FROM THE OFFICE OF PUBLIC AFFAIRS
January 27, 2005
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The Honorable John W. Snow
Prepared Remarks: Real Estate Roundtable’s State of the Industry Meeting
January 27, 2005
Thank you so much for having me here today. It's great to see all of you, and I'm looking forward to our conversation.
This is an exciting time for the real estate industry. Over the last few years, you've played an integral part in a remarkable, national economic recovery. Today, there is growth in your industry and the country's overall economy is very strong.
The housing market in particular has been vibrant in the past few years, and it truly dampened the effects of the recession as well as helped fuel the recovery. In 2004, housing starts climbed to a 26-year high. We expect that final data for 2004, which will be released soon, will show that sales of single-family homes set a new annual record. And boosted by new home building, jobs in the construction industry have increased by nearly 300,000 over the past 16 months, accounting for over 10 percent of the more than two and a half million jobs created since August of 2003.
This is exceptional news, and I deeply appreciate the economic contributions of the people represented in this room today. You are part of a vibrant national economy – the fastest-growing economy of any major industrialized nation in the world.
The American economy has posted steady job gains for each of the last fifteen months. The unemployment rate is down to 5.4 percent – lower than the average rate of the 1970s, 1980s and 1990s. After-tax income is up by over ten percent since the end of 2000 and household wealth – reflecting, among other things, rising home values – is at an all-time high. Inflation, interest rates, and mortgage rates remain at low levels. And, as you well know, homeownership rates are at record highs.
Is it enough? Can we do better? Yes – continued economic growth is important to every person in this room, and to every worker in
We still face considerable economic challenges as a country, and this is a superb time to tackle those challenges. Our underlying economic fundamentals have been strengthened, thanks largely to well-timed tax cuts and sound monetary policy, and now we must address the next set of issues, each of which comes with significant short and long-term implications.
First up, it's budget time for the federal government, and I want you to know that the Bush administration is cognizant of both the short and the long-term implications when it comes to budgeting the taxpayers' money.
We're not happy with our deficit. It's unwelcome, although it is understandable, given what our economy and our country went through in recent history.
We're dealing with the deficit in two key ways: first, controlled spending and, second, implementation of policies that encourage continued economic growth.
Growth is important for so many reasons… and at this time most valued for creating jobs and reducing deficits. Four rounds of Bush tax cuts clearly stimulated growth; millions of jobs have been created and we are also seeing an increase in Treasury receipts – they are up 10.5% in the last three months versus the same three months last year.
The real key is spending discipline – we are not under-taxed – and the President's 2006 budget will control spending. We will remain on track to cut the deficit in half by 2009.
We're also focusing on the longer-term deficit situation including, importantly Social Security and other federal programs.
The current Social Security system is unsustainable; it's a matter of arithmetic. Demographic changes have brought us from circumstances where we had 16 workers paying into a system for every one beneficiary in the 1950s, to today where we have three workers for every beneficiary. That ratio will drop to two-to-one by the time today's young workers retire.
People are living longer and having fewer children. And that has made the pay-as-you-go Social Security system financially unsustainable. I've called for all sides of the reform debate to, first, agree on these simple facts.
Social Security is a sacred trust, and it has made a critical difference for millions of retirees. It has kept its promise to America's seniors since it was enacted in 1935. Social Security is secure for today's retirees and for those nearing retirement but it is offering empty promises to future generations.
It is the future of the program that President Bush is concerned about, and it is the future of the program that we must address, this year, in Congress.
We can, and should, do this without increasing payroll taxes. Many of you in this room are employers, and you know what a terrible impact massive payroll tax increases would have on our economy. It would negatively impact economic growth; jobs would be lost. We don't have to go that way.
We can, and should, reform the system in a way that encourages younger generations of workers to build a nest egg that they own and control and can pass on to their loved ones.
Those of you who are part of the housing industry likely appreciate how powerful this concept of ownership is. Owning your own house is the centerpiece of a free and independent way of life.
When you own your own home, you are proud of it, you look after it, you spend hours, days and years improving it and increasing its value. A retirement nest egg holds that same power, and that same promise. And that's why personal savings accounts should be part of Social Security reform.
The President is the nation's greatest advocate for owning your own home, owning your own retirement savings, and owning your own business. In a free country, we as individuals are uniquely positioned to achieve ownership, and the government should never impede us from doing so; it should encourage us.
Some of our laws, and a big part of our legal system, can make ownership frustrating. I'm thinking specifically of our civil justice system – an area that I know your group would like to see changed.
Abuse of the civil justice system is rampant. Trial attorneys make millions in cases where plaintiffs are paid pennies. Business owners are subject to what amounts to extortion – settling frivolous cases out of court rather than subject themselves to unknown legal costs at trial. And even if a suit is never filed, businesses and doctors pay the price of an out-of-control system through insurance fees, record-keeping and legal counsel.
There are few things that create a greater disincentive to job creation than an atmosphere where little stands between every business owner, ever manager, every doctor and professional of almost any kind… and the next frivolous lawsuit.
I want you all to know the priority that lawsuit abuse reform is to President Bush and his administration. We are deeply committed to ensuring that victims are compensated fairly when they are injured due to the fault of another person, but we also know that key job creators – the top ones being small-business owners – live in fear of frivolous suits that can damage or destroy their businesses and all the jobs they support.
We know that the current tort system is costing
To make the situation even less fair, less than 50 cents of each dollar of those tort costs go to victims… and, of that, only 22 cents goes to compensate them for actual economic losses they have suffered… meanwhile the personal injury lawyers profit enormously.
At a time when our economy needs to continue expanding, at time when we need to reduce deficits and increase savings, this is unacceptable.
Because a frivolous lawsuit has never created a single job – except jobs for personal injury lawyers – but baseless and excessive suits have killed many. Every small-business owner knows this, as they are on the front lines of job creation.
Our economy is resilient. Our free market system is strong, and the envy of the world. Imagine if we freed it from frivolous suits.
Class action reform was re-introduced in the U.S. Senate on Monday. It has the unwavering support of the President, and I am optimistic this legislation will move us away from a system of jackpot justice and back to a more rational method for resolving genuine disputes. Predatory class action lawsuits have been the bane of innovation for many companies, and the time for ending this abuse of the system – and of the plaintiffs who are targeted to put their names on these suits – is long overdue.
Nothing, however, is longer overdue for reform than the
As you know, this is another top agenda item for President Bush's second term. The tax code is terribly long, mind-numbingly complicated, and ultimately leads to a lack of fairness and a disincentive for economic growth.
The President recently appointed an Advisory Panel on Tax Reform. It is made up of some of the sharpest minds in the tax policy community, chaired by two solid leaders: Senators Connie Mack and John Breaux. That panel will report recommendations to me later this year, and I will present them to the President by year's end. I am looking forward to reviewing proposals that increase the fairness of the code, reduce its length and complexity, and promote economic growth.
And, as the President has said, any proposal that goes forward will also retain our country's commitment to encouraging homeownership and charitable giving. These are elements of the current code that should be carried over into a new structure.
So much can be done to promote and protect the economic health of our country. A few issues of particular interest to your group include the regulation of government sponsored enterprises (GSEs) and the Terrorism Risk Insurance Act, and I'd like to touch briefly on each of those issues.
Promoting homeownership is a top priority of President Bush and thisdministration has enacted policies that have helped make owning a home a reality for millions of Americans. Our national system of housing finance plays a key role in promoting homeownership, and the housing GSEs, Fannie Mae, Freddie Mac and the Federal Home Loan Banks, have played a vital role in that system.
GSEs are among the world's largest financial institutions, and this administration has long noted that the GSEs' potential to create systemic risk warrants close examination.
Because of the important role the GSEs play in helping to fund our mortgage markets and in the financial markets as a whole, we need to be sure they are operating safely, prudently, and efficiently.
While GSEs have continued to grow in size, complexity, and importance, the regulatory structure governing their activities has not. Therefore, we need a strong, credible, and well-resourced regulator with a clear mandate and all the powers of other world class financial regulators. The new regulator should have at heart two guiding principles: promoting a sound and resilient housing financing system and increasing homeownership for less advantaged Americans.
The administration is committed to fully examining this complex issue and these critical questions, with the goal that the homebuyers and taxpayers are fully protected.
As for another issue that I know is on your mind… I want to talk a little bit about Terrorism Risk Insurance. First, by saying that we haven't forgotten how the horror of September 11th was particularly hard on your industry. I've heard from many of you and I know that the Terrorism Risk Insurance Act of 2002 – and the extension of the "make available" provision of the act – helped you through that difficult.
We made the decision to extend the "make available" provision because we wanted to ensure the continuation of the key elements of the re-insurance program. At the time we did so, I noted that the terrorism risk insurance program had been an important confidence builder as this country recovered from the attacks of September 11 and the recession.
The issue of reauthorization of TRIA is one that will involve a detailed analysis and more data than we have at this time. The Act requires that Treasury study its effectiveness and report to Congress by
We are looking forward to a prompt completion of our study, so that we and Congress can have a full and open discussion about these important questions.
It's an important issue, and Treasury is dedicated to the most thorough study and analysis possible so that Congress may make a fully informed decision about terrorism risk insurance in the future.
I know I've covered a lot of ground here today, and I'm looking forward to taking your questions.
Once again, I want to commend this group and your industry for your hard work and contributions to this great American economy… and of course to thank you so much for having me here today. I'll take your questions now.