April 12, 2006
JS-4178

The Honorable John W. Snow
Prepared Remarks
The University of Mississippi

Good afternoon; thanks so much for inviting me here. I appreciate the hospitality of everyone here at "Ole Miss" and want to extend a particular thanks to Senator Trent Lott. He loves this university and he loves this state, and it shows. Thank you, Senator, for sharing your home with me today.

Universities like this one are a great place for intellectual and philosophical debate – indeed, open debate and dynamic discourse are key elements of a fine education and a free society. And a larger philosophical debate is taking shape in America today--one that may sound somewhat familiar, but also one that has taken on new importance for our country's future.

On the one hand are those who believe that the future of our economy is best served by a larger role for government in the economy. On the other side are those, like myself, who maintain that while the role of government is to create the conditions for prosperity, the citizens and taxpayers are the best judge of how to spend their own money, not the government. One view necessitates higher taxes, a more expansive role for government, and more government spending. The other holds that low tax rates, a reduced role for government and a vibrant private sector is the best path to prosperity for all Americans.

Recently the former view was exemplified in a presentation in Washington by a number of past officials of the previous Administration. They styled their undertaking the so-called "Hamilton Project," drawing on the name of the first U.S. Treasury Secretary. Based on what was said, it appears that Hamilton's name may have been misappropriated.  Hamilton after all was foremost among the founding fathers in seeing that the new republic's future depended upon the vitality of commerce and the private sector while the authors of the Hamilton Project argue for a larger government role.

The stated goal of this group was to put policy for our economy on a course "diametrically opposed to the current policy regime," calling the current path "on the wrong track on almost every front." They argued for a deceptively simple approach as an alternative, calling for both "fiscal discipline, and for increased public investment in key growth-enhancing areas." Well, if you do the math, growing the public sector--that is, making government bigger--and achieving fiscal discipline, can only lead to one thing: higher taxes.   And higher taxes always mean a larger role for government and a smaller role for the private sector.  Is that the way we want to go?  I don't think so.

They also claim to want economic growth to be "broad based." But, they intend a recipe of more government and higher taxes that is antithetical to growth itself. In that scenario, the only way for some to have more, is for others to do with less. That sounds to me like nothing more than the same old "class warfare."  Hamilton on the other hand saw the boundless opportunity for all to benefit from an expanding economy.

In light of the facts, one wonders why anyone would want to change course now, when the current low tax, high growth policies of this President have worked so well. Is it the 5.2 million new jobs that they disagree with? Is it the unemployment rate of 4.7 percent, which is lower than the average of the 60's, 70's, 80's and the 90's? Perhaps it's the record home ownership or household wealth?  Or maybe it's the rising real after tax income that they object to. I don't think they would find Alexander Hamilton an ally on any of these points.

Perhaps it is, as Hamilton once said, that "men often oppose a thing merely because they have had no agency in planning it, or because it may have been planned by those whom they dislike."

From where I stand, and from where 5.2 million American workers with new jobs stand, the President's economic policies have been an unambiguous success and the underlying fundamentals of the economy are very strong indeed.

There are still challenges ahead, of course, and we won't rest until every American who is looking for work can find a job, until the opportunity for an improved standard of living is truly within the reach of every American. That's the President's objective, and it's a goal we pursue every day.

We have seen that the economy is doing well. That was not the case, however, when the President took office. In fact, he inherited an economy in steep decline. The turnaround of the economy can be directly traced to the two rounds of tax cuts – complemented by sound monetary policy set by the Federal Reserve – which the President worked with Congress to enact.

While officially the recession had ended in late 2001, the pace of the recovery was at first too slow because of the need to work down overcapacity created during the bubble economy of the late 1990s, the impact of 9/11, and the decline in investor confidence as a result of the corporate accounting scandals. Growth was anemic, business confidence low and – of critical importance – capital investment was way down. As a result job growth was nonexistent.

President Bush recognized that something needed to be done. A more favorable climate was needed to encourage capital investment and spur job growth. With the enactment of the Jobs and Growth Act of 2003, the U.S. economy made a remarkable turn-around.  From capital investment suffering nine consecutive months of decline, businesses took advantage of the much-needed incentives and almost overnight began investing more. And since that time, over five million new jobs have been created.

I commended Congress for making real progress before they left for recess on a package to extend the President's tax relief for capital gains and dividends for two years and providing AMT relief.  I strongly urge them to complete work on this package as soon as possible when they return from recess.

With the President's tax cuts made permanent, we will secure a bright future for the country, with good economic growth, strong investment and robust job creation. A landscape of economic growth is also one that produces an appropriate amount of tax revenues to fund the necessary functions of government.

I'm frankly puzzled by critics who call for tax increases – a reversal of effective policy – at this point of success for workers and families. These critics turn a blind eye to the economic success of the tax cuts – and that success is big enough that it's pretty hard to miss.

The basic economics of taxation is clear, you always get less of anything you tax. It is as if the critics of the President's policies don't want to accept that basic fact. They are interested in tax increases, but won't acknowledge the inevitable shrinking of investment and job growth that would result.

Good debates involve points of agreement, and there is one point of the economic debate on which both sides can agree: We need to bring our budget deficit down.  Economic growth is helping to shrink the deficit because growth has increased Treasury receipts to historic levels. Low tax rates are fully consistent with higher tax revenues.  Our recent experience is clear on this point.  The President's prescription, therefore, is for continued growth paired with tight spending restraint. That's why action by Congress on his proposal for a line-item veto is so important.

With tax revenues expected to rise above their historic levels of around 18 percent of GDP, even with the tax cuts, the President and I agree that the problem is not that Americans are taxed too little – it is that government spends too much. Spending restraint is the real key to deficit reduction, period.

This is where we part ways with the opposition. They would prefer higher spending and more government. It is clear that they would call for more taxes to pay for that government expansion, and also tax their way out of deficits. They are not satisfied with revenue levels that are objectively very high!

I believe raising taxes and increasing spending is an entirely unnecessary path, and a dangerous one as well. Increased taxation puts growth and prosperity at risk.

Another point on which there is some agreement, some acknowledgement, is that this country faces one of its greatest economic challenges ever as the `baby boom' generation heads into retirement. Government entitlement programs--like Social Security and Medicare--must be reformed if they are to be saved. President Bush has provided leadership on this issue, with a brave and critical call to reform and save Social Security. But where were the current critics when the President made that call? Nowhere to be found. We welcome them to the debate nonetheless, because our country's future depends on finding bipartisan solutions that won't cripple our economy, or bankrupt our government.

The economic future of our country is important to each of us, to every American, and to the world as well, for we are the economic leader and envy of the world. So an open debate about the issues will always be important. And while I know which side of the debate I'm on, I want the debate to go forward.

Another important voice from our illustrious history, Thomas Jefferson, seems to have well-anticipated the current debate when he said: "I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them."

So we'll stay engaged with those who hold other views– even those who claim to have adopted Jefferson's intellectual rival, Alexander Hamilton.

For those who criticize the economic policies of President Bush, I simply ask two things: which of the facts about the current economic picture of growth and job creation do you dispute? And where is your plan for the future?

This is a debate that should be free from partisan considerations. It should be serious, and analytical.

Bi-partisan collaboration on the biggest issues is not just desirable, it is critical. I am reminded, seeing him today, that Trent Lott has taught Capitol Hill about working together for the good of the nation, and we should all keep his lessons in mind as we debate economic policy today and in the future.

Thank you again for having me here today; I look forward to taking your questions.