Vice President Discusses Growth and Jobs Package
Remarks by the Vice President on the Economy to the United States Chamber of Commerce
U.S. Chamber of Commerce
Washington, D.C.
11:33 A.M. EST
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."