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President Highlights Importance of Small Business in Economic Growth
THE PRESIDENT: Thanks for having me. Please be seated. Thanks for coming to say hello. What I thought I'd do is share some thoughts with you and then answer questions for a while. Before I do, I want to thank Randy and the Loudoun County Chamber of Commerce for setting this up. I appreciate you all coming.
I've got something to say, and I hope you do, as well, as we have a conversation about how to make sure this economy of ours continues to stay robust and strong, so people can find work and realize their dreams.
Before I talk about the economy, I do want to say Laura sends her regrets. She came home last night about 12:45 a.m. She just came back from Africa, where she and my daughter, Barbara, and Condi Rice went to witness the swearing-in of the first elected woman President on the continent of Africa. They had a great trip. She said it was an inspiring inauguration. I just wish she'd have tiptoed in a little quieter.
She's doing great. One of the best things about the presidency is how close our family has remained. And how wonderful a wife and mother she is. And the American people are getting to see that.
Speaking about families, Chuck Kuhn's family is pretty remarkable. Turns out his mother works for him. That's the opposite in my family. I need a little advice on how to restructure the chain of command in the Bush family. But I love being here in a place where a guy who had a dream at age 17 -- that's how old Chuck was when he started to act on his entrepreneurial instincts -- said, if I work hard and if I'm smart and if I figure out what the market wants, I can build something that I call my own. And 23 years later, we're standing, obviously, in what has become a very successful business enterprise. Successful because he is thriving and expanding. Successful because he has provided people a good place to make a living.
And so I want to thank you, Chuck, for being a great entrepreneur.
I want to thank the folks who work here for setting this deal up. I'm here to talk abut how to make sure that America is the place where the entrepreneur can succeed. That's what we're really here to discuss, isn't it? And it's a wonderful place to have that discussion.
Before we get there, I want to thank the Attorney General, Bob McDonnell, of the state of Virginia, the Commonwealth of Virginia, for being here. Appreciate you. He's sitting next to an old governor buddy of mine -- Bill Graves, he was the governor of Kansas during the time I was governor of Texas. And I used to remind him he made a really smart move when he married a woman from Texas. Still married, aren't you? Yes. Good move. The best deal that's ever happened to you. It's great to see you. Bill is the President and CEO of the American Trucking Association. I want to thank all the other state and local officials who are here, but most importantly I want to thank the small business owners who are here.
I was interested to find out that Loudoun County is the home of 10,000 small businesses, 80 percent of which have got 10 employees or less. It's pretty strong isn't it? Amazing. Probably one of the reasons why you're growing so fast is that people realize this is a good place to take risk.
And that's really the role of government, when you think about it. I like to tell people the role of government is not to try to create wealth; that's not the role of government. Oh, sure, the role of government is to help the poor and help the elderly with medicine -- but it's not to try to create overall wealth. The role of government is to create an environment in which people are willing to risk capital, to take risk; an environment in which people are willing to work to realize their dreams -- just like here at this trucking company. That's the fundamental policy -- principle on which I'm basing my decisions as I ask Congress to think about how to make sure the economic growth that is now prevalent in America continues.
We have got a robust economy, but it wasn't necessarily going to be that way -- when you think about what we've been through, it kind of helps point to what good policy may be. We've been through a stock market correction. We've been through corporate scandals, which affected the confidence of people. We have been through a terrorist attack, which hurt our economy. We have been through war. We have had significant natural disasters. All of which could have sent us into a downward spiral had we not put good policy in place.
We've overcome these issues, and I believe one of the main reasons why is because we let people keep more of their own money. I asked Congress for tax relief. I believe strongly that if the entrepreneurs of America have more money in their pocket they will use it to expand their businesses. I believe very strongly that if a consumer has more money in their pocket, they will demand extra goods and services; and when somebody demands an extra good and service in a market economy, somebody is going to produce it to meet that demand.
And so I went to Congress and said, look, we've got problems; let's be aggressive about how we address it; let's cut the taxes on everybody. I remember the debate, they said only some people should have tax cuts. So we lowered rates for everybody. If you all have tax relief, everybody who pays taxes ought to get relief; you ought not to try to play favorites with who gets it and who doesn't get it.
We mitigated the damage of the marriage penalty. I always thought it was a little contradictory to have a tax code that discouraged marriage. Seems like to me we ought to encourage marriage in this country, and the tax code ought to encourage that.
We lowered taxes on dividends and capital gains because we want to encourage investment. We put the death tax on the road to extinction. The death tax is a punitive tax for small businesses and farmers and ranchers. It's a tax you pay -- you know, you're paying income tax, when you're making money, you're paying tax to the government, that's fine. And then you die and your heirs get to pay it all over again, and that doesn't seem fair. It seems like to me that you want a tax system that encourages a family member to be able to pass their assets on to whomever they choose without the government making it impossible to do so. So the death tax was put on its way to extinction. I said, put on its way to distinction, the problem is the way the law was written, it's coming back to life in 2011, which is going to make some interesting estate issues, particularly in 2010.
We increased the child credit. We want to help families who have got children. One of the things that's really important for Congress to recognize is that most new jobs in America are created by small businesses. If you're interested in job growth, then you've got to be thinking about where's the engine for growth? And it's the small business owner. Seventy percent of new jobs in America are created by small business owners and entrepreneurs. Many small businesses pay tax at the individual income tax level: sole proprietorships, subchapter S. These are structures in which people are able to grow their businesses, but they're advantageous to the owners of business and, yet, you pay individual income tax rate.
So when you hear me talking about, we cut taxes on individuals, you also have to recognize we cut taxes on small businesses. And if you want there to be job creation to offset the trauma that our economy has been through, our country has been through, then it makes sense to say to the job creators, here is a little more money for you in your pocket.
We also encouraged investment. You might remember we made it tax advantageous to increase investment in plant equipment if you're a small business owner. All the policies that I'm describing to you were aimed at saying to the small business sector: we understand your importance, here's how to help you grow.
The other thing that you've got to understand in Washington is that you hear a lot of debate about the deficit, and it's an important debate, don't get me wrong. But in my judgment the best way to solve the deficit is to grow the economy, not run up your taxes. There is a myth in Washington, they say all we've got to do is just raise the taxes a little bit and we'll solve the deficit. No, that's not how it works. They're going to run up your taxes, but they're going to find new ways to spend the money and not solve the deficit. That's how Washington works.
The best way, it seems like to me, to solve the deficit is to keep pro-growth tax policies in place and do something on the spending side. And so I'm working with Congress -- and I want to thank the Speaker and the Leader for supporting and passing lean budgets. I say "lean" because we've got one aspect of our budget that is not going to be lean. And that is any time we've got a kid in harm's way, he or she is going to have the best equipment, best training, best possible pay. That's what we owe the families of our military.
But on non-security discretionary spending we've slowed it down every year I've been in office. And, actually, the non-discretionary -- non-security discretionary spending -- I'm from Texas -- (laughter) -- is lower in '06 than it was in '05. We've actually reduced non-security discretionary spending. The issue for the budget is mandatory spending. That means you don't have discretion over it, it's fixed by formula. The two biggest programs we face, of course, are -- for mandatory spending increases are Medicare and Social Security. And we're going to have to do something about it, and a lot of folks in Washington don't want to do anything about it -- it's too hard, politically.
I want to share some thoughts with you about my view of "too hard, politically." I think we're supposed to do the hard things, politically. I think the job of a President and jobs of leaders in Congress from both political parties should confront problems now and not pass them on to future generations. And we've got a problem with Social Security and Medicare and I'll tell you why. We've got a bunch of baby boomers like me getting ready to retire. As a matter of fact, I'm 62 years old in the year 2008 -- it's a perfect fit. And there are a lot of us. I'm looking at some of them here. And we've been promised greater benefits than previous generations.
The politicians that ran for office said, vote for me, I'll make sure your Social Security benefits go faster than the rate of inflation. And as a result of a lot of us retiring and fewer people paying into the system, the deal is going broke. And it's hard for me to travel our country and look at hardworking people paying payroll taxes to a system that I know is going broke. And it should be hard for Republicans and Democrats on Capitol Hill, as well.
And so I just want to assure you that no matter how hard it may seem for some, I'm going to keep talking about it. That's the job of a President, is to remind people of the challenges.
There's a long-term deficit issue as a result of a system which is out of balance and out of kilter. And we need to do something about it now. We have that obligation. The Senate has the chance -- or the House now has the chance to pass a budget bill, or an appropriations bill, reconciliation bill that actually starts to cut mandatory spending by making reforms. The deal passed out of the House, passed out of the Senate, now it has to go back to the House. And it would be a good faith gesture on people from both political parties to say, we see we've got a problem on mandatory spending, why don't we start reforming the system for the sake of future generations of Americans.
Things are going well, by the way, in the economy. We added 4.6 million new jobs since April of 2003. What I'm telling you is the tax plan is working and here's why I can say it to you without having to throw some hot air your way. Since April of 2003, 4.6 million new jobs have been created -- not by government, but by entrepreneurs. We had a national unemployment rate of 4.9 percent -- I think it's 2 percent, 2-point-something percent here in Loudoun County. The economy grew at 4.1 percent in the third quarter. And that's in spite of high energy prices -- or higher energy prices and two storms. Think about that. Think of how robust our economy is when it's growing at 4.1 percent in the third quarter of this year, in the face of storm and high energy prices -- it's got to affect your business, doesn't it, all those high energy prices. And, yet, you're growing.
In other words, we've got an economy that is robust. The interesting statistic is the manufacturing activity has been up for 31 straight months. You hear a lot of talk about manufacturers and the trouble with manufacturers and of course there are some troubles. But we've had growth for 31 straight months. Productivity is up. That's a really important statistic for our country because productivity -- as a worker becomes more productive, as the workforce is more productive, higher wages follow, that's just a fact of life.
Do you realize that from 1973 to 1995, productivity in America grew at 1.4 percent. At that rate, the standard of living doubles every 50 years. Today, our productivity is up, averaged 3.4 percent over the past five years. In other words, we're more productive as time goes on. Technology enables our workers to be more productive. Education enables our workers to be more productive. Smart business leaders are constantly trying to figure out how to make their companies more productive. The more productive a workforce is, the faster incomes go up.
So what I'm saying is things are going fine. I mean, you know, we've got more minorities than ever before in our country owning their own home. Home ownership is on the rise. And the fundamental question facing us is what do we do to keep it going. What do we do? Well, first thing is, Congress needs to make the tax relief permanent. This relief is set to expire. The easy course is, of course, say, well, then just let it expire. That's a tax increase if the tax relief expires. When you hear people say, well, we're not going to make it permanent
-- what they're telling you is they're going to run up your taxes, that's what they're saying.
Failure to make tax relief permanent is a tax raise on the working people and the small businesses in this country. If you're a small business owner, there's got to be certainty in the tax code. Congress needs to put themselves in the shoes of people who are trying to plan. Good business owners, good small business owners don't think two months in advance, they think years in advance; they're making capital schedules; they're thinking about how to grow their company; they're constantly strategizing. Uncertainty in the tax code makes it hard for the small business sector to stay confident and to make investments. And when there is uncertainty, it makes it harder for this economy to show steady growth.
So people need to make this tax cut permanent so we don't take money out of your pocket. And we need to make the tax cuts permanent so there will be certainty when it comes time for small businesses to plan.
I understand there's a problem in health care and I suspect during the question and answer we'll get questions on health care. One of the biggest problems our small businesses have is the increase in health care. The role of government in my judgment is to take care of the poor through Medicaid and community health centers. The role of the government in my judgment is to take of the elderly through a Medicare program which is modern, and by the way, provides choices for our seniors. But I also think the role of government is to encourage a direct relationship between the consumer/the patient, and the provider/the doctor, without a lot of go-between.
I think that -- I know that small businesses should be allowed the same affordability of health care that big businesses get by being able to pool across jurisdictional boundaries, pool your risk. If you're a restaurant owner in here Loudoun County and a restaurant owner in Crawford -- I think there are a couple of restaurants here. If not, there will be. No, there is a good one, The Coffee Shop -- I mean, Coffee Station, excuse me. But they should be allowed to pool their risk across jurisdictional boundaries. In other words, the larger the risk pool, the more employees you're able to get in a risk pool, the easier it is to manage your costs when it comes to health insurance. You can't do that now. And Congress should encourage you to be able to pool risk.
An interesting product available is called health savings accounts. I strongly urge small business owner here to look at them. It's an innovative product that enables the small business owner and the employee to combine, to work together to come up with a plan where the employee owns it. It provides for a high deductible catastrophic plan, coupled with tax-free contributions in the plan, basically gives the consumer control over his or her medical decisions. The plan can grow tax-free, which is an encouragement for people to make wise decisions about how they treat their body. If you have a catastrophic event, the insurance kicks in and covers it. It's portable. If you change jobs, you can take it with you. It's an interesting idea.
It certainly stands in stark contrast with a system in which the federal government gets to make the consumers decisions, or tells the providers what they can charge. It's the opposite of federal control. It is patient control.
We need do a lot on information technology. The health care industry is inefficient in that you've still got people filing out forms with handwritten notes. And doctors can't write anyway -- (laughter) -- and it creates a lot of confusion, as you can imagine.
We need to have legal reform. You can't have a legal system -- I mean, a medical system that's available and affordable when you've got your doctors being sued. Do you realize we've got a crisis when it comes to OB/GYNs in America. These good docs who have got the great compassionate job of taking care of youngin's, they're getting run out of business because of frivolous and junk lawsuits. It makes no sense.
When I first came to Washington, I said, you know, this is a state issue. But the problem with all these junk lawsuits is that they cause doctors to practice defensive medicine. In other words, they prescribe more than they should because they're afraid of getting sued. And when you practice defensive medicine it makes the cost of medicine go up. And when you couple that with increasing premiums, it costs us a lot of money at the federal level -- I'm talking billions a year as the result of junk lawsuits. And good small business owners have trouble affording health care; part of the reason why is because of these junk lawsuits. And so I've decided this is a national issue that requires a national response. We need medical liability reform in Washington, D.C. so that health care is available and affordable.
Laura always says I get too long-winded when I come to one of these deals -- (laughter) and so I'll try to rein it in here. I've got something to say, though.
We've got do something about lawsuits, in general, not just medical lawsuits. One of the things I hear a lot from small business owners is they're afraid of getting sued. I mean, we've got a society which is litigious in nature. People are just suing right and left. That makes it -- that runs up the cost of staying in business. It makes it harder for people to work. Of course, if you have a legitimate lawsuit, you ought to get -- have your day in court. Everybody understands that. It's just these frivolous lawsuits.
We're trying to do some things about it in Washington. We've got class action lawsuit reform passed. We're trying to get asbestos reform passed. We got bankruptcy passed. We got manufacturers liability passed when it comes to firearms. I mean, we're making some progress when it comes to lawsuit reform. I urge the Attorney General here to -- and urge the Governor in the Commonwealth to pass good lawsuit reform, as well. It's a really important issue for the vibrancy of our economy.
Energy, real quick. Look, we're hooked on foreign sources of oil and we need to do something about it, pure and simple. I've got a strong faith in technology being able to lead away from a hydrocarbon society. It's going to take a while. But the federal government has a role to invest in research and development. I envision the day when we're using corn, corn husks, different kind of grasses to be able to convert into energy.
Down in Brazil they've got enormous amounts of energy they get from their sugarcane. Their automobiles are flex-fuel automobiles; they're able to convert from gasoline to ethanol made by sugarcane on an easy basis. I mean, it's coming. And the role of the federal government is to encourage these new technologies, to be able to make us less dependent on foreign sources of oil.
We need to be -- we ought to have more nuclear power in the United States of America. It's clean, it's renewable, it's safer than it ever was in the past. And we need to be thinking about how we can use solar batteries better. I mean, there's a lot of things we can be doing. I'm confident that with the right policies and the right incentives, technology will help us diversify away from a hydrocarbon world.
But we've got plenty of certain kinds of hydrocarbons we can use: coal. I'm also convinced, with the right expenditure of money, that we'll be able to have zero emissions coal-fired plants that will make us less dependent -- do you realize we've got about 250 years of coal here in America? It seems like to me a wise investment is to figure out how to use that coal in a way that heats your homes and fuels your businesses, and at the same time, protects the environment. So we have to think about how to incorporate new technologies to diversify away from foreign sources of energy, not only for economic security, but for national security purposes.
I want to talk real quick about trade. I believe it's important to open up markets. I think it's a mistake for this country to go isolationist when it comes to economic policy. Do you realize we're 5 percent of the world's population, which means 95 percent of the rest of them could be customers, so long as we've got a level playing field. My job is to make sure that if you're producing a product, that it has fair access to markets. We ought to treat people -- people ought to treat us just like we treat them. And I'm a strong believer that if the playing field is level, this country can compete with anybody, anytime, anywhere. And if we can't, we ought to figure out why not. Competition is good, so long as it's fair competition.
And, finally, I want to talk about education. As you expand your businesses, as they become -- as they change because of technology, you're going to need a workforce that is capable of filling the jobs. We've got to make sure we get education right in the United States, otherwise the jobs of the 21st century are going to go somewhere else. This is a competitive world in which we live; there's no way to deny that there's competition in the world. We can play like it. We can put up foolish, short-term economic policies that will hurt the small business sector, protectionist policies -- but it's a competitive world. And people are going to go to where the skill sets of the labor market are such that they'll be able to produce the products of the 21st century. It's a reality.
So what do you do about it? Well, the first thing you do about it is you make sure your kids at the elementary school get an education; teach them how to read, write and add and subtract. The No Child Left Behind Act is a great piece of legislation. I think as small business owners you'll understand where I'm coming from. It says you've got to measure to determine whether or not you're succeeding.
I was concerned when I was the governor of Texas that we had an education system that didn't measure and, therefore, we didn't know. And oftentimes when you don't know whether a child can read and write and add and subtract, they just end up being shuffled through the system. I believe that we ought to measure. As a matter of fact, we are now measuring as a result of the No Child Left Behind Act, that says we want to determine whether or not you can read at grade level by the 3rd grade, and whether or not you're grade level at the 4th grade and the 5th grade and so on. And if not, here's some money to help you make sure the child is up at grade level.
You cannot solve a problem until you diagnose a problem. And the No Child Left Behind Act is a diagnostic tool for local school districts. We're not telling you how to run your schools, that's up to you. We didn't design a federal test; we just said, you design an accountability system. And it's working. We have an achievement gap in America that is not right and needs to be closed. We have too many African American kids not reading at grade level and they should be, and I'd say a lot of that is due to just moving kids through without determining early whether or not they've got the skills necessary to read, write and add and subtract. And we're changing that. The achievement gap is closing. It's a really positive development. I can tell you how I know: because we measure and we solve problems early, before it's too late.
We've got to have these same high standards in high school, with an emphasis on math and science. We've got to use our community college system to constantly upgrade the skills of people. As you know, the job market changes. And the easiest thing for a society is to have technological change; the hardest thing is to make sure that the education systems are flexible enough to help the job market change with technology.
Community college is a great asset in our country. They're available, they're affordable. And if they're run right, they have a curriculum that changes with the times. They're not one of these institutions to just stay stuck. They're an institution that says we're going to change our curriculum to be able to educate people for the jobs which actually exist. That's what we need to do, what I'm telling you.
So I'm going to go to Congress here pretty soon and call on them to put economic policy, energy policy, health policy in place that understands that this economy is strong, but we need to do the right things to keep it going -- with the centerpiece of our economic policy being the small business in America.
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