November 17, 2006
HP-171

Remarks of U.S. Treasurer Anna Escobedo Cabral

Before the Massachusetts Institute of Technology Sloan CFO Summit

Newton, MA - Good morning. It's a pleasure to be here this morning to welcome you to this year's MIT Sloan CFO Summit.

Academic institutions like MIT are great catalysts to open discourse and debate on how we go about confronting the many challenges we face today. So I think it's appropriate that the MIT Sloan School of Management brings together so many distinguished executives in the form of this conference. Here you will all have a chance to share open discussions on the many concerns and challenges facing the business and finance industry.

So again, I want to thank you for being here.

For my part, I want to share with you some of my insights as Treasurer and some of the issues the Department of Treasury is focused on. Now as you can imagine, I'm no stranger to open debate about important issues. I worked on Capitol Hill for nine years and have sat right in the middle of those debates.

But I always find that no matter what side of the aisle you're sitting on, one thing is usually true – we all want the same results. In the case of the economy, that's an issue important to all Americans, and quite frankly, to the rest of the world because they have to do with our economic future.

We all want a strong and prosperous economy that will continue to grow so that future generations will be able to enjoy the same opportunities we have.

But we have to ask important questions like how do we ensure wise and responsible use of taxpayers' money? Thomas Jefferson once 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."

All of us in public service have a responsibility to make smart choices about how we spend tax money so that our children will not have to carry the burden of our mistakes later. Just as all of you in the private sector face critical decisions on how to manage cost and spending, where to invest, and how to keep an edge on your competitors.

That is why I am so thankful that I work for two men – President Bush and Secretary Paulson – who recognize the importance of looking beyond what can be accomplished in two years and instead looking at how the decisions we make today will affect us in four years or eight years or even further down the road. That means we must examine our policies closely and critically.

As a result of the President's steady leadership we have overcome some tremendous challenges in recent years – from the burst of the stock market bubble, to the September 11 attacks, from decline in investor confidence due to corporate scandals to a devastating hurricane season last year.

To be sure, we've been dealt some serious blows from many angles, but we've managed to stay on our feet because of smart economic policies. These policies have sustained us through even the most formidable adversity.

That is why the President and his Administration remain committed to advancing pro-growth economic policies that will allow our economy to continue to thrive.

The proof that pro-growth policies work lies in the 6.8 million new jobs that have been added to the economy since the President signed the Jobs and Growth Bill in 2003. That's more than all the other major industrialized countries combined. That also means that our economy has added jobs for 38 consecutive months and has grown a solid 2.9 percent over the past four quarters.

We've seen further proof in recent budget numbers. In 2004, the President made a promise to the American people that we would cut the federal budget deficit in half. He gave us five years to do it, but we beat that goal.

Budget numbers released last month show that the budget deficit has been reduced to $248 billion and is down to just 1.9 percent of the economy. As a percentage of the economy, the deficit is now lower than it has been in 18 of the last 25 years.

I know the need to bring our budget deficit down is one point of economic debate on which almost all Americans agree.

By implementing sound fiscal policies in Washington and allowing Americans to keep more of the money they earn, the President has created an environment in which job growth, deficit reduction, and prosperity are all possible.

See, the President believes that when we allow people to keep more of their own money to invest, buy a home, or save for a rainy day, we actually strengthen our economy. We enable small business owners to grow their businesses and create more jobs. We enable more Americans to invest in their futures.

The President has worked with Congress to double the child credit, reduce the marriage penalty, cut taxes on capital gains and dividends, and create new incentives for businesses – particularly small businesses – to invest and expand.

It's important that we continue our work to make tax cuts permanent so that Americans can continue to benefit. What we need to keep in mind are the real results of these tax cuts in our homes and in our communities.

It's the small family business on the corner that is able to stay in business because of tax cuts. Or another small business that decides to grow and expand because they have more money in their pockets to do so.

What we're really talking about here is fostering the entrepreneurial spirit of this great nation. We're talking about allowing people to fulfill their dreams, grow their wealth, and contribute positively to our strong economy.

Now, some people doubted that lowering taxes would actually bring our economy wealth. They worried that it would take money away from the federal government. But we're seeing just the opposite. In fact, our strong economy has led to historic revenue growth.

Tax revenues grew by $253 billion in 2006 – an increase of 11.8 percent. We've seen the largest consecutive increases in tax revenues in the last two years, and the largest percentage increase in 25 years. In other words, when you allow people to hold onto more of their own money, more revenues come to the treasury.

If we continue to foster a growing economy and remain wise about our spending and the choices we make, we will continue to see positive results.

I often find there is some confusion around what exactly the Treasury Department does. How I like to describe it is like one big giant federal checkbook. Part of our responsibility and the responsibility of everyone in the federal government is to be sure that we're spending wisely.

This is important to the President. In fact, the last two budgets have cut discretionary spending on items not related to defense and homeland security. Congress votes on discretionary spending, and so we really all have to work together to make sound choices – to cut what isn't working, negotiate on what does, and improve spending habits all around.

That is why the President is also working with Congress to get line-item veto power. This would allow him to veto certain parts of the bill or specific appropriations which may not have been thoroughly debated. Rather than vetoing a good bill, the line-item veto allows the President to keep the wise parts of the bill and remove wasteful, unnecessary spending.

These are all steps President Bush's administration has taken to get our country's fiscal house in order. But there's another critical part of our country's budget that needs to be addressed and that we can no longer hide from. It's almost like the elephant in the room when talking about the economy. That is mandatory spending on entitlement programs – specifically, Social Security, Medicare, and Medicaid.

The cost to the federal government of these programs – if left unreformed – is projected to more than double from the current level – 8 percent of GDP to nearly 17 percent by 2060. In order to protect future generations and safeguard our economy, we need to address this challenge and fix a broken system.

Social security was created in 1935. Today, people are living longer, but the system hasn't been adjusted to accommodate them. For example in 1950, about 16 workers supported each social security recipient, while today only about 3.3 workers carry that burden. To be sure, the situation will not improve by itself.

The President and Secretary Paulson have both made it clear that they are committed to working with Congress to confront the Social Security problem and improve entitlement programs for future generations.

As part of my job as Treasurer, I help Americans understand these complex issues. Regardless of what changes are being made to these programs in Washington, there is something that every person can do to protect themselves.

And that is – to improve awareness of the programs out there, to learn how to properly manage finances, and to take your own steps in planning for the future.

There's so much talk these days about preparing for all kinds of emergencies – from terrorists attacks to natural disasters. If there is one thing we've learned in recent years, it's that life can bring all kinds of surprises. In a way, I think financial planning is a kind of emergency preparedness in and of itself.

All Americans can take specific steps to manage their finances and prepare for the future – whether planning for retirement or just having your finances in line so you're ready in case of the unexpected.

Most of us know by now that we cannot hope to rely on Social Security to last us through retirement. While many Americans are confident they will have enough money to live comfortable in retirement, only 42 percent have actually calculated what they will need and what they need to save to reach their retirement goals.

As a result, the Treasury Department is working hard to improve financial literacy throughout our country. One of the ways we're working to accomplish this goal is through the Financial Literacy and Education Commission. The Commission consists of representatives from across the federal government. For the first time, a variety of experts sat at one table to share ideas and find out what we were all doing. Now the right hand is talking to the left.

We've partnered with the public and the private sectors to promote the importance of financial education and to help bring together resources to better serve our citizens. Earlier this year, the Financial Literacy and Education Commission released The National Strategy for Financial Literacy. 

The Commission was also tasked with developing a federal financial education web site and toll-free hotline, which were launched in English and Spanish in October of 2004 – MyMoney.gov and 1-888-MyMoney. 

I encourage you to visit MyMoney.gov.  The Strategy that I just mentioned can be downloaded from the web site as well. The strategy looks at a variety of important topics – from homeownership to credit management; from retirement savings to the benefits of establishing a relationship with a financial institution. The strategy identifies challenges in each of the focus areas and to recommend solutions.

Now some of the solutions may come from the federal government, but often nonprofit organizations, businesses and other private sector players provide important resources for those who want to learn more about personal finance issues.

The strategy lists examples of financial education programs that community leaders, entrepreneurs, and volunteers can all look to as they design programs of their own to enhance financial literacy. It's a wonderful resource I strongly encourage you all to check out.

Without question, we all benefit from the incredible economic growth and prosperity in our country. We have some tough challenges to confront, but we're a relentless and determined society. The innovative and optimistic spirit that has carried us this far will continue to ensure that the United States remains on the leading edge and our economy remains the strongest in the world.

Now I'd be happy to take any questions.

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