Excerpts from the Press Briefing by Ari Fleischer, May 6, 2003 (Full Transcript)

QUESTION: Senator Grassley has laid out a proposal on this package which would include the notion of a cut on dividend income -- taxes on dividend income, that that would be phased in, and then sun-setted. Is that a good idea?

MR. FLEISCHER: Well, the phase-in, sunsets are a typical part of tax policy. Obviously, given the fact that the President's original proposal was for $726 billion, and the two proposals in the House deal with $350 and $550 billion, it's important that the central elements of the President's plan be included. And the President is very pleased by what he's hearing about the inclusion of the central elements of his plane. Even beyond the dividends, there's so much more that the President sought that is in the plan.

So there's a lot of progress being made. Obviously, it's not everything that the President sought, but it's an awful lot of what the President sought.

QUESTION: But isn't cutting taxes and then sunsetting the tax cut a kind of gimmick by saying -- it's sort of defying a future Congress to reinstate the taxes on dividends, where it's pretty obvious that that would be a real politically difficult thing to do. So essentially, it's trying to pass a bigger tax cut that they're willing to admit.

MR. FLEISCHER: Well, of course, the 2001 bill was done in a similar manner. That's why I say this is a common way that tax legislation is considered on the Hill. You're all very familiar with the alternative minimum tax, which every year has to be treated as what they call an extender because the provisions sunset on an annual basis. Sunsets -- these are regular parts of the tax code. The President would have preferred for it to be dealt with in its entirety through the $726 billion proposal that he made. Congress did not agree to all of that, but they've agreed to much of that. And so we're working now on the specific details of it.

But no matter how you cut it, substantial progress along the lines of what the President proposed is being made. And the President's appreciative of that. More importantly, people looking for work in America can be appreciative of the fact that Congress is taking action to help them to find jobs by stimulating the economy through these presidential plans.

QUESTION: And on that, the President reiterates again and again, one million new jobs from this package. That comes from the Council of Economic Advisors. But most economists say that most of those jobs, the vast majority of those jobs would come about given the current projections for economic growth in the economy. So the President is trying to take credit for potential job growth that most economists think will happen as the economy comes out of this slow time.

MR. FLEISCHER: There is a school of thought among economists that the economy is going to recover later. That doesn't do a whole lot of good for people who are unemployed now. For somebody who is unemployed now, it is small comfort to know that some economist somewhere says you may get a job in six months or may get a job in a year, but by the way, until then, do you mind collecting unemployment benefits, because we're not here to help you. That's not the President's approach.

QUESTION: So the President is promising, guaranteeing, that this package would create these jobs in the next six months?

MR. FLEISCHER: Well, let me walk you through some of the studies that have been done on this. And one of the best ways to understand the job creation that the administration economists believe would take place in this 2003 proposal is to look at history.

The 2001 tax bill that was passed at a time when the country was actually in recession, which helped propel the economy out of recession, without the stimulative effects of that proposal, one million fewer people would be working today. This is according to the Council for Economic Advisors. The Job Creation and Worker Assistance Act of 2002, which was passed earlier in 2002, with bipartisan support, also helped mitigate the effects of the economic downturn. That act created an additional 220,000 jobs and raised current GDP by another 0.4 percent.

Many of the economists that you are accurately citing have also based into their projections for a recovery the fact that Congress will indeed pass a stimulative tax bill this year. They will still differ about the exact elements of it or the size of it, but baked into their cake is the presumption that Congress will pass a stimulus which will help create jobs.

What the CEA has estimated for 2003 is that the President's proposal that he originally made would have created 1.4 million jobs in 2003 and 2004, and the proposal that the President is pushing for, which is at least $550 billion, will create more than 1 million jobs. That's a lot of comfort to a lot of people, and that's why the President is doing it.

QUESTION: And due entirely to this proposal, not to economic growth that would be occurring otherwise?

MR. FLEISCHER: This is the CEA's estimate the President's jobs and growth tax reduction would create.

QUESTION: Ari, has the President given up on a bipartisan tax plan this year? Democrats seem to be digging in their heels, and they're also saying that no one from the administration has contacted them. People like Mark Pryor have said that. Is in fact -- are you still hoping for a bipartisan bill?

MR. FLEISCHER: There have been numerous contacts with Senate Democrats about this. And obviously, the President is interested in as bipartisan a result as is possible. But he's interested in results. And he hopes that many Democrats will be willing to provide support for a jobs plan, a growth plan based on stimulating the economy. We'll see if the Democrats decide to do that, or not. But in the meanwhile, the President is looking to assemble a majority, and we'll see exactly how many Democrats sign up for that majority. We'll see exactly how many Republicans, as well. That's, in the end, how you get things done for the country, to assemble majorities.

QUESTION: If I could go back to the jobs question for a moment. The President said very specifically this morning that he expected this to create a million jobs by the end of 2004. Since he became President, the economy has lost about 2 million jobs. Does that mean that the President is willing to go to the voters in 2004 and say, my record of presiding over the loss of a million jobs in this economy is good enough to warrant reelection?

MR. FLEISCHER: I think the President is going to, no matter what the year, make the case to the American people that the economy that we inherited in 2001 was an economy that had already begun its downturn. The downturn began, as you know, in the summer of 2000. And what's important now is that the economy recover and that people in both parties work together to help the economy recover.

The American people will decide who should get the credit if they want to give the credit to anybody. The President is interested in sharing that credit, and therefore, he wants Democrats and Republicans to work with him to get an economic plan passed so that we can grow from the recession that began in January 2001.

QUESTION: But as the question is losing a million jobs over the course of the presidency a good economic record?

MR. FLEISCHER: Well, I think the American people will decide who they want to credit for the growth and for the recovery that takes place. We'll see what the actual numbers are as the recovery continues. And I can't make any predictions about that, other than the President's approach to it is to share the credit, to work with Democrats and Republicans alike, because what's important to him is that people have an opportunity to work if they're looking for work.

QUESTION: Ari, Congressman Bill Thomas is calling for a $550-billion tax cut plan, including the accelerated cut for income tax, as well as -- not in full, but at least reducing the corporate dividend tax to 15 percent. It's a figure, the $550 billion, that's the closest to what the President is seeking. Is that an acceptable package, with the 15 percent?

MR. FLEISCHER: Well, just as I indicated earlier, both the House and the Senate are making important progress on the President's proposals. I think you'd be hard-pressed to find an example on tax policy where any President has made a proposal and Congress passed it precisely, exactly as is. That's just not how our system, based on checks and balances, works. But when you look at the substance of what the Congress is working on, it's remarkably, remarkably similar to what the President proposed in structure and substance, not in every detail.

The House of Representatives is working on a proposal that will reduce the individual dividend tax rate down to 15 percent and 5 percent. It's currently at 38.6 percent. The President's proposal was to take it from 38.6 percent, reduce it to zero percent. Instead they're reducing it to 15 percent and 5 percent, depending on your income level. That's progress.

When you look at the rest of the tax plan that the Ways and Means Committee is working on, you'll see it is virtually identical to what the President proposed, because it accelerates the income tax rate reductions to January 1st of this year; it accelerates the child credit from $600 to $1,000, immediately effective this year; as well as accelerating marriage penalty relief, all of which the President proposed, all of which are significant in terms of getting dollars into people's hands this year so those individuals can spend that money to buy a good or a service, which, in turn, creates economic growth and helps to employ people.

QUESTION: And Senator Daschle just announced, as you know, his own plan, $152 billion. But he also criticized the President's plan, saying a robust jobs and growth package is just a bust, and talked about the reason why he felt that it would not necessarily create jobs. Is there any response from the administration?

MR. FLEISCHER: Well, obviously, there are going to be some people who previously voted to raise taxes who have said previously they would think about reversing the President's tax cuts, which is tantamount to another tax increase. And the President thinks that that's the exact wrong thing to do. Raising taxes is the wrong thing to do, particularly in an economy that needs a stimulus to create jobs. He respects the opinions of others, but, no, he will not support plans that raise taxes and a plan that provides, in this case, not enough stimulus to the economy.

QUESTION: Ari, two quick questions about numbers. The President this morning said his package as sent to Congress would create a million jobs. There's almost no one left in this town who believes that that package will survive intact. So is the President really acknowledging that the lesser tax cut will -- is he prepared to acknowledge that it would create fewer than a million jobs?

MR. FLEISCHER: Well, I think that remains to be seen when you have to examine the exact details of what the Congress passes, and the exact level at which final conference agreement is reached, whether it's, as the President has asked for, is at least $550 billion. The Council for Economic Advisors has also come to the conclusion that if a proposal were scaled back to about $350 billion, it would create some 300,000 to 400,000 fewer jobs -- actually, 425,000 fewer jobs -- then a package proposed at -- passed at $550 billion.

So the President is concerned that any plan that was passed that would be smaller would create fewer jobs. And that's why this is an ongoing process, and we'll continue to work with both the House and the Senate to create as many jobs as possible. So we'll see what the exact formula the Congress uses and see what the exact substance is.

QUESTION: On the tax cut, you've said it several ways this morning, but you appear to be saying that the administration will consider it a victory no matter what you get on the tax cut because, as the President suggested yesterday, people are now just arguing over the amount.

MR. FLEISCHER: Well, keep in mind what this tax relief package is comprised of. First of all, the goal is to pass it to help create jobs. Secondly, it's comprised of an across-the-board marginal income tax rate reduction for all taxpayers, accelerated to January 1, 2003, so it delivers the most oomph this year to help give a boost to the economy.

It consists of the acceleration of the child tax credit, a proposal the President made in 2000 that was enacted into law in 2001, that was originally put on the books by the Republican Congress in 1997. It also includes reduction of the marriage penalty, a long sought-after policy goal by President Bush and many Republicans. So when you take a look at the other major component of the bill, it tracks virtually exactly with what the President proposed and what the President ran on and now what the President has said needs to be accelerated.

On the dividend piece of it, clearly, there are some differences between the exact manner the President proposed the dividend elimination and the manner in which it's proceeding in the House and the Senate. It delivers substantially what the President asked for. Not all, but a lot. And we'll continue to work with the Congress to get more. But I just think it's hard to look at this tax bill in its entirety in any way and say the President is not getting substantially what he asked for, which is a good result, because that's how jobs will get created and the economy will benefit.

The President proposed this because he looked at what is best policy to create jobs. And Congress is looking at it in a similar way.

QUESTION: But even the most vigorous plan on the Hill, in the House side, not only pared back the amount the President asked for, but also approaches it in a different way, not reducing it to zero, paring it up with capital gains, and that sort of thing. So it was the dividend tax cut that really caused you the problems here. That's the part that was expensive, that's the part that some Republicans gagged over, and that's the part that was difficult. The other part, you seem to have quite a bit of agreement on, even going in.

MR. FLEISCHER: Well, that's why I said, on the dividend piece in the House, the current dividend rate is 38.6 percent to the top rate. And the House is proposing to lower it to 15 percent, and in many cases for taxpayers, all the way down to 5 percent. The President's preference would have been to taking it to zero percent in its entirety. That's progress. It's not everything the President wanted.

Now, in the Senate, we're still working with the Senate. We'll see exactly what the Senate does. But the President does think it should be reduced to zero percent. So we're dealing with either a lot of progress or a tremendous amount of progress. We'll see.

QUESTION: Ari, on the House dividend proposal, is it now the position of the White House that it's okay to take something less than a complete deal, given the political realities where the House is and where the Senate is --

that you're willing to take what you describe as substantial progress the House is making, the 38, 15, as a step in the President's direction, even if you don't get all of --

MR. FLEISCHER: Well, that's why I called it progress. It is not everything the President asked for, but it's a lot of what he asked for.

QUESTION: Coming out of this process, which will mature in the next few weeks, that would be acceptable for the White House?

MR. FLEISCHER: The President continues to believe that the best policy is to have zero percent on individually paid dividends. He believes it's double-taxation, that it's wrong to tax someone twice. And if it's wrong to tax someone twice, the preferred policy outcome is zero. That's what he will continue to make the case to the Hill to do. We're continuing to make that case to the Senate as we speak. We'll see what the House and the Senate, as independent bodies, decide to do. They are elected officials; they, too, are entitled to their opinions and their votes. After the House passes something, that will also be taken up by -- the Senate will pass it, then they'll meet in a conference committee, and we'll have additional opportunities to convince members of Congress about the President's plans.

QUESTION: So there's a recognition here you're going to have to compromise?

MR. FLEISCHER: Well, Congress has to compromise, as well. They'll work with us and we'll work with them.

QUESTION: The President has said several times, he said this morning, too, that the dividend repeal would create 400,000 new jobs. Was that part of the original CEA estimate from January, or is that part of the estimate of -- your reestimate of 1 million for $550 billion?

MR. FLEISCHER: I'll have to go back and take a look at the internal elements of the study -- I brought some of the cover sheets -- to take a look at how they broke it down by component.

QUESTION: And do we know how -- if 400,000 new jobs are created by full repeal, which has been the rhetoric back since January, do we know -- can we get an estimate on what we would have by way of job creation with a reduction in the 15 percent?

MR. FLEISCHER: Yes, we'll work with you, Greg, and try to see what we can find on the components.

QUESTION: And can we also get an explanation exactly how a dividend repeal creates jobs, as opposed to a tax cut for small business or for the rate decreases?

MR. FLEISCHER: Well, on the way the dividend repeal would create jobs, it provides more stimulus to -- for the economy to grow, as a result of increased capital being available for companies to grow and hire people. If you're an employer, you can't hire somebody if you don't have money to pay for your employee. And so that's where --

QUESTION: -- awards old money in the market, and doesn't reward new money coming into the market.

MR. FLEISCHER: That's the capital formation that is a result of the dividend repeal.

QUESTION: Yes, Ari, just a couple of quick follow-ups. One, on the dividend proposal, do I hear you correctly, basically saying you're going to declare victory no matter what you get, even though on the dividend proposal on the Senate side, you basically only have one year, 2005, where there's 100 percent repeal of the dividend?

MR. FLEISCHER: First of all, we haven't -- the Senate mark is not in final form. The markup is two days from now, and so we'll see exactly what takes place in the Senate. But it's just as I said earlier. This is progress. This is -- you can compare the progress, you can take a look what the President asked for.

QUESTION: Is this the early stages of declaring victory?

MR. FLEISCHER: This is not a question of declaring one thing or another. This is a question of creating jobs for the American people.

QUESTION: Let me follow up Terry's question, if I can, about the Senate proposal that's cooking on the dividend tax cut, the sunset division. Didn't the President just go to the people last fall saying, let's make the original tax cuts permanent? Why would he even consider a version that now creates another tax cut that disappears?

MR. FLEISCHER: There's no question that the President is not getting everything he's asked for, but he's getting, in both the House and the Senate proposals, a lot of what he's asked for. And one of the problems in Washington, there are people in the other party who say, because I didn't get everything I wanted, I'm not going to accomplish anything for the people. One of the problems in Washington, there are people who don't want to work together to compromise to get good things done for the country.

So, no, this President is not getting everything that he asked for in his tax bill, but he is getting an awful lot of it. And I remind you that every year you take a different look at the budgets, you take a different look at factors, and the President can keep coming back and trying to do more and do more for the American people.

QUESTION: Does that totally counter to what he campaigned on and his philosophy that tax cuts should be permanent and not disappearing?

MR. FLEISCHER: Well, if you keep working on it every year, you have a way of making things permanent.

QUESTION: Two questions, and an administrative matter. Could you please post the answers to Greg's factual questions, please?

On taxes, I understand that you will continue to press for the complete elimination of the tax on dividends, and that that's what you'd like to get. But when you say a reduction as opposed to a total elimination would be substantial progress, isn't that a very first signal to the Congress and to everyone else that you'll take that, at least this year?

MR. FLEISCHER: Well, it's a signal that the President makes a proposal and that Congress ultimately has to act on it. And I think I'm really stating in a very factual way the status of the President's request and how it's been received by the House and by the Senate, when you take a look at all the different components of it, including the dividend piece.

This is still a story being written. They haven't even marked up yet in committee. Now, we do have the outlines of what the Chairman's mark looks like in the Ways and Means Committee; we have the specifics of it. So we'll see ultimately how this comes up. But I remind you, there's a conference ahead. The President will continue to push for zero. But I remind you, the President also wants to get things done for the American people. The President believes in working with the Congress to get things done.

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