July 19, 2007

11:35 A.M. CDT

THE PRESIDENT: Thank you all for coming. I'm glad you're here. Thanks, Darrell. Are you sure you want the federal government moving to Nashville? (Laughter.)

Thanks for the invitation. I've got some thoughts I'd like to share with you, and then if you've got some questions, I'd love to answer some. My job is the Commander-in-Chief and my job is the Educator-in-Chief, and part of being the Educator-in-Chief is to help our fellow citizens understand why I've made some of the decisions I've made that have affected your lives. So thanks for letting me come.

Here we are in the presidential ballroom -- smart move, Darrell, to pick a presidential ballroom. (Laughter.) I'm sorry Laura is not with me. She is, first of all, a fabulous woman. She is a patient woman. And she is doing a marvelous job as the First Lady. (Applause.)

I want to thank Ralph Schulz, the president and CEO of the Nashville Area Chamber. I thank the business leaders who have allowed me to come and visit with you. You do have an exciting city here. This, of course, is not my first time here -- I can remember being here in the Opryland hotel complex when I was the owner of the Texas Rangers baseball team. And I can remember coming here for my mother and father's 50th wedding anniversary. They had a bunch of country and western singers sing to honor the 50th wedding anniversary, and it was a special time. And you're right, you've got a fabulous city here.

I have just come from the Harrington's company, a small business here, the Nashville Bun Company. (Applause.) And I know that some of the employees from the Nashville Bun Company are here. Thank you for being here today. It's quite an operation. I love going to small businesses because the small business sector of our economy is really what drives new job growth. If the small businesses are doing well in America, America is doing well.

And so I went by to see this operation, and I want to spend a little time talking about small business growth, if you don't mind. So I want to thank the Harrington -- good, solid Tennessee citizens who are entrepreneurs, risk takers, dreamers. (Applause.)

I don't intend to talk about this war against radicals and extremism in my remarks. If you've got questions, I'll be glad to answer them. I do want to, though, pay homage to those who wear the uniform. I'm honored to be with you. Thanks for serving the country. (Applause.)

Cordia asked me in the limousine coming over here, have you had any amazing experiences as the President? And, yes. (Laughter.) I told her there's no more amazing experience than to meet those who have served in harm's way and to realize the strength of spirit of American citizens who volunteer during a time of danger. And one of the young men I have met during my presidency -- I did so in my home state of Texas -- who is with us today, a man who is recovering from terrible injury, but has never lost the spirit of life: Kevin Downs. (Applause.) He's a good man. We're going to get him some new legs, and if he hurries up, he can outrun me on the South Lawn of the White House. Proud that Kevin's mom and dad are here with us, too.

I want to spend a little time on the economy -- more particularly, the budget. You've got to worry about your budgets; we've got to worry about your budget, too, since you're paying for it. (Laughter.) There's a philosophical debate in Washington, and really it's kind of to calibrate how much money we need and how much money you need. Some say we need more of your money to expand the size and scope of government, or, they would argue, more of your money to balance the budget. Then there are those like me in Washington who say, there's ample money in Washington to meet priorities, and the more money you have in your pocket, the better off the economy is. In other words, let me put it bluntly: I think you can spend your money better than the federal government can spend your money. (Applause.)

Part of my job is to deal with problems. And I try to do so with a set of principles in mind. A principle is, you can spend your money better than the government can, but a further principle is, if you have more of your money in your pocket to save, invest or spend, the economy is likely -- more likely to grow.

We were confronted -- this administration has confronted some difficult economic times, particularly earlier in this administration. There was a recession. There were the terrorist attacks that affected the economy in a very direct way. There were corporate scandals which created some thousand -- uncertainty about our system that needed to be corrected. And we responded to those problems by cutting taxes.

See, if you believe in the principle the more money you have -- and all of a sudden you see some rough, economic times, act on the principle. So I worked with Congress and we cut taxes on everybody who pays taxes. On one of these tax cuts -- said, okay, you deserve a tax cut, but you don't deserve a tax cut. It was the belief that everybody who pays taxes ought to get tax relief.

And as you can see from this chart here, this is what the tax cuts have meant in 2007. But ever since they have been enacted, it has got the same type of effect. So if you're a average taxpayer, you're receiving $2,200 of tax relief. Some receive more, some receive less, but the average for all taxpayers is $2,216.

See -- and the fundamental question is: Does it make sense to have the average taxpayer have that money in his or her pocket? I think it does for a lot of reasons: It encourages consumerism, it encourages investment, it enables people to be able to put money aside for a family's priorities. You don't want the government setting your priorities; you set your own priorities. And if college happens to be a priority of yours -- if you want to save for your little guys coming up -- here's some money for you to put aside. That's what the tax relief meant.

There's obviously more tax relief for married families with children because there's the child credit. I thought it makes sense to say, if you've got a child, you ought to get credit for that child when it comes to the tax code to help you raise the children. You know, we put the -- did something on the marriage penalty. Imagine a tax code that penalizes marriage. That's what the code did earlier on and we mitigated the marriage penalty and the tax code. We ought to be encouraging marriage, not discouraging marriage through bad tax policy. (Applause.)

The Nashville Bun Company folks are organized so that they pay tax at the individual income tax level. A lot of small business owners know what I'm talking about. If you're an LLC or Subchapter S, you don't pay corporate tax, you pay tax at the individual income tax rates so that when you cut taxes on all who paid income taxes, you're really cutting taxes on small business owners as well. And if most new jobs are created by small businesses, it makes a lot of sense if you're dealing with economic problems to cut the taxes on those who are creating new jobs.

The more money in the small business's treasury, the more likely it is they'll be able to expand. And when they expand, the more likely it is they'll be hiring new people. We also put incentives in the tax code that said if you purchase equipment -- you're a small business owner and you purchase equipment, like the English muffin rolling deal or whatever you want to call it -- (laughter) -- getting out of my lane here -- (laughter) -- we provide an incentive in the tax code to encourage you to purchase equipment. That not only helps your business become more productive and more competitive, the more productive and competitive you become, the more likely it is you'll be able to sustain growth and, therefore, continue hiring.

But it also means that the English muffin manufacturing company -- English muffin machine manufacturing company is more likely to have work. In other words, there's an effect, the tax code can affect commerce. And that's exactly what we did, and we cut the taxes and it's worked. This economy is strong. Unemployment has dropped. Since August of 2003 we've added over 8.2 million new jobs. Productivity is up. People are working. (Applause.)

People are working. And that's what we want. We want people to say, I'm making a living for my family, and I've got more money in my pocket so I can make decisions for the best of my family. And I'm going to spend a little time, if you've got any questions, on how to keep it going strong.

But I now want to talk about the budget. People say you can't balance the budget if you cut taxes. That's one of the arguments in Washington, D.C. I think all of us would like to balance the budget. But they're saying, I'm going to raise your money -- raise your taxes so we can balance the budget. There's a flaw in that argument. And that is, most of the time they raise taxes on you, they figure out new ways to spend the money, as opposed to reckon it to deficit reduction. I've got a better idea that I want to share with you and share with the American people. And that is, the best way to balance the budget is to keep taxes low, growing the economy, which will yield more tax revenue into the economy. And it works, so long as you hold spending down. And that's the most important thing, is to keep taxes low and spending down.

And I got a chart here I'm about to show you. Yes, there you go. And so I submitted a budget based upon no tax increases and being fiscally wise with your money. And here's the record of that plan. As you can see there, we had a deficit of $413 billion in 2004. This economy started picking up steam -- kept the taxes low -- and tax revenues started coming in, and then the deficit dropped to $318 billion, and it dropped to $245 billion, and it's anticipated it's going to be $205 billion in the year 2007. You can see the projection. We've done this without raising your taxes. We've done this by saying keep taxes low, keep the economy growing, and be wise about how we spend your money.

I project -- we project if we can continue to have fiscal sanity in Washington, D.C., that we'll be in surplus by the year 2012. That's where we're headed. And I believe we can do so without penalizing the small business sector -- or the large business sector, for that matter. And particularly we can do so without penalizing the families and individual taxpayers in the country. But that's the argument.

Now, the Democrats have submitted their budget. Put up the next chart. Oops, that's my budget. (Laughter.) This is non-defense discretionary spending. This is what we propose, see. We go to Congress and say, here's our budget proposals. We're going to make sure our troops have what it takes to win this war against these extremists and radicals. That's what the American people expect. (Applause.)

So this is my proposal, and I'd like to show you what the Democrats have proposed. Here's their proposal. They've added billions of dollars in new spending on the budget they submitted. The reason I'm -- this is not a -- I'm not bashing anybody. I'm just -- what I'm here to do is educate you on the different approaches to how we're dealing with your money when it comes to the federal budget. And as you notice, there is a -- quite a disparity about the different approaches of how much money ought to be spent. You can't pay for the red lines unless you're willing to raise taxes on the American people. I would call that a return to the tax-and-spend days. I have showed you our budget to get to surplus, and it requires this level of increase in spending, the blue.

The people now in charge of the House and the Senate have submitted their own budgets; their own blueprint for how we should spend your money, and it's reflected in the red lines. Now, you can't grow the economy fast enough to get to the red lines. And, therefore, the only way to do so is to run up your taxes.

I'd like you to see the next chart, if you don't mind. This is the tax increases inherent in a different approach. As you can see, will raise taxes $392 billion over five years, and with a $1.8 trillion increase in taxes in order to make the budget projections that they have spent. I would warn the Nashville Bun Company to be very careful with this kind of approach because you can't keep making buns if the Democrats take all your dough. (Laughter and applause.)

I don't disparage anybody; there's just a difference of opinion. Part of my job is to make it clear to people that there are choices to make. And people have got to understand this budget process. You know, we're throwing around huge numbers in Washington, D.C. And the reason I've come today is to clarify the difference of opinion so you can make your own choice about the right approach. I've obviously got my choice, but the American people need to know the facts so they can make up their mind as the best approach to dealing with the finances of the United States today and tomorrow and for the next decade to come. This is the tax increases that will be required under one vision of dealing with your money -- and here's my view of what we ought to do on taxes. (Applause.)

And, of course, the comparison. (Laughter.) We don't need to raise your taxes in order to balance the budget. We shouldn't raise your taxes in order to balance the budget. As a matter of fact, we ought to keep your taxes as low as possible to make sure this economy continues to grow. (Applause.) So you'll watch this budget process and the appropriations process unfold here. And it's really important for the leadership in Congress to pass the appropriations bills -- that's the spending bills -- as quickly as possible. There are 12 spending bills that are supposed to get to the President's desk.

And they need to be passing these things; they need to be doing the people's business in Washington, D.C. They need to have an honest debate about the appropriations for the different departments that they're dealing with -- an open, honest debate. They ought not to be trying to slip special spending measures in there without full transparency and full debate -- those are called entitlements. And they ought to be wise about how they spend your money, and they ought to get these appropriations bills to my desk as quickly as possible, and not delay.

Now, I will tell you that there's an interesting relationship between the President and the Congress. The President [sic] has got the right to initiate spending bills -- and they do; they've got the right to decide how much money is spent. And I've got the right to accept whether or not the amount of money they spend is the right amount. That's what's called the veto. If they overspend or if they try to raise your taxes, I'm going to veto their bills. (Applause.)

So I'd like -- I appreciate you letting me come and give you a little budget discussion. But I thought it would be appropriate, if you don't mind, to answer some of your questions, any question, I'd be glad to answer them. I've been there for six and a half years, if I can't answer them, I can figure out how not to answer them. (Laughter.)

Yes, sir.

Q Your administration has been pro-small business. How do we continue that philosophy in Washington?

THE PRESIDENT: Look, here's the thing that the country -- first of all, tax policy helps small businesses. If a small business owner has got certainty in the tax code that taxes will remain low, it causes people to be more interested in investment.

The biggest issue I hear facing small business owners, however, is health care. We got a lot of small business owners are really having problems dealing with the rising cost of health care. When I talk to risk takers and entrepreneurs, I find that people have a lot of anxiety about how to deal with health care for two reasons: one, whether they can afford it; and two, they have this great sense of obligation to their employees. In other words, they want their employees -- really good CEOs or owners of small businesses care deeply about the life of their employees.

There is a -- as you can imagine, and this is the great thing about our democracy -- there tends to be differences of opinion. And we got a big difference of opinion on health care. And I would like to tell you where I'm worried -- my worries and my recommendations. I'm worried that there are people in Washington who want to expand the scope of the federal government in making health care decisions on behalf of businesses and individuals. There is a debate in Washington, D.C., now taking place on whether or not to expand what's called S-CHIP, which is a health care program designed primarily for poor children. I support the concept of providing health care to help poor children, just like I support the concept of Medicaid to help provide health care for the poor.

The problem, as I see it, is this: that the people -- some in Washington want to expand the eligibility for those available for S-CHIP, in some instances up to $80,000 per family -- which really means, if you think about it, that there will be an incentive for people to switch from private health insurance to government health insurance. I view this as the beginning salvo of the encroachment of the federal government on the health care system. The federal government has got a huge role in health care -- as I say, Medicare, Veterans Affairs, Medicaid, poor children. But I am deeply worried about further expansion will really lead to the undermining of the private health care system, which would take the greatest health care system in the world and convert it into a mediocre health care system.

Now, you can't -- not only am I against what they're trying to do, I am for something else, and I'd like to share with you what it is. First, there is a common goal, and we all share the goal in Washington -- is to make sure health care is available and affordable. If you're worried about available and affordable health care, there are some practical things you can do like stopping these junk lawsuits that are running good doctors out of practice and forcing professionals to practice defensive medicine so they can defend themselves in a court of law. (Applause.)

Secondly, small businesses ought to have the right to pool risk across jurisdictional boundaries. If you're a restaurant owner in Nashville, Tennessee, you ought to be allowed to pool risk. In other words, you ought to be allowed to put your employees in a larger risk pool with a restaurant, say, in Texas, or in Minnesota. Part of the problem small businesses have is they are unable to get the economies of purchase that big businesses are able to get because they have got such a small number of employees. And so we ought to encourage the pooling of assets -- the pooling of risk so small businesses can buy insurance at the same discounts that big businesses get to do. (Applause.)

Thirdly, I'm a strong proponent of Health Savings Accounts. Health Savings Accounts is an insurance product that has got high-risk deductibles -- or high deductibles for catastrophic illness, plus the ability for an employee to be able to put money in -- with employer's help -- put money into the account tax-free, save tax-free and withdraw money tax-free. And the reason I am is because I believe one of the real problems we have in health care is that there is no market, in essence. In other words, somebody else pays your bills; we have a third-party payer system. I think you know what I'm talking about: You submit your claims, somebody else pays the bills.

I don't know many of you have ever asked the doc, what's your price? Or, you know, how good are you? Or, what's your neighbor's price? You certainly do that in most aspects of your consumer decision making; you think about price and you think about quality, but not in health care. And the reason why is, is that somebody else has been paying the bills under our traditional system. But what Health Savings Accounts -- do and products like it -- is that it puts the consumer, the patient in charge in the decision making. And in order to make that effective, there needs to be more price transparency and more quality transparency in the marketplace. In other words, when people shop, it helps affect the cost of a good or a service, in this case.

And so since we're such huge health care providers, one of the things we're working with is large corporations and entities to say, look, you've got to post your price to providers and hospitals. It creates some angst, but nevertheless it is a much better alternative than the federal government making all decisions. So one of the things we're trying to do from a philosophical perspective is to encourage more consumerism in health care.

Another thing that needs to happen in health care is there needs to be better information technology in health care. The way I like to make this point is that this is an industry that still -- where a lot of the paperwork is still filled out by hand. Most businesses have been able to use these fantastic new technologies to be able to make their companies more productive. But not health care. You got doctors writing prescriptions. They don't know how to write very well anyway, and secondly, it's easy to lose paperwork.

And so the health care industry lags behind when it comes to the modernization that a lot of other industries have been through by the advent of information technology. There's a role for the government. Remember, we're huge providers of health care. The Veterans Affairs Department, for example, now has got electronic medical records for each person covered through Veterans Affairs. So somebody can just take your chip, show it to -- run it into the computer, and out comes the medical records. And they estimate that as we help develop a common language so that IT can take hold in the health care system that we can save up to 30 percent of the costs in the current system.

But finally, I want to share another idea with you. They've got -- those folks up there who want to spread further government into health care have got their ideas -- and you've got to beat a bad idea with a good idea, in my judgment, and I want to share with you another idea that seems to make sense.

If you work for a corporation, you get your health care free. There's a tax break for you. If you're an individual, you have to pay for your health care. People are not treated the same in the tax code. If you're working for a big company, you come out pretty good when it comes to health care. It's a tax-free benefit. If you're out there on your own, you got to purchase your health care. It's an after-tax purchase. If you're working for a small business that has trouble affording health care, and they have co-payments, for example, a lot of times the employee is not treated as fairly in the tax code as someone who works for a larger company.

And so I propose that we change the tax code, we treat everybody fairly. For example, if you're a married couple -- a married couple, yes, you ought to get a $15,000 deduction, no matter where you get your health care, so long as you then use the savings to purchase health care. If you're single, you ought to get a $7,500 tax deduction. (Applause.) So it's like -- it's like a mortgage deduction off your income tax. But it levels the playing field. And then what ends up happening is the market starts to respond as more individual decision makers are now able to use the fairness in the tax code to demand product.

Part of the problem we have is there is no individual market that is developed. If you're out there trying to find your health care on your own, it's very difficult to find competitive -- something that you can live with, something that's competitive. And we believe that changing the tax code will help. There are some in Congress who believe a better approach would be a tax credit. I happen to believe that deductions are a better way to go, but I know that either approach is better than the nationalization of health care. And so one of the real issues that we got -- (applause) -- anyway, thanks for the question.

Don't get me started on energy. If you're a small business person, you better worry about the cost of energy, and that's why I have said that it is in our national interest to diversify away from oil. It's in our national interest to promote alternative fuels, and I believe we can do so with current technology and new technology. It's in our national security interest that we're not heavily dependent on oil. I think you know what I mean by that. I mean there's a lot of parts of the world where we buy oil that don't like us. That's not in the national security interest of the country.

It's in our economic security interest to diversify because when the demand for crude oil goes up in a developing country, for example, it causes the price of crude oil to go up, unless there's a corresponding increase in supply; and when that price of crude goes up, it runs up the price of your gasoline. And therefore, it is in our interest to promote ethanol, for example, or biodiesel as ways to power our automobiles. It also happens to be good for the environment that we diversify away from crude oil.

On the electricity side, I'm a big proponent of nuclear power. I think if you're genuinely interested in dealing with climate change, you have to be a supporter of nuclear power, because nuclear power will enable us to grow our economy, and if we grow our economy, it'll mean we'll be able to afford new technologies and at the same time, there are zero greenhouse gas emissions.

And so to answer your question -- obviously, a little long-winded -- (laughter) -- is: Good tax policy, good health care policy, and good energy policy will make it more likely that this small business sector of ours will remain strong.

Yes, sir. Go ahead and scream.

Q Sir, thank you very much for your service to our country so far, we appreciate that very much.

THE PRESIDENT: Thank you. Appreciate it. (Applause.)

Q My question is, in light of the immigration bill, I'm not understanding exactly how if, with the amnesty of this many people coming in and then with the still concern about the borders being somewhat porous, how do we really achieve your desired effect in this, which would be, for obviously taking care of them, but yet afford not to be a big bulk sort of expense and the lack of the safety of the border?

THE PRESIDENT: Thank you for bringing that question up. It's a very important question that the nation is confronting. You can sit down. (Laughter.)

Here are the common-sense objectives that need to be addressed when it comes to immigration. First, we need to enforce the border. (Applause.) A sovereign state -- it is the job of a state, of a nation, to enforce its borders. That's not an easy task. I'm real familiar with the border. I was a border-state governor. I understand how difficult it is to fully enforce a border. But nevertheless, as a result of congressional action and the administration working with the Congress, we're making substantial progress on modernizing the border.

Now, you go down to Arizona, for example, you can't find the border. Man, it's just desert. It is, like, wide open desert. And so what you're beginning to see is new infrastructure, new technologies, some fencing, berms to prevent automobiles from moving -- all aimed at making the Border Patrol agency, which we are now doubling on the border, more effective. And we're making progress. The number of arrests over the last 12 months are down significantly. That is one way to measure whether or not people are making it into our country illegally.

Last year, we arrested and sent back 1.1 million people on the southern border. Now, you divide that by 365; there is active participation on the border to do that which the American people expect us to do. Secondly, you're about to find -- I think the country is about to find out that we're going to need hardworking, decent people to do jobs that Americans aren't doing. And that is why, for the sake of the economy, I support a temporary worker plan.

There are people who are coming -- look, let me start over. There are people in our hemisphere whose families are really hungry, particularly compared to the lifestyle we have in America, and they want to work to feed their families. And they're willing to do jobs Americans don't want to do. That's just -- that's reality. Some say, well, force Americans to do the jobs they're unwilling to do. Well, that's not the way the system works. And yet there are people willing to come, to get in the fields, the agricultural sector. There are people willing to pick apples in Washington, you know, hitting those vegetable fields in California. And they want to do so because they want to feed their families.

And the interesting problem we have, sir, is that because they're motivated by the same thing you're motivated by, I suspect -- love of family and desire to provide for your family -- they will go to great lengths to get in to the country. You think about somebody who's willing to get stuffed in the bottom of an 18-wheeler and pay one of these thugs that are smuggling them into the country to do work Americans aren't doing. So I've always felt like a temporary worker program will recognize an economic reality, and also help keep pressure off the border. It's a long, hard border to enforce.

By the way, in my state of Texas, when it comes to the fencing, I would strongly urge those who advocate it not to go down there and go face to face with some of these Texas ranchers down there. They're really not interested in having the federal government on their property. See, most of our property down in Texas is private land. The farther you go west, it's federal land.

And the reason I say that, it just shows how difficult it is to do what some assume can be done, which is, like, totally seal off the border. One way to make it easier for our Border Patrol is to have this temporary worker program with verifiable identification and say, yes, you can come for a limited period of time and then you're going home.
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