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For Immediate Release
Office of the Press Secretary
July 27, 2006

President Addresses the National Association of Manufacturers
Grand Hyatt Washington
Washington, D.C.

President's Remarks

1:47 P.M. EDT

THE PRESIDENT: John, thanks. Thanks for the good, short introduction. (Laughter.) Thanks for having me here. I want to thank you all for doing what you do for the country. I appreciate your leadership. I appreciate the entrepreneurial spirit which is represented in this room. Our manufacturers make products that enrich our life, that drive and sustain our economy, that create jobs and opportunity. When America's manufacturing sector is healthy, this country is healthy. And that's what I want to come to talk about, how to make sure that this nation has a healthy economy and how to make sure the manufacturing sector remains one of the most important parts of our economic vitality.

I want to thank John Luke for his Chairmanship of the National Association of Manufactures. I appreciate you hiring my buddy, the former Governor of Michigan, John Engler -- (laughter) -- who is doing a fine job, I might add. I'm proud to be joined today by a member of my Cabinet, Ambassador Susan Schwab, who is the U.S. Trade Representative. Thanks for coming. (Applause.) I'm going to talk a little bit about -- and I appreciate the members of the National Association of Manufacturers. Thanks for coming to Washington; thanks for giving me a chance to visit with you.

I understand the importance of manufacturing to our nation's economic leadership and prosperity. Our economic growth is powered by manufacturing. Catch this fact: By itself, U.S. manufacturing output is greater in size than the eighth largest economy in the world. Our manufacturers pioneer the innovations, technology and methods that maintain this nation's economic leadership. And it's important that we remain the economic leader in the world, for the good of our people. Manufacturers are responsible for nearly three-fifths of all private sector research and development. In other words, if you want to be the economic leader, you must have research and development to constantly stay ahead of the competition. And the manufacturing sector of the United States spends a lot of money making sure this country is innovative.

Our nation's standard of living depends on our manufacturers. America's manufacturers provide our people with rewarding careers and high-paying jobs. Manufacturing jobs pay over 20 percent more than the national average. If you're working for a manufacturing company, you're likely to be getting paid more than your neighbor. Your standard of living is higher.

For decades our manufacturers have faced the pressures of increased competition and globalization, but you've handled that competition well. Not only have you handled it well, you've excelled.

Manufacturing today represents roughly the same share of the real economy as it did 20 years ago. Every day American manufacturers confront the competitive challenges of the global marketplace. I know that. You especially know that. But every day you stay innovative and creative and work on productivity, you continue to lead this nation. And so I'm here to thank you, to thank you and your workers.

You know, we've overcome a lot together. Sometimes it's easy to forget short-term history. I'm sure you still remember the days of recession, stock market adjustment, corporate scandals, the terrorist attack of September the 11th, 2001 that still drives my foreign policy, the response of our government to defend ourselves; natural disaster, high energy prices. We've faced a lot. But as John mentioned, I'm the kind of fellow that sees a problem and likes to address it head-on.

And working with the Congress, we cut the taxes on you to get this economy back. I believe that when you have more of your own money in your pocket to save, spend or invest, this economy is going to grow. I would rather have the American people spending their own money to drive this economy forward than government trying to drive the economy forward. And so we cut the taxes. We didn't cut the taxes on a few, we cut the taxes on everybody who pays taxes. We doubled the child tax credit. We reduced the marriage penalty. We created new incentives for small businesses to invest.

We cut the taxes on dividends and capital gains, and we did so because we thought it was important to lower the cost of capital. If you're counting on the private sector to help recover from the tough situations we've been through, what you want to do is make capital less expensive so you can borrow easier or raise money faster, to invest. Investment means jobs and expansion.

We put the death tax to the road -- on the road to extinction. I believe it's unfair to say to somebody who's built up some assets -- a farmer or business owner -- that the government is going to tax you twice -- once when you make your money and then once when you move on, and try to pass it on to your relatives. That's called "taxation without respiration." (Laughter and applause.)

This Congress passed -- repealed the death tax, and the Senate is working on it. I strongly urge the United States Senate to come together with the House and put an end to the death tax for the sake of economic expansion. (Applause.)

Our policies have worked. Let me rephrase that: Our policies to enable you to work better have worked. After all, the economy grew at an annual rate of 5.6 percent in the first quarter of 2006. In 2005, the American economy turned in a performance that's the envy of the industrialized world. Our economy grew at 3.5 percent. That's faster than any other major industrialized nation.

Since August 2003, this economy of ours has created 5.4 million new jobs. That's more than Japan and the 25 nations of the European Union combined. For 34 straight months, the American economy has added jobs. Our unemployment rate is 4.6 percent -- that's below the average of each of the past four decades. Manufacturing employment has increased by 18,000 over the past year -- it's the largest 12-month gain since the period ending September of 1998.

Across the United States, real after-tax income is up more than 7 percent per American. Since January 2001, productivity is on the rise. Our productivity has been growing at 3.5 percent for the past five years. That's the fastest rate in nearly four decades. American workers are more than 18 percent more productive than they were in early 2001.

Let me talk about productivity for a minute -- it's kind of a concept that some may not relate to. From 1973 until 1995, productivity grew at 1.4 percent per year. At that rate, it would take 50 years to double the standard of living for Americans. Our economists now project that productivity will grow by 2.7 percent over the long-term, and at that rate, we can double the standard of living of Americans nearly twice as fast. In other words, the more productive a society it is, the better lifestyle our citizens will have.

Manufacturing activity is growing. For 37 straight months, the Institute of Supply Management's manufacturing index has indicated that the manufacturing sector is expanding. Over the past 12 months, industrial production has increased 4.5 percent. And this morning, the Commerce Department reported that new orders for durable manufacturing goods were up 3.1 percent in the month of June. What I'm telling you is the economic policies we have pursued are working. (Applause.)

And the fundamental question facing this country is: What do we need to do to ensure the economy remains strong? What is it that Congress and the administration can do to help the manufacturing sector continue to grow? What is it we must do to make sure the entrepreneurial spirit remains strong? What actions must we take to make sure America is the economic leader in the world?

Well, here are some ideas. One, is we've got to be wise about how we spend your money. We've got to be wise when we appropriate money here in Washington. Deficits can hurt economic vitality. And I understand that. So the first thing you've got to do here in Washington is set priorities when it comes to spending the people's money.

And I'll tell you my priority. My priority is this: So long as we have a man or woman wearing our uniform who is in harm's way they will get all they need to secure the victory. (Applause.) And we'll spend resources to protect this homeland. September the 11th reminded us that we're no longer an island, that we can't assume problems overseas won't come home to hurt us. Our most solemn duty in Washington, D.C. is to protect the American people, and we take that duty seriously.

And that priority is reflected in the budgets. And so we've got to show spending restraint elsewhere in the budget if we're going to be wise about how we spend your money. We've reduced the rate of growth of non-security discretionary spending since 2001, and my last two budgets have cut this kind of spending. We said to Congress, here's our priorities, you need to make tough choices. And they've come along with us. And I hope the appropriations bills coming out this fall match this same fiscal responsibility that we've shown in the past.

I also addressed mandatory spending earlier this year when I signed the Deficit Reduction Act, which saves taxpayers nearly $40 billion over the next five years. In other words, we're working with Congress to be wise about spending your money.

I set a goal for this country that we cut the deficit in half by 2009 -- just had an interesting statistic come out in the Mid Session Review recently. That's the time we take a look and see how things are going. When Rob Portman, who is the Director of OMB, analyzed revenues and spending, he projected that tax revenues will grow by $246 billion during this year. In other words, when you cut the taxes and you grow your economy, more revenues come into the Treasury. And it looks like we're on track to balance our budget by 2008[sic].* The current deficit is now -- projected to be 2.3 percent of GDP. We're fulfilling our responsibilities. We're meeting the goal of reducing this deficit. The best way to reduce the deficit is to keep pro-growth economic policies in place by keeping this tax code -- making these tax cuts permanent and being wise about how we spend your money. (Applause.)

If Congress really does want to work with the administration to make sure that there's fiscal sanity in Washington, they need to give me the line-item veto. And I appreciate your hard work on this issue. Thank you for supporting our attempt to work with Congress to make it easier for both parts of government, both branches of government, to be smart about how we spend the people's money.

Forty-three governors have got the line-item veto. It's a useful tool. It works. It's time to bring the important tool to Washington. The line-item veto will allow a President to target unnecessary spending. See, sometimes they get these big spending bills and put a little something in there for their district. (Laughter.) Sometimes they're able to do it without a hearing. Just kind of ends up in there, in the bill, without much scrutiny. They're able to put earmarks on large bills.

What the line-item veto would enable a President to do is take a look at the big bills, and kind of call out some of the programs that might not fit into the national priorities, and then send it back up to the Hill for an up-or-down vote. That's one way to make sure there's fiscal sanity in the budget. But the line-item veto would do something else. It would make lawmakers hesitant to try to tack something into the bills in the first place if they knew that their programs would see the light of day. In other words, sometimes sunshine is the best way to heal a problem.

I want to thank you for helping get the bill out of the House of Representatives. A bipartisan majority supported this concept of a line-item veto, a concept where the executive branch and the legislative branch would work closely together. And the United States Senate needs to take up this important legislation.

I was pleased the other day when my opponent in the 2004 campaign, John Kerry, came down to visit with me in the Cabinet Room to endorse the line-item veto. He's one of the bill sponsors of the line-item veto. The Senate needs to get the bill passed and to my desk. (Applause.)

I understand what you understand, that one of the biggest drags on our economic growth is going to be Social Security and Medicare, unless we do something about it. See, we've got a lot of guys like me who are fixing to retire. (Laughter.) I'll be 62 in 2008 -- which is a convenient time to turn 62. (Laughter.) And there's a lot of baby boomers that are living longer and that are getting ready for the benefits that we have been promised -- by the way, benefits that are larger than the previous generation's benefits.

And there are fewer people paying into the system to make sure that the promises that have been made to my generation are kept, which means these big programs are becoming insolvent very quickly. There's an overhang. There's unfunded liabilities that we've got to address. One of the reasons why Hank Paulson came to Washington is because he wants to address big problems -- he's the new Secretary of the Treasury. He's a can-do kind of person, John; he can get things done. And I'm looking forward to working with Hank and working with the United States Congress to once and for all put Social Security and Medicare on the road to solvency. We owe it to a new generation of Americans coming up, and we owe it to our entrepreneurs and risk-takers to solve this problem now.

It's so easy in Washington to say, well, it's not necessarily a crisis; let's just shove it down the road. That's not why I ran for office. I believe a President and a Congress must confront problems now and not pass them on to future generations, which is what I intend to do. (Applause.)

Here's some other ideas to make sure we're an economic leader. We've got to remain competitive. We've got to make the R&D tax credit permanent. (Applause.) I talked about -- here's somebody trying to figure out how much to spend on R&D, and you're not sure whether or not the tax credit will be around in the out years, you're less likely to take risk, less likely to spend the money, less likely to invest in the future, so the R&D tax credit -- the permanency of the R&D tax credit makes sense if you want to remain a competitive nation.

And here at the federal level, I have proposed doubling the federal commitment to the most basic critical -- the most critical basic research in physical sciences over the next 10 years. I'll tell you why I have. I think that the federal government can help leverage ideas. I know it's in our national interest to spend taxpayers' money on research. The research that we conduct today will enable future generations to remain competitive tomorrow. I don't know if you know this or not, but the iPod came about because of a lot of federal research, or probably the most known one is the Internet. In other words, it makes sense to invest taxpayers' money because there's a greater good to be gained when it comes to investing in basic research.

You know what I know, that we better have an educated work force if we're going to be able to compete in the 21st century. We've made great strides in early grade education. I don't know if you followed the debate on No Child Left Behind, but it's a really important piece of legislation. I'll tell you why it's important -- is because for too long we had a system that just shuffled kids through the schools. You know, I spoke to the NAACP the other day and I recounted a story of when I was a governor. I remember going to a high school in a pretty tough neighborhood in Texas. I'll never forget, the 9th grade teacher looked me in the eye and said, "I'm having trouble teaching." And I said, why is that? He said, "Because my kids can't read." In other words, they'd just been moved through.

We can't compete in the 21st century if we have a system that does not hold people accountable. And so we said, in return for additional federal money from Washington, D.C., we expect you, the state, to measure. Why do you measure? Because you want to know early in a child's career whether they can read or write, and add and subtract. And if a child is falling behind there's extra money in No Child Left Behind. The whole purpose is to have an accountability system that is able to detect problems early, before it's too late. And guess what. Because we measure, we can now see that an achievement gap is closing.

But there's more to be done, particularly in math and science. We need to apply the same rigor of No Child Left Behind that we use in reading in No Child Left Behind in math in the middle grade. We're doing fine early in math. The problem is, is that the measurement shows us that we're falling behind in math in the middle grades. We need to measure and solve problems earlier for our children than high school when it comes to math and science.

I'm a big believer in Advanced Placement. These are programs that believe in high standards and high accountability. And so we're going to train 70,000 high school teachers over the next five years to head AP courses in math and science.

I'll never forget going into Dallas recently to see an AP class there. And presumably, this little school graduates more AP students than any school in the country, at least that's what the Texas teacher told me. But you know how we Texans are, we tend to -- yes, we -- (laughter.) Let's just say this: they graduate a lot. (Laughter.) And there were Latinos and African Americans. These bright young kids will become -- will be the scientists and engineers. But they need that rigor, they need to be challenged, they need to have high standards, and they need a teacher group that is capable of teaching Advanced Placement.

We need to have an adjunct teacher corps, to bring 30,000 math and science professionals into the classroom. Sometimes science isn't viewed as cool. But we need to make sure that students understand that it is good to take science and engineering and math. As a matter of fact, we need to be able to connect the fact that the jobs of the 21st century, the high-paying, high-quality jobs will depend on a person's ability to be able to be an engineer or a mathematician or a scientist.

And I want to thank John and your crowd for helping us with this American Competitiveness Initiative. It's vital for our country that we take action now to make sure that we remain the leader in the world when it comes to the economy.

We've got to do something about health care to make sure we're competitive. One thing we will do is we'll take care of the poor and the elderly. This Medicare bill I signed is a really good piece of legislation that now says to poor seniors, you no longer have to choose between your medicine and food and electricity. They've been talking about modernizing Medicare for a long period of time, and my administration, working with the United States Congress, finally got it done. (Applause.)

I'm a big believer in health savings accounts, because it puts customers in charge of the health decisions. I would hope that as you analyze your health care plans, look at health savings accounts as ways to save money, but equally importantly, ways to empower your employees to make rational choices about their health care.

In order to make sure customers have got more choice in their health care, you've got to have transparency. You know, health care is one of the few industries where you really don't know pricing. How many of you ever actually asked a doctor, "What are you going to charge me, Doc?" Generally, you don't ask that because a third party pays the bill. If you're worried about rising health care costs, it seems like it makes sense to have transparency in pricing and quality, and to give consumers more choices to make in the marketplace, to empower people to ask the questions necessary to make sure there is some rational pricing in health care.

And along those lines, we're strongly supporting health IT. Many of you are very productive because you've been able to employ information technology. In the health care field you can find places of medicine where people are walking around with handwritten files. And sometimes it's hard to read a doctor's handwriting. And sometimes the files get misplaced. And a lot of times there are medical errors as a result of that and cost inefficiencies in the system. And so health information technology will help modernize our health care system.

And if you're truly interested in making sure that you have health care that's available and affordable for your employees, you need to join us in making sure we end these frivolous and junk lawsuits that are running good doctors out of practice. (Applause.)

A couple more ideas to make sure that we're strong economically. And I repeat, a strong economy is good for our people. That's why I want the -- America to be the leader, economic leader in the world. It's because I want the American people to benefit. I want people's lifestyles to go up. I want people to be able to realize their dreams.

We got to make sure that our energy policy is diverse and balanced and sound if we expect to be competitive. This is an interesting moment where we're able to advance new technologies that will make us less dependent on foreign sources of oil and enable us to be good stewards of the environment. And we're investing a lot of money to be able to achieve energy -- economic independence, national security independence, and being good environmental stewards when it comes to energy.

Here's some ideas. One, we must -- we must expand our nuclear power industry if we want to be competitive in the 21st century. (Applause.) We have got to be wise -- we have got to push hard to build new plants. And the energy bill I signed last year is -- it's a good step forward. This government is going to spend a lot of money on fast breeder reactor technology. We're going to join with other countries to work on fast breeder reactor technology so that we can burn reprocessed fuel which will reduce the waste on civilian nuclear energy. In other words, there's technological gains to be made that will enable us to even advance nuclear power even faster.

And by the way, it's not only in our interest to develop nuclear power, it's in the interest of our country that India and China develop nuclear power. In the global energy market, when demand for hydrocarbons goes up in energy in China, it affects your gasoline prices. And therefore, the more we can help these countries develop technology, the more we can help them develop a civilian nuclear industry that is safe, the better off it is for American consumers.

And yesterday -- I want to applaud the House of Representatives for passing an important piece of legislation when it comes to America's relationship with India. We're spending a lot of money to make sure that we can have coal-fired electricity plants that reduce the amount of pollution they put out. We're spending money to make sure that liquefied natural gas terminals are more quickly permitted. We need to get more gas into the United States. The House of Representatives has passed a bill to open up more areas for offshore exploration in the Gulf of Mexico. I strongly pass that -- support that piece of legislation. I urge the Senate to do so, as well. (Applause.)

We're also working hard to promote alternative forms of energy. I mean, we want -- look, I like the idea of people using ethanol to power their automobiles. So do our farmers. (Laughter.) It makes sense, doesn't it, if you can grow a product that you can power your cars with, to do so. Every bushel of corn grown in the Midwest makes us less dependent on oil from overseas.

We're working on battery technologies. They say we're pretty close to a breakthrough in a battery where you can drive the first 40 miles on a battery, and your car doesn't look like a golf cart. (Laughter.) One of these days our children will be driving cars powered by hydrogen. In other words, in order to make sure this country is competitive, we've got to be spending money on technology now, on research and development now, to change our habits and to make sure we're good stewards of our environment.

I'm excited about the energy future for this country, I really am. I think there's going to be some fantastic opportunities for people. And I'm going to look back on this period, and I know you will, that we made the right decisions for a new generation of Americans.

I'm also a big believer in trade. That's why Susan's here; so is she. But I'm -- what I'm for is trade that opens up people's markets just like we opened up ours, that's what I'm for. (Applause.) I believe good trade policy -- here's my definition of good trade policy: it's fair. That's all we ask. See, we open up our markets, you open up yours. You treat us the way we treat you.

There's a lot of talk about the WTO and the Doha Development Round. We're very much in favor of it moving forward. We think it makes a lot of sense. We think it makes a lot of sense for American workers that we open up markets. We think it makes sense for people who are locked in impoverished nations that we open up markets. We think trade helps lift people out of poverty, that's what we believe. So we're strongly supportive of the WTO round.

I told Susan that she needed to be flexible, she needed to go in the meetings with flexibility, particularly when it comes to our agricultural subsidies. Look, I said to the world last September, we'll reduce them, just so long as our folks have got access to markets, that's all we ask. Just give us a chance to compete fairly.

And so we'll continue to work on this agreement. Susan is committed to getting a deal done, if we can. Secretary of Agriculture Mike Johanns, as well, will continue to reach out to other nations to achieve our objectives. I want to thank you for your support on this. My attitude is, we want to be treated fairly, and the American people and the American manufacturer and the American farmer can compete with anybody, anytime, anywhere so long as the rules are fair. (Applause.)

So there are some ideas for Congress to consider and the administrative branch to promote; ways to make sure this country is competitive. One of my big fears is that we lose our nerve, is that we kind of say, well, this is a new emerging economy and, therefore, we can't compete, let's just retreat; why don't we become protective, why don't we throw up walls and barriers around the United States of America -- why don't we just try to isolate ourselves from competition.

That's not the American I know. The America I know is a country that is confident -- confident in our capacity to compete; entrepreneurial by nature. There are some smart things we can do, and will do, to make sure we remain competitive. But one thing we must never do is to not be willing to do the right policies so we can remain the economic leader of the world. We owe it to our people to put good policies in place. We owe it to future generations of Americans to keep the entrepreneurial spirit strong. And here are some ideas as part of a strategy to do just that.

I want to appreciate what you're doing for the country. I thank you for the risks you take. I thank you for the folks you employ. Government is not going to stand in your way; we want to stand side-by-side with you to make sure the entrepreneurial spirit remains strong here in the country.

God bless. (Applause.)

END 2:20 P.M. EDT

*Cut the deficit in half by 2008

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