For Immediate Release
Office of the Press Secretary
August 7, 2002

Vice President Discusses the President's Economic Security Agenda
Fairmont Hotel
San Francisco, California

9:45 A.M. PDT
(As Prepared)

THE VICE PRESIDENT: Thank you very much, and good morning. Connie, thank you for the introduction. I appreciate the warm welcome.

It's always good to be in California. This state gave America Ronald Reagan, who in so many ways personifies the strength and idealism of our country. I remember the story of President Reagan's lunch with Mikhail Gorbachev at a summit meeting in New York City in 1988. Gorbachev asked Reagan what he should see in New York. President Reagan replied, "California."

I thank the Commonwealth Club for hosting me this morning. For nearly a century, you have provided a respected forum for discussing some of the most important issues on the public agenda. I've been looking forward to this opportunity to speak to you about the economic challenges facing our country today. I will conclude with some thoughts on the war against terror. Then I will be glad to take your questions.

As it happens, this is not the first time I've come to the Commonwealth Club to address economic issues. I was here some 30 years ago, as a young staffer in the Nixon Administration, to give a talk on wage and price controls. Exactly three people showed up. As one can see from the turnout today, I've become a much more charismatic figure over the years.

In the past eighteen months, the United States has gone through a serious economic slowdown, a great national emergency, a war abroad, and a series of scandals in corporate America. Yet there is no doubt about our nation's strength. This is a tribute, above all, to the American worker and entrepreneur. Worker productivity in the last four quarters has been impressive. Higher productivity, leads to wage increases, greater investment, and even more jobs down the line. In the month of June, personal income rose at the fastest pace in two years. Also in June, sales of new homes reached an all-time high. The number of unemployment claims has remained below the 400,000 mark for most of the last nine weeks. Industrial production has been rising since January, after 17 months of almost steady decline. Mortgage interest rates stand at near 30-year lows. Inflation remains firmly under control.

We have the most productive, creative, and promising economic system the world has ever seen. In America we value freedom of movement, competition, private property rights, the rule of law, and limited government - and all these have made our country the best place to work and invest. We lead the world in technological progress, and scientific and medical breakthroughs. We have by far the most skilled and productive work force. Our companies and universities attract the greatest talent from every continent. The energy and innovativeness of American business, especially in the high-tech industries, have made the economy much more flexible and better able to absorb the kinds of shocks we've experienced in recent months.

All of these conditions create a platform for long-term growth and prosperity. But success tomorrow will depend on the policy choices we make today. And if we continue in the positive direction President Bush has set for the nation - with solid, pro-growth, pro-job reforms - Americans will enjoy even greater prosperity in the years ahead. We will not be satisfied until every sector of this economy - from agriculture to high-tech - is vigorous and growing. We will not rest until every person who wants to work can find a job.

The primary objective of this administration's economic policy is faster growth that leads to new jobs. Here the federal government's responsibility is plain. Outside its own limited functions, government doesn't build plants or create jobs. Our responsibility is to create an environment in which private-sector employers want to expand and hire more people. That is the way to lift wages and the standard of living across the country. That is the way for companies to innovate, and grow, and produce value that attracts investors.

A growing economy brings the added benefit of higher revenues for the government - revenues that permit us to balance the budget, meet key priorities, and protect Social Security and Medicare, without ever resorting to ruinous tax increases on the American people.

The President and I ran for office on a growth agenda, starting with an across-the-board rate reduction for every income taxpayer in the nation. Our goal was to ensure long-term prosperity by increasing the incentives to produce, save, and invest - and by limiting the total amount of our national wealth controlled by the federal government. Bipartisan majorities in both Houses of Congress agreed with us. Under the 2001 tax cut we reduced the tax bills of more than a hundred million individuals, families, and sole proprietorships - the largest reduction in a generation. We made those reductions retroactive to the first of January, 2001, in order give the economy an immediate boost.

January of 2001 was also the month that brought a change in administrations. It is now clear from the data that when President Bush and I took office, the nation had slid into a full-blown economic recession. The first sign of a slowdown had appeared around the summer of 2000. Among the contributing factors were high and unpredictable energy prices, a steadily rising tax burden, and high interest rates. By inauguration day, business investment growth had halted - and the nation had already lost nearly a third of a million manufacturing jobs in a year's time. The slide continued, with the economy contracting throughout the first, second, and third quarters of 2001.

In the third quarter, of course, we had the terrorists attacks, which themselves caused a massive disruption of economic activity throughout the country. Every foreign and domestic flight was cancelled for days, some of them for weeks or even months. For a time, many hotels, shopping malls, and restaurants went practically empty. Stock trading was halted for nearly a week. Hundreds of thousands of Americans were laid off, some of them still looking for work to this day. Overall, the attacks cost the economy about 120 billion dollars in the last few months of 2001 alone.

Even so, the worst period for the economy last year was actually the second quarter, prior to the attacks. By September 11, millions of tax rebate checks had already arrived in American homes, and had begun to strengthen the economy. The Bush tax cut came just in time. Together with the great flexibility of this economy, and the extraordinary resilience of the American people, tax relief helped us to climb out of the recession, and to weather the terrible financial effects of 9/11.

The nation gained as well from the President's economic stimulus package, enacted last March. We lengthened unemployment benefits for those who lost jobs in the recession or in the aftermath of 9/11. We provided tax incentives for companies to expand by investing in plant and equipment. The stimulus also extended net operating loss rules, granted some alternative minimum tax relief, and provided more than five billion dollars in tax relief to assist in the economic recovery of lower Manhattan. Following passage of the stimulus, business investment in equipment and software went up by 2.9 percent in the second quarter, the first gain in a year and a half.

All of these steps - the rebate checks, the additional rate reductions on tax day, and the stimulus package - have helped turn three quarters of decline into three quarters of positive growth. By leaving more money in the hands that earned it, we trusted the American people - and the American people have produced this recovery.

So far this year, the economy has grown at an annual rate of about three percent. This is significantly better than those nine months of recession in 2001. Many private sector forecasters anticipate that we'll stay at a solid three percent growth rate for the balance of the year. Just as the President's tax cuts put a floor under the recession, Federal Reserve policy has been critical to our progress. Eleven consecutive cuts in interest rates have reduced deflationary pressures and helped stabilize prices. We believe the economy is poised for sustained growth without inflation - so long as we hold to the right policies.

Going forward, our Administration will continue the work of strengthening the free enterprise system and reducing the barriers to further growth. We will keep the federal government squarely on the side of growth, business starts, and new jobs.

I am not here today to analyze the stock market. Yet we're all aware that just as the first signs of recession became visible in 2000, the equity markets began a major adjustment in the spring of that year. Some of the more recent declines are at least partly explained by a loss of confidence in the corporate sector.

The President has acted firmly on the matter of corporate integrity, because it goes to the heart of our economic system. That system rests on confidence - the basic belief that corporate officials are truthful, numbers are real, audits are thorough and independent, and investors are protected by law from fraud and deception.

All of us recognize that the vast majority of men and women in the business community are honest and above-board. They run solid companies, providing the goods and services that enhance our quality of life - and, for some of us, even save our lives. At the same time they provide jobs for their workers and real value for investors. Acts of fraud and theft are outside the norm in corporate America. But when those acts do occur - where corporate greed and malfeasance causes honest people to lose their jobs, life savings, and pensions, the people's confidence in the system is undermined - and the wrongdoers must be held to account.

We are pleased that Congress came together to pass the President's corporate integrity proposals, and last week he signed the most far-reaching reforms of American business practice since Franklin Roosevelt lived in the White House. Under this law, financial disclosures will be broader and better for the sake of shareholders and investors. Corporate officials will be held to higher standards of accountability for the statements they make and the papers they sign. For the first time ever, the accounting profession will be regulated by an independent board, which sets clear standards to uphold the integrity of public audits.

These reforms will bring out the best in the free enterprise system, answering abusive practices with stricter enforcement and higher ethical standards. When there is corporate fraud, the American people can be certain that the government will fully investigate, arrest, and prosecute those responsible.

We intend to do even more to protect the interests of the small investor and pension holder. More than 84 million Americans own stock, either as individuals or through their retirement plans. This level of participation in the market is unprecedented, and it is good for the country.

Investing in the stock market gives individuals the opportunity to build wealth over the long term - a real chance to enjoy a level of security and independence in retirement that was out of reach to earlier generations. This is precisely the kind of responsible investing we should promote in America. And one of the best ways to encourage stock ownership is to make sure that pension plans give workers better information, and treat them fairly.

Some workers today are locked into pension plans that hold stock in a single company, which is sometimes an unwise risk. Workers should be able to sell company stock and diversify into other investments after three years in their own company's plan. They should receive updates on their retirement savings every three months. And they should have access to sound investment advice. President Bush has proposed these and other reforms to protect Americans and their pensions. The House has passed this legislation. It remains only for the Senate to act, and we call on them to do so as soon as possible.

We are also asking Congress to take the next crucial step to reduce the tax burden on the nation's families and entrepreneurs.

Under present law the reductions we worked so hard to enact are scheduled to expire in 2011. The return of higher marginal tax rates, a restoration of the marriage penalty, a cut in the child credit -- all these would almost certainly cause an economic reversal. Even the expectation of these events will put downward pressure on the economy's ability to grow, as families and firms prepare for an approaching tax increase. We should prevent that increase, and make the President's income tax reductions permanent. The House has already voted for permanent tax relief -- and here again, we call on the Senate to do the same.

The death tax is also scheduled to return nine years from now. That would spell trouble for farmers, small business owners, and employees across America. A farm or a family business should be a legacy for your children, not a target for the tax collector.

We need to pass terrorism risk insurance. The latest figures show a decline in construction spending. The fact is that billions of dollars in projects are on hold today because the developers can't obtain coverage against the risk of terrorism. This problem also affects the transportation industry. With terrorism risk insurance, the federal government would step in and cover losses above a certain level of claim. Coverage would therefore become both accessible and affordable to employers across the country. Congress should enact this reform without delay -- and without offering a windfall to trial lawyers.

We in Washington must also keep federal spending under control. A period of war and recession-induced deficits imposes the need for extra care in our spending priorities, and discipline that fits the times. The President's budget commits most new spending to national security and homeland defense, and seeks to hold the rest of government to an increase of two percent.

We will meet these and other priorities, but we must not permit spending to grow without restraint. This would divert more billions from families and entrepreneurs, limiting the economy's ability to expand in the future. President Bush is going to insist on spending discipline in Washington, and use his veto power if necessary.

Another fundamental condition of long-term growth is a reliable and affordable supply of energy. If we are to avoid regular price spikes and chronic shortages, we must continue our progress in energy efficiency and conservation, and increase energy production here at home. The Congress should pass the President's energy plan to strengthen our economy and reduce our dependence on foreign oil.

Our administration is committed to a broad agenda to promote small business. To buy or start a small business is to stake one's livelihood on the American Dream - believing that good ideas, hard work, and fair dealing will pay off in the end. Because so many have put forth that effort, smaller firms today create three out of every four new jobs, and account for half the private-sector output of the entire economy. The small business sector has become an especially promising avenue of opportunity for women. Over the last five years, the number of women-owned businesses has increased by 14 percent nationwide, twice the rate of firms overall. This economy can thrive only if our small businesses thrive - and we want to see a lot more small businesses in all parts of the country.

One way to make that occur is to continue holding the line on federal regulations, which so often cause wasted effort, lost jobs, and higher costs to the consumer. The annual cost of federal regulations now stands at some 8,000 dollars per household. I'm pleased to note that the year 2001 brought an actual decrease in the number of new regulations coming out of Washington. That's a positive trend we hope to continue.

Small business also stands at the center of America's trade policy. Fully ninety-six percent of America's exporters are firms with fewer than 500 employees. The nation's farmers and ranchers receive a quarter of their income from sales abroad, and one out of every three acres is producing goods for export. For the farms and ranches and manufacturers who trade with the world, the prospects have grown even brighter with the passage of trade promotion authority. It's been more than eight years since a president had that tool. Last week Congress, on a bipartisan basis, granted this authority to the President. Yesterday he signed it into law. He will use it to enter into favorable trade agreements wherever possible, giving people around the world many more opportunities to buy American.

America strongly supports a new round of global trade negotiations. We're also working with nations in Central and South America to establish a Free Trade Area of the Americas by January of 2005. We will move quickly to build free trade relationships with individual nations such as Chile, Singapore, and Morocco. Such agreements, and others we intend to pursue, will create jobs in America and hope around the world.

Every advance for global trade is an opportunity to expand our economy, and include more of our people in the nation's prosperity. America is also the engine of economic growth for the rest of the world. Just as we stand to gain from wider trade, so do our trading partners - especially the less developed nations. For them, the stakes are even higher. Short-term grants and foreign aid can only go so far. In the long term, open trade and investment can bring their first real hope for material uplift ? all the more when economic reforms are joined with political freedom. And we must provide it.

Many nations on the path of democracy and open economies look to the United States as an example, and an ally. They rely on our support, our encouragement, and our leadership in the world - and we must always provide it.

Our future security, and the hopes of the civilized world, also depend upon America's continued leadership in the war on terror. Even with a very full agenda for this fall and beyond, never for a moment do the President and I forget the most important responsibility we have: To protect this nation against further attack, and win the war that began on September 11.

We still face an enemy determined to kill Americans by any means, on any scale, and on our own soil. We're dealing with a terror network that has cells in more than 60 countries. Such a group cannot be held back by deterrence nor reasoned with by diplomats. For this reason, the war against terror will not end in a treaty. There will be no summit meeting or negotiations with the terrorists. This conflict can end only in their complete and utter destruction.

In this challenge to our freedom we have already asked a great deal of the men and women who wear our country's uniform. And as a former Secretary of Defense, I've never been more proud of our military. For missions that lie ahead, we are investing in our military so we can deploy swift and agile forces - anyplace and anytime they're needed. We are building precision weapons that can spare the lives of American soldiers in combat, and innocent civilians in foreign lands. We will multiply every advantage in order to prevail over any enemy.

The attacks of 9/11 confront us with a whole new set of considerations - from our ongoing vulnerability to international terrorism, to the possibility that terrorists will gain access to weapons of mass destruction. In the rubble of Afghanistan we've found confirmation, if any were needed, that bin Laden and the al-Qaeda network are seriously interested in nuclear and radiological weapons, and in biological and chemical agents.

It's one thing to have that sort of possibility discussed in foreign policy seminars. It's quite another to have in your hand documents clearly describing their aspirations and plans for acquiring these capabilities, so that they can use them against the United States and our friends and allies around the world. In the case of Saddam Hussein, we have a dictator who is clearly pursuing these capabilities - and has used them, both in his war against Iran and against his own people.

In the words of a recent editorial in The Economist, "wishful thinking in the face of mortal danger is bad policy." And as President Bush has made very clear, the government of the United States will not look the other way as threats accumulate against us.

Every significant threat to our country requires the most careful, deliberate, and decisive response by America and our allies. As all Americans now understand, the struggle for our freedom and security is proceeding on different fronts, engaging the economic, diplomatic, intelligence, and military resources of the United States. There will be times of full and sustained combat action, as in Afghanistan. There will be other, quieter times, when success comes without need of military force. But at all times, at every turn, we will press on, because the stakes could not be greater. Deliverable weapons of mass destruction in the hands of terrorists would expose this nation and the civilized world to the worst of horrors. And we will not allow it. We will not live at the mercy of terrorists or terror regimes.

More than sixty years ago, in the early stages of World War Two, General George C. Marshall made a pledge on behalf of the nation that resonates very well in our time. "Before the sun sets on this terrible struggle," he said, "our flag will be recognized throughout the world as a symbol of freedom on the one hand, and overwhelming power on the other."

At the beginning of this new century, the United States is again called by history to use our overwhelming power in defense of freedom. We have accepted that duty, because we know the cause is just, we understand that the hopes of millions depend on us, and we are certain of the victory to come. The President and I are mindful of the tremendous responsibilities that have been placed in our hands. And we are grateful to you, our fellow citizens, for giving us the opportunity to serve the greatest nation on the face of the earth.

Thank you very much.

* * * * *

THE VICE PRESIDENT: (in progress) -- Sooner or later, the international community is going to have to deal with that. But, again, I think it's important for us to remember that the transgressor here, the one who has not complied with the U.N. Security Council resolutions, the one who has not lived up to the commitments that were undertaken at the end of the Gulf War is Saddam Hussein. And I think the burden ought to be on him to prove that he, in fact, is in compliance. And I'm not sure at all that that's likely to happen.

So the international community will have to come together in some fashion and figure out how we're going to deal with this growing threat to peace and stability in the region, and obviously, potentially for the United States itself.

Q If Iraq agrees to international weapons inspections, would we call off the war -- or not move forward in that effort?

THE VICE PRESIDENT: Well, let me emphasize that the President has not made a decision at this point to go to war. We're looking at all of our options. It would be irresponsible for us not to do that. But the issue here isn't inspectors. That's a secondary item, if you will. The issue is the fact that he's required to dispose of his weapons of mass destruction and the inspectors are merely the device by which the international community can assure itself that he's done so.

So many of us I think are skeptical that simply returning the inspectors will solve the problem. A great deal depends upon what conditions they would operate under; would they be able to go anywhere, any time, without notice on extensive searches? You've got to remember he's had about four years now to hide everything that he's been doing and he's gotten to be very good at that, worked at it very aggressively. So even if you had the return of inspectors, I'm not sure they would be able to do enough to be able to guarantee us and our friends in the region that he had, in fact, complied. He's gotten very good at denial and deception.

But we do know, as I say, from defectors and from other sources that he continues to have robust programs, and a debate with him over inspectors is simply -- I think would be an effort by him to obfuscate and delay and avoid having to live up to the accords that he signed up to at the end of the Gulf War.

Q There are many questions evidencing some concern about Saudi Arabia. For instance, how does the U.S. justify continual alliance or even inaction against Saudi Arabia, seeing that's where the pilots who terrorized our nation came from?

THE VICE PRESIDENT: There has been a lot of talk with respect to Saudi Arabia. I think it's important, first of all, to recognize that we've had a very good relationship with the Saudis now for about 60 years. It's been a very productive relationship in terms of the values that we gain from it and that the Saudis gain from it, as well. And while we do have our differences -- obviously, there are fundamental differences in our cultures and our political systems and the way we operate -- that doesn't mean that we should in any way ignore the benefits that both countries derive from that very close relationship.

So I'm comfortable that we can have honest differences with the Saudis. Certainly, the Saudi government had absolutely nothing to do with the events of 9/11. There were -- and there are -- in al Qaeda, individuals of varying nationalities -- some American citizens, many from other countries in the Middle East and Southeast Asia. It is, in fact, the al Qaeda organization, a multinational entity.

It happens that Osama bin Laden, the man who founded it and set it up, is Saudi by birth. He's been, in effect, stripped of his citizenship by Saudi Arabia, and so it would be a mistake for us to assume that the events of 9/11 were in any way, shape, or form sanctioned by or supported by the Saudi government.

Q Thank you, Mr. Vice President. While we're on the subject of the Middle East, can you talk a little bit about the administration's evolving policy with regard to Israel? Can you discuss any potential link or perceived link between our policy with regard to Israel and that with Iraq? And beyond condemning violence, how this latest round of violence might change the administration's policy?

THE VICE PRESIDENT: The United States is actively committed to trying to bring about resolution of the decades-old conflict, now, between the Israelis and the Palestinians. The President is heavily engaged in the effort, as are Colin Powell and the rest of us.

The President, in effect, broke a lot of new ground in June with his speech on the subject, when he in effect called for fundamental reforms in the Palestinian Authority as a sort of a prerequisite to being able to make progress. The ultimate vision, clearly, is for two states, Israeli and Palestinian, living side by side, peace and security for both. We believe that is not possible, after years of effort, unless there are some fundamental changes in the Palestinian entity.

So we pushed aggressively for reform. We've got a major effort underway that involves the European Union, the Russians, the United Nations, as well as many Arab nations in the region -- the Saudis, the Egyptians, the Jordanians, and so forth. We hope that that effort will bear fruit, that there will be created a Palestinian entity, if you will, that is capable of being an effective interlocutor for the Israelis, and that will set the stage, then, for the kinds of resolutions that obviously are going to be required in order to bring that conflict to an end.

We feel like we're making progress. But I don't want to underestimate the extraordinary complexity and difficulty of the task at hand. It is as intractable a problem as I've ever tried to deal with. As I say, I think we are making progress, but there's a long way to go, and a great deal of suffering on both sides, both Palestinian and Israeli. But establishing a viable Palestinian Authority is going to be key to being able to safeguard Israel against attacks launched against Israel from Palestinian territory, and beginning to make progress on the basic peace process itself.

Q Mr. Vice President, turning to the economy a bit, a two-part question. How can you resurrect investor economic confidence when so many high-profile leaders and companies are under investigation for fraud and accounting improprieties? And I know you know this is likely to come up, but people want to know how would the accounting practices at Halliburton while you were there hold up under the current new corporate checks-and-balances law?

THE VICE PRESIDENT: Well, I, first of all, have great affection and respect for Halliburton. It's a fine company, and I'm pleased that I was associated with the company and with the men and women of Halliburton, some 83,000-strong around the world, during my tenure there.

There currently is an inquiry underway by the SEC with respect to Halliburton's accounting practices. I am, of necessity, restrained in terms of what I can say about that matter, because there are editorial writers all over America poised to put pen to paper and condemn me for exercising undue, improper influence if I say too much about it, since it is a matter pending before an independent regulatory agency, the SEC.

If you're interested in the facts of the Halliburton situation, I would refer you to the Halliburton web site. I would recommend you pull up the transcript of the quarterly conference that was held a couple of weeks ago with securities analysts, where my successor CEO, Dave Lesar, and the current CFO, responded for a long time to a lot of very detailed questions about the SEC inquiry. And I think I'm -- from my perspective, I need to leave it there.

Q Thank you, Vice President Dick Cheney. My question has to do with the war on terrorism and the massive weapons of destruction. Why don't we have better relationships with Iran, that supports Hezbollah, that sent that ship to Israel with those weapons for the Palestinians? Thank you.

THE VICE PRESIDENT: I'm sorry, why don't we have better relations with Iran?

Q Yes.

THE VICE PRESIDENT: Well, the situation in Iran is interesting. It's different than circumstances elsewhere out there. The government, the current government in Iran, clearly has actively and aggressively supported, especially, Hezbollah. It has been a major source of state-sponsored terrorism, if you will, and devoted to the effort to destroy the peace process.

We find that, clearly, something that we can't accept. And we've made clear our opposition to that, as well as to their efforts to try to acquire weapons of mass destruction. They're actively working trying to acquire

ballistic missile technology, as well as nuclear weapons themselves.

But our argument with Iran is not with Iranian people. What we find is I think that the potential exists that underneath that regime whose policies we find so objectionable, there is a growing body of opinion on the part of the Iranian people that favors and supports democracy, that wants to build a good relationship with the United States, that believes in an opening to the West. And we think the prospects there are promising in some respects.

The President spoke out recently about the yearning of the Iranian people for democracy. We think that's something we need to support and we've been very forthright in encouraging that. And so we'll see what happens, but that's clearly a different situation than we have in some of the other places where we're operating.

Q Mr. Vice President, a last question. Do you expect to be on the GOP ticket as the Vice Presidential candidate in 2004? Under what conditions would you reconsider plans to seek reelection? And then, put a different way, how's your heart? (Laughter.)

THE VICE PRESIDENT: Well, I suppose two people are going to figure very prominently in that decision. One is, obviously, the President; the other is my wife. (Laughter.) And I have enjoyed immensely my time with the President. The return to public life carries certain penalties. You pay a price once you get into the public arena because you do become a target. But, by the same token, the opportunity to serve alongside President Bush for these last two years, the campaign and all that we've been through as an administration, has been clearly, I think, the high point of my professional life, and I wouldn't have missed it for the world.

In terms of what happens next, he'll have to make a decision by this time about two years from now when the convention rolls around, in terms of deciding who he wants to have serve as his Vice President in a second term, and that will be his call. And I'll be happy to support whatever decision he chooses to make.

With respect to my health, it's good. I have been probably watched now than I have ever been. (Laughter.) I've got the doctor following me around everyplace I go, literally. When I get on the elevator, there's a guy there with a black bag -- (laughter) -- actually, two guys with black bags. One has the football, the other has medical capabilities. (Laughter.)

And so I don't have any complaints. I'm proof positive of the enormous value of the wonders of modern medical technology, and for that I'm very grateful. I've been able to pursue a full and active career, even though I have coronary artery disease. And so if the President's willing, and if my wife approves, and if the doctors say it's okay, then I'd be happy to serve a second term. But I emphasize again, that's the President's call, not mine.

MODERATOR: Thank you so much, Mr. Vice President, for joining us today. (Applause.)

END 12:42 P.M. EDT

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