inter-Agency Task Force and what we might expect from that.
THE VICE PRESIDENT: Sure. Well, we do -- the President set up this Inter-Agency Task Force. It involves about half the Cabinet. He asked me to chair it, especially in these early weeks of the administration.
One of the difficulties we face is we still have an awful lot of those sub-Cabinet jobs to get filled out there. It just takes a long time to get people through the process. And while all the Cabinet is in place and most of the deputies are there, it's still going to be a considerable period of time before all the assistant secretary slots are filled.
Now, we're working as fast as we can, but given the FBI full-field checks that are required and the enormously complex financial processes you have to go through now to get out from under any entanglements so that you avoid conflicts and so forth, it's going to be a while before we have all those slots filled.
That's not true with respect to the White House. I'm fully staffed in my operation, but I don't have to get any of my people confirmed. So the President asked me to take on the assignment of coordinating this activity.
We are going to produce for him an interim report here within about the next couple of weeks that will be a first cut that will go to the President, and hope to follow that up, hopefully, by early April, with our final report.
The effort is focused very much -- we don't want just another study to go on the shelf and collect dust. We're specifically interested in finding ways to move forward in making it possible for the private sector to make the investments to develop the capacity that we clearly need to generate power for a growing economy.
Now, we're very cautious about not wanting to get government into areas where it doesn't belong. We also are very sensitive to making certain we keep clean the roles and responsibilities of the states, for example, versus the responsibilities of the federal government. But working together, we ought to be able to find ways to cut through some of the red tape and create an environment in which people are willing to invest and develop those facilities.
The fact is, there are important tradeoffs here between all of the things we like to do as a society. We clearly want to grow the economy. We want to create more jobs. We're going to have to have increased power to do that. At the same time, we're concerned about the environment.
We have concern in a lot of places in the country that nobody wants to be able to see a transmission line or have a power plant in the neighborhood. But the result is, in California, for example, there hasn't been any significant additional creation of electric generating capacity in the last 10 years.
Nationwide, there haven't been any new refineries built in over 10 years. Part of the problem in various places isn't a lack of generating capacity, it's a lack of gas. We're unable to deliver the gas to the site where it's needed.
Some places, it's a problem with transmission lines or pipelines, the difficulty of getting right-of-way to move forward on those kinds of facilities. In some places, frankly, it's unwise price regulation, which we've seen has created, I think, a lot of the problems in California.
Bottom line is that if we don't address these issues in some kind of comprehensive fashion, if we don't look for ways to increase our power supplies and at the same time do it in an environmentally sound and responsible fashion, it's going to put a real brake on the economy.
I think the American people don't want that. I think they understand that we need to have a national dialogue and debate, make some conscious decisions that what you do in one state does oftentimes ripple over into another; and we may want to do certain things for environmental reasons, but sometimes those have costs and consequences that aren't fully understood, either.
So we're going to try to encourage that debate and dialogue, make sure the federal government has got its house in order, and do what we can to help the states move forward to meet these demands and these requirements.
Q Good morning, Mr. Vice President. You have been interested in sanctions issues in the past, and Secretary Powell has been involved with them lately, and we've seen a lot in the paper. Can you tell us where you think we are and where we need to be with the sanctions issue?
THE VICE PRESIDENT: Well, clearly, there is a very wide variety of sanctions that the government has imposed for various and sundry reasons over the years.
I think many of you know that during my time in the private sector, I made speeches that some might say were critical of the imposition of unilateral economic sanctions. I still am a critic, oftentimes, of unilateral economic sanctions, because I believe that frequently they don't work. That is to say, the idea that we're going to change the behavior of some foreign government by keeping U.S. businesses from doing business in a particular area I think sometimes is misguided, and lots of those sanctions have been adopted more for domestic political reasons than they have because of their efficacy in shaping foreign affairs.
There are other places where, clearly, sanctions are required, especially when you do it on a multilateral basis, if there's an international consensus and a mechanism for enforcement, and a way to sort of marshal the capacities, if you will, of the international community to try to bring pressure to bear on a regime.
I think we have to make careful judgments each time as we go along. I like, for example, some of the provisions of the Lugar bill that have been recommended in the past on sunsetting sanctions, that we wouldn't slap sanctions on and then just kind of leave them there indefinitely, but rather, you would have to re-address each one of those every couple of years and decide, as a government, whether or not you want to continue in that vein.
I also think we have to be careful to recognize that lots of times sanctions have the effect of imposing penalties on American businesses without doing any positive good from the standpoint of our overall direction and course of our policy.
So I think that we're not going to get of all sanctions. I think there are places where they're appropriate. But as a general rule, I think you're more likely to see an emphasis from this administration on supporting those that are multilateral in nature and less of a tendency to respond to a foreign policy problem with a unilateral economic sanction that only imposes a burden on American business and doesn't get the job done.
MR. JASINOWSKI: Thank you, Mr. Vice President.
THE VICE PRESIDENT: Thank you, Jerry. (Applause.)