For Immediate Release
August 24, 2006
THE VICE PRESIDENT: Thank you. (Applause.) Thank you. (Applause.) Thank you very much. Well, thank you, Tom, for that introduction. And thank all of you for that welcome. I am pleased to be back before the chamber, once again. Those of us who have worked in Washington over the years have developed an enormous respect for the organization and for its members. And the President and I deeply appreciate all that you've done to support key policy initiatives over the years.
You know, this is always a very special time in Washington -- the time of renewed hope and progress and achievement. I just swore in the new members of the United States Senate this week. We usher in a new year, welcome a new Congress, and renew our resolve to make America safer, stronger and more prosperous than ever before.
In the coming year, our top priority remains winning the war on terror and protecting our homeland against new and unprecedented Threats. We know that the terrorists who struck us on September 11th are still at work, still attempting to do everything they can to strike us whenever possible. Where al Qaeda and its allies are concerned, we are dealing with a network that operates in more than 50 countries; that has murdered Americans in Bali, in Kuwait, in Yemen and Jordan; and that is determined to acquire and use weapons of mass destruction against us and against our allies.
The gravity of the threat we face was underscored in recent days when British police arrested seven suspected terrorists in London and discovered a small quantity of ricin, one of the world's deadliest poisons, for which no cure exists. Make no mistake, America is at war. And the front lines are our centers of work, of transportation, of commerce and entertainment.
Against such enemies, America and the civilized world have only one option: wherever terrorists operate, we must find them. Wherever they dwell, we will hunt them down. We will stop them in their plotting and training, and we will remain vigilant at all times.
We will also continue our efforts to stop the grave danger presented by al Qaeda or other terrorists joining with outlaw regimes that have developed weapons of mass destruction to attack their common enemies -- the United States and our allies. That is why confronting the threat posed by Iraq is not a distraction from the war on terror. It is absolutely crucial to winning the war on terror. As the President has said, "Iraq could decide on any given day to provide biological or chemical weapons to a terrorist group, or individual terrorists" -- which is why the war on terror will not be won until Iraq is completely and verifiably deprived of weapons of mass destruction"
The United States and our allies are also confronting the threat posed by North Korea's repudiation of its international commitments not to develop nuclear weapons. While not unexpected, given North Korea's recent behavior, today's announcement is of serious concern to North Korea's neighbors and to the entire international community. Their actions threaten to undermine decades of nonproliferation efforts and only further isolate the regime.
North Korea's relations with the entire international community depend on their taking prompt and verifiable action to completely dismantle their nuclear weapons program.
While confronting the challenges that face us abroad in the coming year, we will need to act aggressively to meet our needs here at home, especially on economic security. Every advance in the war on terror will reduce the danger to our country and remove some of the uncertainties that can discourage investments and undermine economic growth in the long term.
As we look to a safer world, and to a more secure economic future, the President and I know we'll be able to count on the support of the U.S. Chamber of Commerce. Over the years, the Chamber has played an important role in the struggle for greater economic security and never more so than during the past two years. You gave crucial support to the President's call for early tax relief. You worked with us to gain trade promotion authority. And you helped the President win the fight for terrorism insurance. These are all tremendous achievements, and the President and I thank you for your support.
This year, we'll work with you, as well, to provide more affordable health coverage, to pass a comprehensive energy bill, and to help end unfair, frivolous lawsuits against American businesses and doctors, which are harming consumers and patients. And we remain committed to making the Bush tax cuts permanent and to repealing once and for all the death tax.
All these are crucial to our country's economic security. Today, however, I want to talk about the centerpiece of our administration's economic security agenda, the growth and jobs package that President Bush announced on Tuesday in Chicago.
To begin with some recent history, President Bush and I came to office facing a recession that had already begun. The first sign of a slowdown had appeared in the summer of 2000. The equity markets began a major downward move in the spring of that year. Among the contributing factors were high and unpredictable energy prices, a steadily rising tax burden and slowing business investment.
President Bush acted decisively to confront all of these challenges. In 2001, he kept his campaign promise to reduce income taxes for everyone who pays them, and more than 100 million individuals, families and sole proprietorships saw their income tax bills reduced. The Bush tax cuts came just in time, putting a floor into the recession and helping us weather the terrible financial effects of 9/11.
The nation gained, as well, from the President's economic stimulus package enacted last March. We provided unemployment benefits for those who lost jobs in the aftermath of the recession or in the aftermath of 9/11. We provided tax incentives for companies to invest in plant and equipment, and we are helping the people of New York with more than $20 billion to continue their remarkable recovery and rebuilding efforts.
Following passage of the economic stimulus, business investment in equipment and software rose in the second and third quarters of last year for the first time in a year-and-a-half. The President helped to restore public confidence in corporate America by signing into law the most far-reaching reforms of American business practices since Franklin Roosevelt lived in the White House.
The President has taken other actions, as well, to strengthen our economy. Refusing to spend wasteful contingent funds authorized by Congress, he demonstrated his determination to enforce spending discipline. The terrorism insurance bill he signed is allowing many construction and real-estate projects to go forward providing jobs for thousands of our people. And he is using the trade promotion authority he's been granted to open up new global markets for American farmers and businesses, creating more jobs for America's men and women.
Our administration's pro-growth initiatives were the products of a very clear economic philosophy. The President and I understand that the government does not create wealth and it does not create jobs, but government policies can and should create the environment in which firms and entrepreneurs will take risk, innovate, invest and hire more people.
Lower taxes, sensible regulation and more freedom, that's the way to lift wages and to build prosperity all across the country. That's the way for businesses to grow and to produce value that attracts investors.
The President's policies, complemented by 12 interest rate cuts by the Federal Reserve to ease deflationary pressures, are succeeding. Despite the recession we inherited and despite 9/11 and the corporate scandals, this economy is growing. America has now entered its second year of economic growth. GDP has grown by $478 billion since the first quarter of 2001. Personal income is rising faster than inflation nationwide. Mortgage rates are at 40-year lows. Our homeownership levels are at historic highs. And, most importantly, the productivity of American workers has increased by 5.6 percent for the last four quarters for which we have data, the sharpest increase since 1973.
As Chairman Greenspan observed recently, we are clearly seeing a notable improvement in the resilience and flexibility of the U.S. economy. Yet while our economy is sound in the fundamentals, it could be growing faster. Our job now is to preserve the hard-won gains the economy has made and to speed up growth, to add new jobs across the country, and to expand the reach of our prosperity in both the short and the long term. Those are the objectives of the jobs and growth plan that the President outlined earlier this week.
As all of you know, under the Bush tax cuts already enacted, taxpayers are due to receive additional relief in 2004 and again in 2006. The President has asked Congress to accelerate all of those marginal rate cuts, making them effective January 1st of this year. By speeding up the income tax cuts, we believe we'll speed economic recovery and the pace of job creation.
The President is also calling for acceleration of three other tax reductions passed in 2001. Instead of gradually reducing the marriage tax penalty between now and 2009, we should do it now. Instead of waiting until 2008 to move more taxpayers from the 15 percent bracket to the 10 percent bracket, we should do it now. Instead of slowly raising the child tax credit to $1,000 by 2010, we should do it now.
When Congress passes these proposals, the President will direct the Treasury Department to immediately adjust the amount of money withheld for income taxes so that Americans can keep more of their paychecks right away.
This will leave more money in the hands of the people who earned it and will do so now, when Americans need the money to buy, to save, to produce, to invest and to do all the things that create new jobs, add momentum to our recovery and help ensure long-term economic growth.
Over both the short- and the long-term, the President's plan will also encourage investments to help turn small businesses into large ones. He's proposing an increase in the amount of an investment that small businesses can deduct as expenses, from $25,000 a year to $75,000 a year. This will help improve cash flow and make it easier for small firms to acquire the technology and the machinery they need to expand and hire more employees.
Also to encourage investment in a climate of uncertainty, the President has called for abolishing the double taxation of dividend income. This proposal will be particularly important for economic growth, both in the near and the long term. Taxing dividends only once, at the corporate level, will significantly increase the return from investing.
Among the group of seven countries -- some of the largest developed nations in the world -- the United States has the highest effective tax rate on dividend income, which undermines American competitiveness. Historically, 40 percent of the return on U.S. stocks comes from dividends. So ending double taxation will significantly increase the return on investment. That will immediately draw more money into the equity markets, providing the capital needed to build and expand plants, to buy equipment and to hire more people. And this tax reduction will return as much as $30 billion a year to the American people to spend and to invest.
Abolishing the double-taxation on dividends will also transform corporate behavior in America and encourage responsible practices. Without the current tax penalty, investors will demand higher cash dividends and companies will be motivated to share them. This should discourage companies from artificially inflating profits just to cause a temporary spike in stock prices.
Meanwhile, companies will be less inclined to over-leverage themselves with debt and more inclined to finance business expansion with equity. Over the long term, this will lead to healthier companies and stronger growth.
I want to emphasize that while the President's growth package will help the economy right now, it will also create 2.1 million jobs over the next three years, according to the Council of Economic Advisors. A private sector analysis predicts it will create an average of 941,000 jobs per year each year for the next five years. And for Americans out of work today, this week Congress heeded the President's call to extend the unemployment benefits that expired last month when the President signed the bill into law.
The President is also urging Congress to provide states with $3.6 billion to fund personal re-employment accounts. These accounts would give unemployed workers up to $3,000 to use for training, for child care, for moving costs or other expenses associated with finding a new job.
The jobs and growth proposals the President announced on Tuesday constitute a focused plan to increase capital formation, to encourage consumer spending, to promote small business growth, boost confidence in our markets, and give critical help to our unemployed citizens. We urge Congress to act swiftly to pass this package.
As the debate goes forward, I suspect we'll be hearing some criticism of the President's plan. These criticisms are not convincing, but they are familiar. We've all heard them before. One argument holds the President's growth package will enlarge the current budget deficit. Eliminating the deficit is an important goal, and the President's plan to expand the economy ultimately will reduce the deficit. But we also need to put the current deficit in perspective.
The recession, the declining stock market and the ongoing war on terror have combined to turn budget surpluses into deficits. Even so, the deficit in the last fiscal year was only 1.5 percent of our national economy, well below the average the government has incurred coming out of recessions during the last several decades.
The President's growth package will reduce the tax burden on the American people by $98 billion this year, $670 billion over the next 10 years. But the actual impact on the deficit will be considerably smaller than the static projections, because the President's package will generate new growth, it will expand the tax base, and thus increase tax revenue to the federal government ultimately.
In the end, we must weigh the cost of the President's proposals against the cost of an economic slowdown that might well take place if the President's growth package is not enacted. And here, the figures are very clear. If the economy were to grow just one percentage point slower for the next two years than we anticipate, then the budget deficit over the next 10 years would be almost $800 billion larger than expected. Clearly, acting now to promote growth and to prevent even larger deficits in the future is the economically sensible thing to do.
Some people dispute this. They argue that increased deficits necessarily lead to increased interest rates, which, in turn, slows economic growth. But the argument has one slight flaw. The evidence of recent years simply doesn't support it.
In January of 2001, the Congressional Budget Office projected fiscal 2002 budget surpluses at $313 billion. It turned out, though, that the actual fiscal 2002 result was a deficit of $157, or a swing of $470 billion. Yet the 10-year Treasury note yields are now about 4 percent -- more than a point lower than when the budget was expected to enjoy a surplus.
As I stated earlier, mortgage interest rates are at a four-decade low. The evidence is clear that interest rates do not move in lock step with changes in the budget deficit. The return path to a balanced budget is faster growth in the American economy and spending discipline here in Washington.
The President has proposed a plan that benefits all Americans. Taxpayers with incomes of $200,000 or more would receive an average cut of 11.2 percent; while those with incomes between $30,000 and $40,000 would receive a 20 percent tax cut; and those earning less than $30,000 would receive a 17 percent tax cut. Those are all figures for calendar year 2003. Under the President's plan, a typical family of four, with two earners making a total of $39,000 in income will receive more than $1,100 in tax relief -- money to help pay their bills and keep America's economy growing.
And it's important to remember that more than 23 million small businesses will benefit from the President's plan, and within this group are to be found many women and recent immigrants. In fact, over the last five years, the number of women-owned businesses has increased by 14 percent nationwide -- twice the rate of the creation of firms overall. For the small business owners of this country, success comes through great effort and perseverance. And thanks to that enterprising spirit, smaller firms create the majority of new jobs and account for half of the private sector output of our entire economy.
Other critics have suggested that ending the double taxation of dividends is somehow tilted toward a small number of wealthy beneficiaries. The fact is that 54 million Americans own stocks that pay dividends. Moreover, 45 percent of all dividend recipients make under $50,000 per year. Let me repeat that: 45 percent of all dividend recipients make under $50,000 per year. Three-fourths of them make less than $100,000 per year. And it's important to remember that more than half of all dividend income goes to America's seniors, many of whom rely on these checks as a steady source of income in their retirement.
It's also been suggested that tax relief on dividends will somehow hurt state budgets. But our Council of Economic Advisors projects that the President's jobs and growth package will increase our gross domestic product by four-tenths of a percent this year and 1.1 percent next year, boosting annual state revenues by some $6 billion. And these greater revenues will more than offset the revenue states lose from the dividend exclusion.
Finally, some of the President's critics claim that his tax cuts will drain resources needed to win the war on terror. But, in fact, we've been in similar situations before. Back in the 1980s, President Ronald Reagan cut taxes to stimulate economic growth, increased defense spending and won the Cold War. Thanks to his leadership, the American people successfully confronted challenges on many fronts.
Today, confronted yet again by a host of challenges, we can and we will achieve success across the board. After all, we are Americans.
I was proud as a member of the House of Representatives to support President Reagan in those efforts, and I'm even prouder to support our President today as he cuts taxes to stimulate economic growth, increases defense spending and acts to win the war on terror and to protect our homeland.
President Bush knows that wars are not won on the defensive. In the fight against global terror we must act boldly and take the battle to the enemy. The only path to safety is the path of action, and the United States of America will act, we will confront every threat from every source that could possibly bring harm to our country.
We will act boldly on the domestic front, as well. The President is confident that his jobs and growth package will unleash the productive energies of the American people, empowering them to work, to build and to create a better America. Ultimately, it all comes down to a question of trust, and the President and I trust our fellow Americans. As he said on Tuesday, "The courage and enterprise of the American people have never failed, and they will see us through once again. And there is no doubt in my mind that this great nation will indeed prevail."
Thank you very much. (Applause.)
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