Excerpts from the Press Briefing by Ari Fleischer, May 16, 2003 (Full Transcript)

12:35 P.M. EDT

QUESTION: Ari, first of all, the President proposed $726 billion in tax cuts. He only got half of it, less than half of it from the Senate. The Senate is putting a sunset provision on the dividend tax cut. How can you be pleased with this?

MR. FLEISCHER: Well, changes were made to the President's proposal. But all the elements of the President's proposal are still included in the Senate proposal -- in the Senate plan that passed last night. And the President is pleased by that, because progress is being made. The House version and the Senate version are now coming together and will be decided in a conference committee. And the President believes that what will come out of that conference committee is going to be good for the economy, good for workers, and good for the unemployed.

And so, therefore, the President looks at what is happening and he does see discernable progress on every element of what he proposed. And I can go right down the line and talk about how the marriage penalty is now going to be reduced, retroactive to January 1st of 2003; marginal income tax rate reductions, including taking the rate of the lowest tax payers from 15 percent down to 10 percent, retroactive to January 1st, 2003. For parents who have children, the child credit will be increased from $600 to $1,000 retroactive to January 1st, 2003.

On the dividend exclusion, there is a difference between how the House did it and how the Senate did it. Nevertheless, progress has been made. We still have issues we need to work out in the conference on that. And, of course, one way to help small business, which is one of the largest employers in our society, the expensing limits -- which are currently capped at $25,000, which means if a small business expends more than that they can't deduct it -- will be increased to different levels, depending on the House version or the Senate version, but between $75,000 and $100,000. So all of that is what the President proposed. Much of that is what is in both versions.

QUESTION: Coming back to the tax cut issue, the President went on record saying that we need at least $550 billion to try to stimulate the economy. We've got a range now of $350 billion, $550 billion. One, how much pressure is the White House going to bring to bear on this process next week? And two, can we expect to see any more tax cut legislation this year, not in 2004?

MR. FLEISCHER: Well, here's what's guiding the President on this. His view is that the economy needs a boost, the economy needs a stimulus because we're not creating enough jobs. We are in a period of low growth in our economy. We're coming out of a recession, but we're coming out of a recession in an uneven fashion.

You can find quarters not too far ago where growth actually did grow above 5 percentage points. But there are too many quarters where growth grew only at about 1 percentage point, or just above 1 percentage point. That type of uneven growth does not lead to businesses, to manufacturers, to factories hiring workers.

The purpose of the tax plan is to create a permanent boost to the economy so the economy grows at a more sustainable rate. From the President's school of thinking, the higher the number, the bigger the boost. The smaller the number, the less the boost. The higher the number, the more jobs. The lower the number, fewer jobs.

So, yes, the President will push for the greatest amount of boost to the economy, therefore, the most jobs get created. We will work with the House and the Senate. There are certain constraints that each of those institutions is working under. And now they face the difficult work of working together to get the agreement. And we will be there to help them with that.

QUESTION: But assuming that figure comes in closer to $350 billion than to $550 billion, what other actions could we see the President propose this year?

MR. FLEISCHER: Okay, and, one, I also need to point out, it gets a little bit into the technicalities of how tax legislation works, but you've got a net number and a gross number. So, of course, you can have a higher tax cut than $350 billion, depending on the offsets that are including. So you can have a gross number that's a higher tax cut number that has a stimulative effect, and assuming that the offsets are benign, then you can deal with that difference as a result of having proper offsets.

I'm not prepared to make any guesses about any other tax legislation down the road. Congress has some ideas that it wants to work on. Of course, there is an issue that's not necessarily -- depending on how you want to review it -- it's tax legislation that deals with our obligations to the World Treaty Organization involving foreign sales corporations, the FSCs legislation. That's tax legislation that does -- that the Congress is taking a look at working on this year. That's an important matter.

QUESTION: I have two questions on taxes. The first is, a few minutes ago you said -- you declined to speculate on future tax cuts. But earlier today, you suggested that future budget submissions from this administration would contain tax cuts. Given the fact that only about -- of the President's budget this year, over a trillion dollars still hasn't even been considered by the Congress, will future budgets contain new starters of tax cuts, of will they just be --

MR. FLEISCHER: Thanks for raising that again. I want you to go back to exactly what I said this morning. When I talked about the budgets, I said the last three that the President proposed all contained tax cuts. And I said the President continues to talk about making certain that the tax cuts are permanent. I did not describe whether there would be or would not be additional future tax cuts. So to be precise, that's what I said this morning. And I can't speculate about tax cuts down the road other than making tax cuts permanent.

QUESTION: And my second question has to do specifically with the bill that was just passed last night in the Senate. On Wednesday -- Tuesday, rather -- the President in Indiana reiterated his insistence that corporate profits -- that it's fair to tax corporate profits at least once. The dividend proposal that the Senate passed last night will create a scenario where a company that's not paying taxes to the government, but issuing dividends, would still be able to issue those dividends tax-free to shareholders. Is the President committed to the idea that corporate profits should be at least taxed one time before their dividends are passed on to shareholders?

MR. FLEISCHER: Well, in terms of the specific way that the tax legislation and the tax code interacts with dividends, in terms of the corporate profitability, this is a technical question that the Department of Treasury can better address when it applies to the dividend provision. Generally, of course, that's what the President believes. He continues to believe that. But there is a specific interactability among different provisions in the tax code that deal with profits and dividend exclusions. And you would need to talk to Treasury, because they're more expert than I am on that.

QUESTION: But, more generally speaking, since the President has argued against this dividend -- double-taxation of dividends as a matter of principle for the last several months, if he gets a bill that doesn't -- that may actually eliminate the single taxation of dividends, that's something he can accept.

MR. FLEISCHER: You just rephrased your same question, but my answer remains the same.

QUESTION: Just double-check, Ari. The Senate tax cut bill that was passed last night, the President called it a "little bitty tax cut" very recently. Does he still think that?

MR. FLEISCHER: Well, we'll see what actually comes out of the House conference. And this is why I indicated there's a difference between the net number and the gross number, and you have to see how that comes out, as well. We're not done yet.

QUESTION: But the level that passed last night is still "little bitty," right?

MR. FLEISCHER: Well, the level that was passed last night looks like it's in the mid 400s as a gross matter.

QUESTION: If you factor in the tax hikes that --

MR. FLEISCHER: That's why I said, as a gross matter. And so we're not done yet. We still have some issues to work out both on the offset side and on the actual tax cut side.

QUESTION: Until recently the President called for a tax cut package of at least $550 billion. Lately you're just calling for a package as robust as possible without giving a price tag. I'm wondering why the administration is no longer setting a figure, and whether the $450 billion that you mentioned a moment ago would be adequate, whether or not it's a gross number, or a net number?

MR. FLEISCHER: I think I said mid-400s. And the President sets a standard that he hopes that the Congress will live up to. The President sets that standard because he thinks it is the best policy for the country.

In our constitutional system, the Senate and the House are also qualified to discuss what they think is the best for the country. And at the end of the day, the President wants to get something done for the country.

Now, you can say a President -- after how he takes a stand, should never change from that stand, should only adhere to that stand, and, therefore, not get compromises reached in order to make progress. If the President came to the conclusion that there was insufficient progress, he would say so. He see progress being made on the tax legislation on Capitol Hill and he's grateful for it. He thinks it's good for the country and good for the economy.

QUESTION: Ari, to this point the President has blamed the sluggish economy on an inherited recession and the war. Since it's apparent now that he's going to get at least some tax cuts, and as you've said, it contains his proposals, if the sluggish economy continues and it doesn't improve, will the President then take responsibility for that and stop blaming it on other factors?

MR. FLEISCHER: I saw a story last week that said that with this tax cut this means the President has responsibility for the economy. This President accepted a responsibility for the country on January 20, 2001. He accepted responsibility for it in all forms, whatever form it was in. And that is what happens when you're the President. And so I think it's a nonissue. The American people know who the President is. They'll make their judgments about factors at the appropriate time.

But when you take a look at what happened in the economy, talk to private sector economists, and they'll tell you that for a rare time the tax cut in 2001 was actually perfectly timed. It did help us emerge that fall from the recession that we were in. It did give a boost to the economy. And clearly, the first quarter of 2002, right after the tax cuts were received, was one of those quarters where the economy in greater than 5 percentage points for that first quarter. Now, the economy has been uneven since then, meaning that this, too, could be a perfectly timed tax cut to give that boost to the economy to help it to get going in a sustainable period of higher growth.

QUESTION: So he anticipates that whatever comes out of Congress is going to be a boost to the economy. Now, if it fails to do that, what other thing can he attribute it to other than his policies aren't working?

MR. FLEISCHER: You're asking a hypothetical. I'm sure that if the economy is not strong a year from now you'll be asking questions about it.

QUESTION: Ari, there are analysts -- back on the campaign -- there are analysts who say that before this President came to office, that the presidency has become a sort of permanent campaign, and that at least so far as the public events that the President undertakes, there is always at least a political element to that. How does the President think about that?

MR. FLEISCHER: Again, I think that you've got an abundance of historians and analysts who can share their perspective with you on this. But as any number of scholars -- as de Tocqueville has pointed out -- I mean, America is a very open democracy, and part of that open democracy is a government that does its business in front of the people, and the people make judgments. That's how it should work. What's the alternative? The alternative is not democratic.

So, yes, this President is going to do everything he can as the elected President of the country to implement good policy. And the American people will form judgments about what he does -- both in the war on terror, in the conduct of foreign policy, and in matters domestically, including the economy.

QUESTION: And on a second subject, there were reports in the British press this weekend alleging that the Jessica Lynch affair was used by this administration, was manipulated in some ways, and that even, perhaps, the conduct of the rescue of Jessica Lynch was manipulated in some way for public consumption.

MR. FLEISCHER: I haven't seen those reports. And I don't comment on things I haven't seen, especially -- there's all kinds of different tabloids.