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For Immediate Release
Office of the Press Secretary
March 13, 2008

Press Briefing by Tony Fratto
James S. Brady Press Briefing Room

  Press Briefings

12:35 P.M. EDT

MR. FRATTO: Good afternoon, everyone. I have just a couple of quick announcements, and then we can get to questions. The Senate Foreign Relations Committee this morning voted out legislation to reauthorize the President's Emergency Plan for AIDS Relief. That's the PEPFAR program. The President, on his trip to Africa a few weeks ago, talked extensively of this program. We commend the Senate Foreign Relations Committee for moving this bill quickly, and certainly want to see it enacted into law so the President can sign it. This is a wonderful program where American tax dollars and American ingenuity in how we designed this program are saving lots of lives in places like Africa and other PEPFAR focused countries. So we certainly want to see this move quickly.

Also, as some of you may know, Congress has been considering a new farm bill for quite some time. Last fall, to provide more time to consider changes in agriculture policy, Congress passed an extension of the current farm bill law. That extension is set to expire this Saturday. Yesterday Congress passed another extension of the current law to provide another month for consideration of these issues. Shortly we will release a statement by the President indicating that he intends to sign this additional extension, and this statement will also reiterate the President's desire to sign a reform-minded and fiscally responsible farm bill that is based on the principles the administration laid out early last year.

And with that, I'll be happy to take your questions. Terry.

Q Oil prices hit a record, above $110 a barrel. How damaging is this, and how much more can consumers tolerate?

MR. FRATTO: Well, I'm not going to try to make predictions for how prices of commodities like oil have in any specific way on the U.S. economy. I think we've said for quite a while now that rising energy prices act as a tax on the U.S. economy, and taxes are contractionary; they take money out of the economy and slow growth. And so we've been dealing with the headwinds of higher oil prices for some time, and not just very recently -- they've come to record numbers recently, but they've been rising for a number of years. We think it's largely attributed to rising demand, a rise in global demand for the use of oil and other energy sources.

The President has taken action that will try to put us in a good place over time to reduce our reliance on foreign sources of oil -- oil generally, but in particular foreign sources of oil -- in ways that we can use more renewables and more alternative energy sources. That's the way we're going to have to tackle this, and also by conserving more, in ways like the energy bill that we passed last year, which followed the President's proposal, for the 20-in-10 plan, to reduce the use of gasoline in cars. So those higher CAFE standards will have an impact in the amount of foreign sources of oil that we use.

That's why we're going to have to deal with it, but it's certainly a global problem. Remember that those high prices aren't just prices that we're dealing with here. Other countries that are also -- that also use crude oil are facing those same high prices, and it's a drag on the global economy. And so we're concerned about it. We've obviously let our views be known with oil-producing nations, including the OPEC countries, and we would like to see higher production in order to meet the higher demand that we're seeing.

Q Is the President going to --

Q Well, do you think that that's a very satisfactory answer for consumers and motorists and people who are looking at these high energy bills?

MR. FRATTO: I don't think there is any one satisfactory answer for that. From our perspective, what we need to do is keep this economy growing and focus on rising wages and job growth so that people can deal with the reality of higher oil prices. Higher oil prices and higher gasoline prices are not going to go away overnight. There is no way to do that, and no one should hold out the prospect that there's some kind of lever or switch that you can pull that will lower gasoline prices for Americans. So it is going to involve difficult choices for Americans.

We're very concerned about low-income Americans that use a higher proportion of their income to pay for energy. That's why we have programs like LIHEAP -- the Low Income Housing Energy Assistance Program -- to help low-income Americans deal with higher prices. And we've fully funded that program.

So there are some things that we can do to help low-income Americans deal with these price increases, but our focus has to be on growing the U.S. economy, growing wages so that people can deal with these -- because it is going to take a long time to deal with changes and transformations in the energy markets.

Q Is the President going to get into any of this in his speech tomorrow?

MR. FRATTO: A little bit, yes. He may mention oil prices. But this is a speech where he will talk about, I think in a very clear way, how he sees the economy today. We've talked a lot about the economy. The President has over the past few months, as we've gone through this transition into a slower economy, after a very long period of strong economic growth and a record 52 months of job growth -- the President was very transparent in saying that we are headed towards a period of slow growth. He was transparent in saying that we're going to need an economic growth plan to deal with it, and try to raise growth in the coming quarters. We were able to introduce that plan and get it passed in Congress very quickly, and I think we're going to start to see the benefits of that soon.

So he'll talk about how he sees the economy today, with the things that Americans are dealing with, and where he sees us going. And in terms of the policy responses, he'll talk about some of the things that we've already done, and he'll talk about some of the things that we should avoid doing.


Q So with the latest bad numbers on consumer spending and labor markets -- the news seems to be getting worse by the day -- how is the President going to allay Americans' concerns that the economy is either heading for a recession, or in a recession?

MR. FRATTO: Look, you can try to put labels on what the economy is. I mean, it's very low-growth and it's much lower, or slower, than we would certainly like to see. What we're focused on is the policies that will return us to higher growth. That's the only thing that we should be focused on -- are making sure that we keep taxes low, making sure that we get these checks out and get more money into the hands of consumers, that we keep our economy open to investment, that we continue to look towards opening markets for American exporters.

Those are the kinds of things that the President is focused on. He's going to focus on economic fundamentals, and that will take care of growth going forward. We know lots of people want to try to find labels for headlines, but we're going to be focused on policy.


Q You talk about labels for headlines, but how much of this effort is really sort of an attempt to ease the psychological burdens that people are feeling, so that it's not a self-fulfilling prophecy that as people hear more and more bad news, they don't stay home rather than go out and spend their money?

MR. FRATTO: There's no question that the confidence of Americans and American businesses is important, and we understand that your confidence can be shaken when you see volatility in markets, and you see record-high prices for things that we all use, like oil. The important thing to remember is that this economy -- there's never been an economy like this in the world. We have very deep, liquid markets. They provide great benefits to the country in terms of our ability to invest and direct capital to businesses who are trying to expand and grow. It's an asset that we have that very few countries in the world have in the same quality. We have an entrepreneurial spirit in this country, where people like to try to find economic opportunities and make a going concern of business ideas. And as long as we can continue to fund those ideas, we can continue to grow this economy.

The President will talk about confidence, about the importance of understanding that we have these attributes, and that what we're dealing with, in terms of housing, at least, is a relatively temporary phenomenon. We had a very rapid run-up in housing, and we had a situation where certain kinds of mortgage instruments -- the subprime loans -- are causing stress in credit markets and in the ability of financial institutions to lend. We want to deal very -- we want to deal with those problems.

We know exactly how many subprime mortgages are out there, so it's a discrete number of mortgages that are out there that are in that category and that are going to cause problems. We also can look at the housing stock out there and the number of Americans who will be moving into home-buying -- the home-buying part of their lives. And so we know that over time we're going to be able to work down those inventories of houses as long as we let the market adjust that way and do those kinds of things. And this economy will return to growth because -- as we have been saying, even as we acknowledge weaknesses in the economy, as we've been saying, the underlying fundamentals of this economy are still pretty strong and still should support growth in the future.


Q Well, isn't it an especially bad sign that the consumer, who has been carrying the economy for a long time now, really stopped spending in a dramatic way last month?

MR. FRATTO: Well, I mean, it's not a positive sign. We would like to see the economy continue to support -- the consumer continue to support this economy. We think as long as wages continue to grow and there isn't a sharp drop-off in jobs -- we still have more Americans working than ever before, so we have a lot of Americans working. We still have a relatively low unemployment rate. And so they should still be there to support the economy. But we want to see consumers have the strength to be able to continue to support growth and the economy.


Q Tony, in tomorrow's speech will the President be offering anything new, or let us know if he's thinking about other things that can be done? Or is there anything that can be done?

MR. FRATTO: We're always looking at new ideas and things that can be done --

Q I've heard that before -- will we be hearing anything new tomorrow?

MR. FRATTO: No, you shouldn't look for new major announcements tomorrow. What tomorrow is about is talking about where we are and what we think the future looks like. You have to remember, we just signed an economic growth bill just -- I think it was maybe just three weeks ago, the President signed this bill. We should -- we're implementing it, and let's see it work. And I'll tell you, our forecasts and what we see from private sector forecasts is that the economic growth package will have an impact in the second and third quarter of the year and will support growth.

Q Is it a matter of tomorrow's theme being "hold on to your hats until we can get into the third quarter, when Lazear says things will be getting better"?

MR. FRATTO: I wouldn't put it quite that way. I think we said --

Q How would you put it?

MR. FRATTO: I think -- Americans should know and Americans should have confidence that this economy will return to stronger growth. Our financial markets have a great deal of talent. I think Secretary Paulson, in his comments earlier today, talked a little bit about our financial markets and things that they can do to help make sure that our markets are strong in the future. We need to -- what we need to do is focus on what are the problems, try to address the problems and help people to understand that there is a brighter future as the year progresses.

Goyal -- I'm sorry, Wendell.

Q On FISA modernization --


Q -- the President commented on it today. Speaker Pelosi says that the House measure gives him all the authority he needs and he knows it. She says the Senate bill would exclude from the definition of surveillance some things that are currently considered surveillance. What is that?

MR. FRATTO: I'm not sure what exactly Speaker Pelosi is referring to. But let's be very clear about what this Democratic proposal does -- or purports to do. It purports to be, as they announced, it was a compromise, and I'm not sure who they were compromising between, because what this bill actually does is take us backwards -- not just backwards to before the Protect America Act; it takes us backwards to thoughts that never even occurred to the original drafters of the FISA bill. It makes changes in this bill that would require our agencies who conduct surveillance to seek court approval to conduct surveillance on a foreign terrorist in a foreign land.

Now, I don't think anyone thinks this is a wise idea. Why it's in this bill, I can only -- they can try to explain it themselves -- but this would hamstring the intelligence community. It would throw roadblocks at every effort to try to collect intelligence on the foreign terrorists and the people who are planning attacks on the homeland. And as the President said earlier today, if this bill would come to his desk, which I think we're pretty confident that it won't -- but were this bill to come to his desk, he would veto it.

Now we know it won't -- I should say we're pretty confident it won't come to his desk because we know that it's unacceptable in the Senate. A number of the provisions that they put in this bill were considered on the Senate floor. They were considered in the Senate Intelligence Committee, and these provisions failed every time. And there's a reason that they failed: It's because they're unwise, and they would damage the ability of our intelligence community to conduct surveillance.

Q When you say it would require court approval to conduct surveillance of a foreign terrorist in a foreign land, is that because the communication is being routed through the United States?

MR. FRATTO: No. That's not what this bill does. This bill says if you are going to conduct surveillance on -- any kind of surveillance, you need prior court approval. That wasn't required for the original FISA bill. That wasn't required in the Protect America Act. And it's not required in the Senate bipartisan bill that got 68 votes. Now, what we did agree to in that bill was to allow prior court approval for the procedures that the Intelligence Committee would use to ensure that they are only targeting people who are appropriate to be targeted. This bill would require the intelligence community to go to the court before they can initiate surveillance on a foreign terrorist.

Q Tony, there are a lot --

Q Let me ask a question on another matter. Yesterday officials here briefed on the Colombia free trade agreement --

MR. FRATTO: Right.

Q -- and said that they had no idea why Speaker Pelosi wasn't agreeing to the path that would lead that to a vote this year. Today Speaker Pelosi said they know very well that what the Democrats want is a new trade adjustment law that provides more money for longer jobless benefits, health benefits, and training. What is the President's stand on that?

MR. FRATTO: Well, we support reauthorizing and reforming the Trade Adjustment Assistance programs. We definitely want to work with both Houses of Congress on TAA legislation. You know, the President believes that it's important to help those individuals who are adversely affected by trade, which we should always remember are a minority of people, you know. We know that broadly speaking, the economy derives great benefits from trade.

We also know that certain industries, when they're exposed to new competition, may be adversely affected by trade and foreign competition. We want to help those workers get the skills and training that they need so that they can compete in this economy. And we also think that that should not be used as a roadblock to further expand trade liberalization, especially with a country as important to the United States as Colombia.

Q Are you talking to Senator Baucus? I mean, are you --

MR. FRATTO: The staff has been talking to Senator Baucus, the House and Senate leadership, Chairman Rangel, and Chairman Rangel's staff. We have had extensive consultations and discussions on these issues.

Q Are you going to meet Baucus halfway at all with some of his, you know, wish list on TAA?

MR. FRATTO: I'm going to let our negotiators, who will be up on the Hill, work with members of Congress to try to find common ground on TAA. I don't think it should be a major challenge to get there. I think we share the same goals. We may have some difference on policy, but I think we can get to a place where we can agree.

Q Tony, could I follow up on something you said at the gaggle this morning about -- in your response to the retail sales numbers? You said, we want consumers to spend. How can they --

MR. FRATTO: We call them consumers.

Q How can they, and why can't -- why should they, when they're spending so much on gas and food prices, how can they buy other retail items?

MR. FRATTO: No, you're right, there's no question. As I said earlier, higher energy prices take -- are a drain on the disposable income of families. That's why we want to see -- we want to return to growth, and importantly, wage growth, so that people can afford more of whatever they want. Obviously, there are certain things that they need to spend on, and energy for a lot of families is a growing cost. But, yes, there's no question it's a drain on their finances, and we're concerned about that and we want to -- but we need to look at it as the needs of the overall economy.

Q How big of a warning signal is this to you, this retail report today? I know you don't want to go down the recession road, but there are a lot of analysts out there saying today that this is further warning that the economy has headed in that direction.

MR. FRATTO: Well, there are -- we have seen lots of data points in recent months that point to a very slow economy in this quarter. There's absolutely no question about that. We've been very clear about that. That's one of them; the jobs report is one of them. We've got some other, more positive news also that mitigate that a bit. I don't know what the final economic growth number is.

You've heard me say this from this podium before, a lot of people put a lot of emphasis on future projections on GDP growth, and I'm always reminding people that it takes us three reports to get the previous quarter correct. So there are people who will report negative growth in this quarter or the next quarter; they may or may not be right. What's most important is that we do recognize that we're in a slow-growth period and we don't want to see slow growth, we want to see higher growth, and we're going to take policy actions to help raise growth.


Q Tony, two quick questions. One, on the economy. There's a big crunch not only the consumers, but also small businesses, and they are in trouble because they may have to file for bankruptcy or fire their workers and close their businesses. So what do you think the President will have any message for them, as well as for consumers and small businesses?

MR. FRATTO: Well, for small businesses we have actually a pretty robust set of policies that we've been promoting for some time. And there are policies to help them deal with health care costs. The President has introduced and proposed a number of ideas, some of which are enacted, like health savings accounts and some of the tax equity treatment of health care. We also want to open -- and don't forget that even small businesses -- exports, that we have an -- interested in opening markets for exporters, or they feed into larger businesses who export.

But the most important thing, and we've talked about a great deal, is keeping the tax rates -- making the tax rates permanent that we passed back in 2001 and 2003. A lot of these tax rates that we want to keep low, and that we keep hearing from Democrats on Congress that they want to raise, are precisely the tax rates that would hit small business owners. Because of the way they file their taxes, these are the people who will be most adversely impacted by repealing those tax increases.

I was happy to see in the Senate today -- it was of course a non-binding vote -- but there was a vote in the Senate today to not allow those tax cuts to expire. So that was good news.

Q And second, as far FISA and fight on terrorism is concerned, last week the President and the Homeland -- Department of Homeland Security celebrated five years of creation of the Department. And what they were saying also, that since 9/11 and since the last five years, there were no major attack on the U.S. soil. Does that credit goes to the borders, let's say, on Afghanistan and Pakistan borders, that all the terrorists are there -- they're holding them so there is no attack on the U.S., or are we still at war here back home?

MR. FRATTO: Look, we're -- I think there's lots of credit to go around for the fact that we've been fortunate enough to not have an attack here in the homeland since 9/11, a major attack. There's -- you know, a lot of credit to our intelligence community; give lots of credit to Congress for giving federal authorities the tools that they need -- that we're still fighting for now -- but to give the tools they need to try to locate and identify potential terrorists and terrorist planning; our military, taking the fight to the enemy overseas so we don't have to fight them here. I think there's more than enough credit to go around for that.


Q Thank you, Tony. Two questions. Would it be accurate to say that our President realizes the great importance of any leader of a free country in setting a national example in supporting morality?

MR. FRATTO: I think the President pretty clearly supports morality.

Q Good. (Laughter.) What does -- I'm delighted. What does the President believe to be the effect on our nation's young people of one of our nation's top national leaders refusing even to comment on her state's married governor's repeated use of prostitutes, in apparent violation of the Mann Act?

MR. FRATTO: I think what the President said is it's a sad day, and I think I'll just leave it at that.

Q Thank you.

MR. FRATTO: Thank you.

END 1:02 P.M. EDT

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