July 10, 2007

1:42 P.M. EDT

THE PRESIDENT: Thank you, Fred. Thanks for coming. Thanks for having me. It's a smart marketing tool -- you know, all the cameras. (Laughter.) I thought for sure the largest Chamber of Commerce was in Texas, but I guess not. (Laughter.)

I'm thrilled to be back in Cleveland. I've had a fascinating day. I went to a small business that is on the cutting edge of changing the way we're going to consume energy. I just came from the Cleveland Clinic, which is one of the most fabulous hospitals in America.

I do want to spend a little time talking about our economy, talking about health care and energy policy that will be an integral part of making sure the economy continues to grow. I'd like to spend a little time talking about the war against extremists and radicals. And I'd like to answer some of your questions, if you have any.

Before I do I want to tell you Laura sends her best. She's arguably the most patient woman in America. (Laughter.) She's a fabulous First Lady and a great mom. I love her dearly, and she told me to say hi to you all -- so, hi. (Applause.)

I appreciate Joe Roman, who works with Fred. Thanks for setting this deal up. Appreciate the chance to come and visit with fellow citizens here in Cleveland. I'm the Commander-in-Chief; I'm also the educator-in-chief. Part of my job is to explain the philosophy behind the decisions that I have made. I'm honored you'd give me a chance to do so.

I'm traveling with a good man, the Congressman from this area -- one of the Congressmen from this area, Steve LaTourette. Proud to be with you, Congressman. Thank you for your time. (Applause.) State Auditor Mary Taylor is here -- thanks for being here, Mary. (Applause.) I met the Mayor of Cleveland across the street at the hospital. I was proud to be with him. I tha nk him for his time, for taking time out of his day. I thank Toby Cosgrove of -- Doc, thank you for being here -- from the hospital there across the street. I thank the docs, by the way, for taking time to show me some amazing technology.

Let me first talk about our economy. It's -- our economy is changing and it's strong. I remember back to -- early on in my administration, when we were confronted with some very difficult times. There was a recession, the economy had gotten overheated and it was correcting. Then we got hit by an enemy that killed nearly 3,000 of our citizens, which such an attack obviously would have an effect on the economy. Then there were some corporate scandals that had a psychological effect on our economy. People were beginning to worry about the system where people were not upholding the law, taking advantage of the situation, taking advantage of shareholders.

And yet, we acted and cut taxes -- and cut them hard -- (applause) -- because one of the philosophical drivers of this administration is, is that if you have more money in your pocket to spend, save, or invest, the economy is more likely to grow. In other words, there's always a conflict in Washington about how -- what's the proper amount of money in Washington and what is the proper amount of money in your pocket. I'm one of these fellows that err on the side of trusting people to spend their money, more than trusting government. (Applause.)

I'm not trying to elicit applause -- thank you, but -- (laughter) -- and our plan has worked. I don't know if you noticed last month that we added another 132,000 new jobs. We've added over 8 million new jobs since August of 2003. Entrepreneurship flourishes when people have got more capital in their pocket.

One of the interesting things about the tax cuts that we proposed is that a lot of the tax cuts were aimed at small businesses. One of the statistics that makes our economy interesting and, I believe, robust is that 70 percent of new jobs are created by small business owners. And that's an important thing for our fellow citizens to remember, particularly those in Congress who are thinking about something to do with the tax code.

Most small businesses are Subchapter S corporations or limited partnerships. In other words, they pay tax at the individual income tax rate. So, therefore, when you cut income taxes on everybody who pays taxes -- in other words, when you lower the rates, it affects the ability of small businesses to keep capital; in other words, keep more of what they earn. And when a small business keeps more of what they earn, it is more likely that business will expand. And, therefore, when you hear me say that 8 million new jobs have been created since August of 2003, I might as well have said, as well, the small business sector of America is strong, and the best way to keep it that way is to keep taxes low.

And now we're going to have a debate on that in Washington. And that's going to be the interesting, philosophical argument. You'll hear people say in Washington, well, we need to raise taxes in order to either pay for new programs or balance the budget. I happen to believe we can balance the budget without raising taxes if we're wise about how we spend your money. And we're proving it possible.

Tomorrow I'm going to talk about the size of the deficit. I'm not going to guess what that will be, but I can predict it's going to be substantially lower than it was three years ago. And we didn't raise your taxes. We kept your taxes low, which caused the economy to grow, which yielded more tax revenues. And because we set priorities, the deficit is shrinking.

And the big fight in Washington is going to be whether or not the budgets that the Congress is trying to now pass is going to go through. It's not -- I'll veto them if they're excessive in spending. I'm not going to let them raise your taxes. I think it would be bad for the economy. I think it would be bad for entrepreneurship. (Applause.)

Let me talk about health care, since it's fresh on my mind. The objective has got to be to make sure America is the best place in the world to get health care, that we're the most innovative country, that we encourage doctors to stay in practice, that we are robust in the funding of research, and that patients get good, quality care at a reasonable cost.

The immediate goal is to make sure there are more people on private insurance plans. I mean, people have access to health care in America. After all, you just go to an emergency room. The question is, will we be wise about how we pay for health care. I believe the best way to do so is to enable more people to have private insurance. And the reason I emphasize private insurance, the best health care plan -- the best health care policy is one that emphasizes private health. In other words, the opposite of that would be government control of health care.

And there's a debate in Washington, D.C. over this. It's going to be manifested here shortly by whether or not we ought to expand what's called S-CHIP. S-CHIP is a program designed to help poor children get insurance. I'm for it. It came in when I was the governor of Texas; I supported that. But now there are plans to expand S-CHIP to include families -- some proposals are families making up to $80,000 a year. In other words, the program is going beyond the initial intent of helping poor children. It's now aiming at encouraging more people to get on government health care. That's what that is. It's a way to encourage people to transfer from the private sector to government health care plans.

My position is, we ought to help the poor -- and we do, through Medicaid. My position is, we ought to have a modern medical system for the seniors -- and we do, through Medicare. But I strongly object to the government providing incentives for people to leave private medicine, private health care to the public sector. And I think it's wrong and I think it's a mistake. And therefore, I will resist Congress's attempt -- (applause) -- I'll resist Congress's attempt to federalize medicine.

I mean, think of it this way: They're going to increase the number of folks eligible through S-CHIP; some want to lower the age for Medicare. And then all of a sudden, you begin to see a -- I wouldn't call it a plot, just a strategy -- (laughter) -- to get more people to be a part of a federalization of health care. In my judgment, that would be -- it would lead to not better medicine, but worse medicine. It would lead to not more innovation, but less innovation.

And so -- but you got to be for something in Washington. You can't be against federalization, you've got to be for a plan that enhances the relationship between doctor and patient, and that's what I'm for. Here's what I believe in: One, I believe in health savings accounts as an alternative to the federalization of medicine. It gives people the opportunity to save, tax-free, for routine medical costs and, at the same time, have a catastrophic health care plan to back them up.

I like the idea of people making decisions that are -- that will, one, enhance their health, and two, save money. The doc told me that -- we were looking at one of these brilliant heart guys working for him. You're not going to believe the technology in this hospital, by the way. If you're a Cleveland resident, you ought to be proud of this hospital. It's unbelievable. (Applause.)

He said something pretty wise, though. He said, you can have all the technology that man can conceivably create, but if you continue to smoke, we're going backwards. If you're not exercising, if you're not taking care of the body yourself, all the technology isn't going to save your life. In other words, there is a certain responsibility that we have as citizens to take care of ourselves. And a health savings account actually provides a financial incentive for you to do that.

I believe in plans that enable small businesses to congregate across jurisdictional lines so they can afford insurance, afford spreading risk just the way big corporations can do. In other words, one way to control costs is to enable small businesses, many of which are having trouble affording insurance, to pool -- pool risk.

I'm a strong believer in medical liability reform. We've got a legal system which is driving up the costs of medicine, because docs are practicing defensive medicine and driving good doctors out of practice. And it makes no sense to have a legal system that punishes good medicine. And therefore, I strongly believe that the Congress ought to pass federal medical liability insurance for our doctors and our providers.

I believe in information technology. The first time I came to Cleveland Clinic, we were talking about how to modernize our hospital systems and our doctors' offices into the 21st century. Perhaps the best way to describe the problem is we've got too many doctors still writing out prescriptions by hand. Most of them can't write to begin with. (Laughter.) And then they pass the file from one person to the next. That's inefficient in this new era. I mean, technology is changing the way we live; it ought to be changing the way medicine operates. And it is, at Cleveland Clinic. I envision the day, one day, when all of us will have our own medical electronic record that will be safe from snoopers, in other words, will be private, but will make health care more efficient.

Cleveland Clinic did something interesting. I went to four different stations, and after every station they gave me an outcomes book. In other words, we're willing to be measured, says the good doc. There ought to be transparency in medicine. How many of you have ever actually tried to price a medical service? Probably not many. How many of you have ever said, gosh, I wonder whether this health care quality is better than the neighbors? I doubt any of you -- many of you have done that. Why? Because the system is not geared toward that. Somebody else pays your bills. If you really think about it, and you're working, say, for a company in America, and they provide a health care plan for you, there's a third-party payer. Well, if somebody else pays the bills, why do you care what the cost is at the time of purchase?

In other words, the whole plan has got to be to bring more accountability into health care, to make the consumer more responsible for making proper and rational decisions. That's what accountability does. And I applaud you for that, Doc. That's what transparency in pricing means, that you should be able to shop for price.

But the system, by the way, the tax system does not enable the individual to be incented to buy insurance in the private sector. If you work for a company and you get insurance, you get a good -- you get a good tax benefit. If you're an individual and buy insurance, you don't get the same tax benefit. That doesn't make any sense. The tax code needs to be reformed. The tax code ought to treat everybody equally when it comes to health care. And therefore, one proposal, one way to deal with that is something I talked to the Congress about, and said, if you're a married person and you're working, you ought to get a $15,000 deduction, just like a mortgage deduction, from your income, whether you're working for corporate America, or you're working on your own; whether you're working for a small-business owner, or you're looking for a job.

And that way, you begin to make sure the tax code is a level playing field. And that way, an individual market begins to grow, because you have got an incentive at that point in time to go out and purchase health care. As a matter of fact, you won't get your deduction unless you purchase health care if you're in the individual market.

The whole point I'm trying to make is there's an alternative to federalization of health care. It doesn't make a nice, neat sound bite. It's not something that's easy to sell -- what do you care about making sure you expand S-CHIP? That sounds nice and cozy, but nevertheless, it is an alternative that will work, and it is working, right here in America today.

The technological changes in the hospital across the street have been amazing. The quality of care has been fantastic. There's just more we can do to make sure we continue to be the leader, without wrecking the health care system.

Energy: In order to keep this economy strong -- and we do have a strong economy -- not only have we added 8.2 million new jobs since August of 2003, interest is low, inflation is down. I mean, this thing is buzzing. There are some parts of the country that are hurting. The manufacturing sector up here isn't doing as well as other parts of the country. However, I would remind you that the unemployment rate in Ohio is 5.8 percent. Is that perfect? No. Is it better than it has been? You bet it is.

But the -- one of the issues to make sure that we continue to grow strong in the years to come is energy. We're just too dependent on oil. I know that sounds hard for a Texas guy to say. You're probably wondering whether I mean it. (Laughter.) I do. It's a national security issue to be dependent on oil from parts of the world where some of the folks don't like us. It's an issue that's got to be dealt with -- now.

There's an economic security issue when it comes to being dependent on oil. When the demand for crude oil goes up in a place like China because of economic growth, it causes the international price of oil to go up, which affects the gasoline price here in Cleveland, Ohio. That's the way it works. High crude oil prices yield higher gasoline prices. And therefore, there's an economic issue for being dependent on oil. And there's an environmental cost for being dependent on oil. When we're burning carbon, it creates greenhouse gasses, which is an issue that we need to deal with. So we have a fantastic opportunity to do something different, for the sake of our economy, for the sake of our national security, and for the sake of the environment.

Today I went to a fascinating little company here that is building hydrogen fuel cells. Hydrogen is the input, water is the output, and in the meantime, your car is going. Hydrogen fuel cells are coming. And there's a role for the federal government to -- spending your money to promote new technologies to enable us to become less dependent on oil and better stewards of the environment.

Imagine one day being able to drive your car with hydrogen as its power source, and water driblets as the output of your engine. And that day is coming. Now, it's down the road a little bit, but, nevertheless, it is a part of a comprehensive plan to make sure we become less dependent on oil. In the meantime, when it comes to powering your cars, I want to tell you, I'm a big believer in having our farmers grow a product that will enable us to drive our cars. I think it makes sense to spend your money to invest in new technologies, or to research new technologies, so that when a fellow grows switchgrass, for example, that grass can be processed into ethanol, which can power your automobile.

Now, I don't know if you know this or not -- we're up to about 7 billion gallons of ethanol being produced and used in America. That's up from 2 billion three or four years ago. That's a good deal, if you're interested about energy independence, because that energy is coming from corn growers here in America. The problem is, we're growing a lot of corn for ethanol, which means the price of corn is going up for the pig farmer. So we've got to relieve the pressure on the pig farmer -- (laughter) -- well, not everybody -- pig farmer is paying -- using a lot of corn. And therefore, we're spending money on technologies. And I believe more and more people are going to be using ethanol to power their automobiles.

It's happening in the Midwest a lot now. Cellulosic ethanol breakthroughs will mean that we're going to be having ethanol produced from wood chips, or switchgrasses, which means the market will spread across the United States, which will make us less dependent on oil. And by the way, the exhausts from ethanol are a lot cleaner than the exhaust from hydrocarbon-based fuels.

We need to be promoting nuclear power. If you're really interested in the environment, like a lot of people are, then we ought to be promoting a renewable source of energy that emits no greenhouse gases. And one of the places where your government is spending money and is part of this comprehensive plan to change our energy mix is to figure out a better way to deal with the waste, nuclear waste. And I'm a big believer in reprocessing and fast-burner reactors, which is fancy words for we can burn down the fuel -- reuse it, burn it down to less volume and less toxicity.

We've got 250 years of coal, at least, in America. If we're interested in becoming less dependent on foreign sources of energy, we ought to be using energy here at home in a wise way. But coal can be dirty and, therefore, we're spending a lot of your money on developing clean coal technologies.

And my only point to you is that one of the reasons I've come to Cleveland is to herald some of the new technologies. As a matter of fact, a fellow came up to me at this place and he said, now, you're a wind person. I said, well, you know, I -- a lot of hot air here. (Laughter.) And he said, we got a new industry evolving here: windmills. That's fine. I support that. I think it makes a lot of sense. It makes us less dependent on foreign sources of oil. And that's important for making sure this economy continues to grow.

So my stop here has been really aimed at heralding technology. You got to be optimistic about America's future, because of some of the great technologies that are taking place. And two of the areas where technology is really going to change America for a long time coming is in the energy field and in the medical field.

I want to talk about this war we're in. First of all, I regret I have to tell you we're in war. I never wanted to be a war president. I -- now that I am one, I'm going to do the best I can to protect America.

My mind changed on September the 11th, 2001. It changed because I realized the biggest responsibility government has is to protect the American people from further attack, and that we must confront dangers before they come to hurt us again. That's one of the really valuable lessons of September the 11th -- is to recognize that oceans can't protect us from an enemy that is ideologically driven and who will use murder as a tool to achieve their political objectives.

Some in America don't believe we're at war, and that's their right. I know we are, and therefore, will spend my time as the President doing the best I can to educate people about the perils of the world in which we live, and that we have an active strategy in dealing with it.

First, the enemy. These folks aren't isolated folks, you know, they just kind of randomly show up. They have an objective. They believe as strongly in their ideology as I believe in ours. They believe that they have a obligation to spread a point of view that says, for example, if you don't worship the way we tell you to worship, there will be a consequence; just like I believe we have an obligation to defend a point of view that says, what matters is the right for you to choose your religion, and you're free to do so in the United States of America.

They believe that they can use -- they have no value for human life, see. That's what distinguishes them from us in another way. They will kill a Muslim, a child, or a woman in a moment's notice to achieve a political objective. They are dangerous people that need to be confronted.

And that's why, since September the 11th, our policy has been to find them and defeat them overseas so we don't have to face them here at home again. Now, that is a strong -- a short-term strategy, because the long-term strategy has got to be one that marginalizes these extremists and radicals by promoting an alternative ideology -- I like to say, an ideology based on light; an ideology that promotes hope; an ideology when, given a chance, has worked every time to lift people's spirits. And that's the ideology based upon liberty, the chance for people to live in a free and open society.

And it's hard work. And this war is on a multiple of fronts. One front is Afghanistan. And the front that is consuming the American people right now is Iraq. And I fully understand how tough it is on our psyche. I fully understand that when you watch the violence on TV every night, people are saying, is it worth it? Can we accomplish an objective? Well, first, I want to tell you, yes, we can accomplish and win this fight in Iraq. And secondly, I want to tell you, we must, for the sake of our children and our grandchildren.

You know, I was very optimistic at the end of '05 when 12 million Iraqis went to the polls. I know it seems like a decade ago. It wasn't all that long ago that, when given a chance, 12 million people voted. I wasn't surprised, but I was pleased -- let me put it to you that way. I wasn't surprised because one of the principles on which I make decisions is that I believe in the universality of freedom. I believe that freedom belongs to every man, woman and child on the face of the Earth. As a matter of fact, to take it a step further, I believe it is a gift from an Almighty to every man, woman and child on the face of the Earth. And therefore, I wasn't surprised when people, when given the chance, said, I want to be free. I was pleased that 12 million defied the car bombers and killers to vote.

Our policy at that point in time was to get our force posture in such a position, is that we would train the Iraqis so they would take the fight to those who would stop the advance of democracy, and that we'd be in a position to keep the territorial integrity in place, and chase down the extremists. That was our policy. We didn't get there in 2006 because a thinking enemy -- in this case, we believe al Qaeda, the same people that attacked us in America -- incited serious sectarian violence by blowing up a holy religious site of the Shia. And then there was this wave of reprisal.

And I had a decision to make. Some of Steve's colleagues -- good, decent, patriotic people -- believed the best thing for the United States to do at that point was to step back and to kind of let the violence burn out in the capital of Iraq. I thought long and hard about that. I was deeply concerned that violence in the capital would spill out into the countryside. I was deeply concerned that one of the objectives of al Qaeda -- and by the way, al Qaeda is doing most of the spectacular bombings, trying to incite sectarian violence. The same people that attacked us on September the 11th is the crowd that is now bombing people, killing innocent men, women and children, many of whom are Muslims, trying to stop the advance of a system based upon liberty.

And I was concerned that the chaos would more enable them to -- more likely enable them to achieve their stated objective, which is to drive us out of Iraq so they could have a safe haven from which to launch their ideological campaign and launch attacks against America. That's what they have said. The killers who came to America have said, with clarity, we want you out of Iraq so we can have a safe haven from which to attack again.

I think it's important for the Commander-in-Chief to listen carefully to what the enemy says. They thrive on chaos. They like the turmoil. It enables them to more likely achieve their objectives. What they can't stand is the advance of an alternative ideology that will end up marginalizing them.

So I looked at consequences of stepping back -- the consequences not only for Iraq, but the consequences for an important neighborhood for the security of the United States of America. What would the Iranians think about America if we stepped back in the face of this extremist challenge? What would other extremists think? What would al Qaeda be able to do? They'd be able to recruit better and raise more money from which to launch their objectives. Failure in Iraq would have serious consequences for the security of your children and your grandchildren.

And so I made the decision, rather than pulling out of the capital, to send more troops in the capital, all aimed at providing security, so that an alternative system could grow. I listened to the commanders that would be running the operation -- in this case, the main man is a man named General David Petraeus -- a smart, capable man, who gives me his candid advice. His advice, Mr. President, is we must change the mission to provide security for the people in the capital city of Iraq, as well as in Anbar Province, in order for the progress that the 12 million people who voted can be made. That's why we've done what we've done.

And we just started. He got all the troops there a couple of weeks ago. He asked for 20,000-some troops, and I said, if that's what you need, Commander, that's what you got. And they just showed up. And they're now beginning operations in full.

And in Washington, you got people saying, stop. And here's my attitude about this -- and I understand there's a debate, and there ought to be a debate in our democracy, and I welcome it. I welcome a good, honest debate about the consequences of failure, the consequences of success in this war. But I believe that it's in this nation's interest to give the commander a chance to fully implement his operations. And I believe Congress ought to wait for General Petraeus to come back and give his assessment of the strategy that he's putting in place before they make any decisions. That's what the American people expect. They expect for military people to come back and tell us how the military operations are going.

And that's the way I'm going to play it, as the Commander-in-Chief. I'll be glad to discuss different options -- the truth of the matter is, I felt like we could be in a different position at the end of 2005. I believe we can be in a different position in a while, and that would be to have enough troops there to guard the territorial integrity of that country, enough troops there to make sure that al Qaeda doesn't gain safe haven from which to be able to launch further attacks against the United States of America, enough troops to be embedded and to help train the Iraqis to do their job.

But we couldn't get there without additional troops. And now I call upon the United States Congress to give General David Petraeus a chance to come back and tell us whether his strategy is working. And then we can work together on a way forward.

In the meantime, the Iraqis have got to do more work. This coming week I'll be presenting to the Congress a list of some of the accomplishments and some of the shortfalls of their political process. They've asked us to report on 18 different benchmarks. That's what the Congress said in this last supplemental spending bill; they said, come back here in mid-July and give us an interim report as to whether or not any progress is being made in Iraq. And that's what we'll be doing. So at the end of this week you'll see a progress report on what's been happening in Iraq -- and then in September, a final report on the benchmarks that I accepted and that Congress passed.

And so that's the challenge facing the country. And it's a necessary -- in my judgment, it's necessary work. I wouldn't ask a mother or a dad -- I wouldn't put their son in harm's way if I didn't believe this was necessary for the security of the United States and peace of the world. And I strongly believe it. And I strongly believe we will prevail. And I strongly believe that democracy will trump totalitarianism every time. That's what I believe. And those are the belief systems on which I'm making decisions that I believe will yield the peace.

You know, it's really interesting in my position -- I obviously have a unique view of things at times. And one of the most interesting views that I've been able to -- of history that I've been able to really focus on is our relationship with Japan. I've told this story a lot because I find it to be very ironic.

When my dad was a young guy, right out of high school, he joined the United States Navy, became a Navy torpedo bomber pilot and fought the Japanese. They were the sworn enemy of the United States of America. And he, like a lot of other young people, gave it their all. And a lot of people died on both sides of the war. As a matter of fact, it was -- the Japanese, as you rightly know, was the last major attack on the United States, prior to September the 11th, 2001. Some 60 years later, I'm at the table, talking about the peace with the Japanese Prime Minister, Prime Minister Koizumi.

I find that to be an inspiring story and a hopeful story. It's a story about the ability of liberty to transform enemies into allies. It's a story about the ability for those who fought to become partners in peace. Prime Minister Koizumi, and now Prime Minister Abe, are close friends of mine in the international arena. We talk about the spread of democracy in the troubled part of the world because we both have seen the effects of democracy in our own relationship.

I've got great faith in the power of liberty to transform the world for the sake of peace. And the fundamental question facing our country is, will we keep that faith?
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