FROM THE OFFICE OF PUBLIC AFFAIRS

Good afternoon. It's wonderful to be with you today. I want to take a few moments to make some remarks about what we're up to in Washington, and then I'd like to hear from all of you. As retailers, you are the first to sense changes in consumer behavior, and therefore sense the direction our economy is taking. Hearing from you about what you are seeing in your stores is crucial in helping me do my job.

I saw the forecast you made and also the data released this morning on retail sales from December. They fit into my overall view of where we are today - we see signs that the economy is improving, but the signs don't give a clear indication that our rate of improvement will be as strong as we'd like it to be. When I talk to executives in different industries, I hear different outlooks. In some cases, I hear that inventories are at record low levels - a good sign for an imminent recovery. Others tell me, however, they see no prospects for new orders. The signs are mixed, and growth forecasts reflect that - suggesting that we'll have positive growth, but less than the 3-plus percent rate that we'd like to return to quickly. That's not good enough. It's especially not good enough for the people who've lost their jobs since this recession started last March.

We need to take action to strengthen our recovery and speed the process of putting Americans back to work. Last month, we were very close to getting an economic security package through the Congress, but we didn't get it done. The President has told the Congress and the nation that we will continue to push for tax changes that will increase business investment and job creation and put money in the hands of consumers.

Getting the economy growing again is good for working American families, good for retailers like all of you, and also good for the federal government's budget. As you know, the economic slowdown has virtually eliminated federal budget surpluses for the next two years. The tax cut enacted last summer accounts for about 15% of the reduction in this year's surplus, new spending in the wake of the September 11 attacks accounts for about 20%, and the rest - two-thirds of the reduction - is the result of the slower economy. For example, the CBO reports that when first quarter revenue is adjusted for the one time shift in timing that was legislated last year, corporate tax receipts would have been down 40% quarter over quarter. The President's tax relief package did not reduce corporate taxes at all in 2001 - the decline is entirely due to the slowdown in the economy.

The sooner we get the economy growing again, the sooner we will return to the era of budget surpluses. Of course we should run a budget surplus when our economy is running well, but we should not raise taxes to achieve an accountant's surplus when our economy is limping or in the early stages of recovery.

Because it is so topical, I want to say a few words about the assignments the President gave me last week to convene two groups to see what action should be taken, if any, to modify laws, rules or regulations to better protect employees and investors from the circumstances of Enron employees and investors.

We who believe in free markets know that government plays a crucial role in establishing the rules of the game. Market economies work when the rules of the game provide investors with the information they need to make sound decisions and also provide them with certainty that the rules will be followed. The United States has the lowest cost of capital in the world because we have the best rules. Individuals - whether they are asset managers at large investment houses or simply managing their own personal savings -- are confident that they have the information they need to make sound decisions and the ability to act on that information as they see fit.

In the Enron case, something clearly went awry.

The Justice Department is pursuing a criminal investigation. If anyone at Enron broke the rules, they will be punished.

At the same time, the President has asked us to look at the rules that apply to 401(k)s, pensions and other types of retirement plans to make certain the rules are adequate to ensure that individuals do not lose control over the life savings they own. We also need to review whether accurate information is available so that individuals can make wise saving and investment decisions.

I met Friday with Labor Secretary Elaine Chao and Commerce Secretary Don Evans to begin an examination of the rules that apply to 401(k) plans and private pensions. Working Americans save through their 401(k)s to buy a home, to pay for their children's education, and to retire in comfort. These savings belong to individual workers, and no one should take control away from the individuals who own those nest eggs. We will look at a broad range of issues, including the rules governing diversification, temporary lock out, and the availability of information to employees. We must ensure that the rules enhance opportunities for individuals to invest in our economy and ensure that their ownership of their life savings is protected. For individuals to make the best possible decisions, they must know that the rules prevent anyone from taking those decisions away from them.

Finally, the President has asked me to lead a group looking into disclosure rules, so that all investors have the information they need to make sound decisions. I will be working with Chairman Greenspan, with Harvey Pitt at the SEC and Jim Newsome at the CFTC to ensure that rules for disclosure keep pace with the increasing complexity of financial instruments used in our economy. Our economy flourishes when each individual is able to make individual decisions based on complete and accurate information. Individual investors making the most informed decisions possible will allocate resources in our economy where they will have the greatest return. It is the foundation of a successful market economy and a necessity for the peace of mind of millions of employees whose life savings are the foundation for their dreams and aspirations.