FROM THE OFFICE OF PUBLIC AFFAIRS

It's wonderful to see all of you gathered here tonight. The fact that you are all here, resuming your normal lives, is commendable. And it is further evidence that the American people stand stronger than ever, with greater resolve to succeed, in the aftermath of the terrorist attacks last month.

This nation, its people, and its economy will continue to excel.

That does not mean that our economy today is everything we would like it to be.

Our economy began slowing in the summer of 2000, and only recently began to show signs of recovery. In the third quarter of this year, leading up to September 11, I believe the economy was running at a low rate of growth and was likely to have concluded the quarter with a small but still positive growth rate.

The fourth quarter prospects were somewhat better and the outlook for 2002 suggested a return to normal growth rates as the economy felt the impact of:

• The stimulus to consumer spending from the tax rebates.
• Aggressive Federal Reserve easing during the first eight months of the year.
• The reduction of excess inventories, paving the way for future production gains.
• The easing of energy prices.

All of that changed dramatically on September 11. Terrorists took down the symbols of America's prosperity and they left us all with a heartache that will take some time to fade away.

On the economic front, the terrorist attacks sent shockwaves through our economy very quickly. Our airways were shut down and all of the travel-associated industries effectively came to a halt. Consumers stayed home, glued to the television news and in no mood to shop.

As a consequence, it now seems certain that when the numbers are tallied for the third quarter, they will show that our economy experienced negative real growth.

We should also expect unemployment numbers to rise, as they are a lagging indicator of our economic activity. That is true no matter what we in Washington do to boost economic growth.

The depth of this contraction, as well as the pace at which the economy returns to a healthy rate of growth, will depend in large part on how fast consumers regain their confidence and on our success in incorporating new protections against possible terrorist acts without material reductions in productivity.

The fourth quarter numbers will depend on how quickly consumer confidence rebounds. I'm happy to report that I flew to New York on the shuttle from National Airport to LaGuardia today - that was a heartening return to normalcy. And we are seeing concrete signs that we are beginning to regain our economic footing. Consumers are returning to the stores, airline usage is increasing and there are buyers again for `big ticket' goods such as automobiles.

And we are seeking legislation to support an economic recovery. The President has asked me to work with Congress to produce a $60-75 billion economic growth package to restore consumer spending, boost business investment and help those directly affected by the September 11 attacks. We've already taken actions that will inject more than $55 billion of spending into the economy this year. Together, the spending in the pipeline and the growth package we are currently negotiating will sum to more than $100 billion, meeting the standard many have set that in order to have the appropriate impact on the economy the fiscal impact of an economic growth package should approximate 1 percent of GDP.

The President believes, and there seems to be broad bipartisan agreement in the Congress, that we should take care not to put upward pressure on long-term interest rates. That does not mean that all policy changes should be limited to one year. We shouldn't be measured by green-eyeshade budget numbers, but rather we should be judged on whether or not we put together a package that has a clear impact on economic growth. A strong and vibrant economy provides the best hope for returning to budget surpluses - it doesn't work the other way around. Our long-term prosperity depends on continued investment to enhance productivity in every sector of our economy.

To boost consumer spending, the President has said he would like to accelerate individual income tax rate cuts that are currently scheduled to go into effect in 2004. The budget impact of that acceleration would be temporary, but it would have the same impact on consumers as a permanent change. The President has also said he will work with Congress to put money in the pockets of low- and middle-income people.

On the business investment side, there is bipartisan support in Congress for accelerating depreciation or expanding expensing. In order to have the greatest possible impact on investment, these changes need to be permanent.

We also must eliminate the corporate Alternative Minimum Tax, which increases the tax burden on employers during an economic downturn, making it more difficult to continue investing and contributing to an economic recovery.

There has been enormous bipartisan cooperation so far to do what needs to be done to recover from and respond to the terrorist attacks of September 11. Members of Congress are willing to set aside rhetoric and get our economy back on track. That same bipartisan spirit should extend to Trade Promotion Authority for the President.

Expanding global markets is crucial to growth and job creation here at home. And expanded trade is also crucial to the economies in southern Asia and the Middle East, where the economies are likely to be impacted as the world takes on terrorism. We must take steps to support those developing economies, as they endure difficult times that they could not have anticipated. Developing nations are being heavily impacted by the global economic downturn, as a World Bank report released October 1 pointed out, and slower growth in world trade is exacerbating the impact. Enacting TPA, and promoting open markets around the world, is vital if the United States is going to help to mitigate the economic harm done to emerging market nations.

I've said before, our world is more interconnected than we realize. At no time is that more obvious than now, as the President builds an international coalition to take on terrorism. We will succeed in defeating terrorism if we can engage the civilized nations of the world to join us in a determined effort.

I have no doubt that we will succeed. Call it my enduring optimism about America. Our nation has risen to every challenge and our strength of spirit will prevail once again.
Thank you.