FROM THE OFFICE OF PUBLIC AFFAIRS
February 28, 2005
JS-2277
The Honorable John W. Snow
Credit Union National Association (CUNA)
Government Affairs Conference
Washington, DC
February 28, 2005
Thank you so much for having me here today.
This is the third year that I've been able to come to this fine conference, and it's always a pleasure to work with your group.
I meet and work with financial leaders every day, but you are special. Credit Unions have great heart, showcased in your terrific motto of "not for charity, not for profit, but for service."
You do good work. Loans to small business, home mortgages, financial education and fighting the financial war on terror… each one of these efforts is critical to our country's economic health and strength, and I applaud you for doing good while you do business.
I believe I told you last year that this administration understands the basic economic principle that you get less of anything you tax… and we don't want less of what you do. Well, that principle, and that position, remains true today.
We don't want less small-business lending. We don't want fewer home mortgages. We want to continue to have a strong relationship with a group of financial institutions that are dedicated to their communities, who want to see their customers educated and financially literate.
And we want to continue working with you as we cut off the flow of blood money to the terrorists who seek to do our country harm. Because while hatred fuels the terrorist agenda, cash makes it possible.
The financial community has shown great resolved since September 11th, and our work together has been productive. Since
Most recently, the Treasury again took action against Muhsin al-Fadhli, whose efforts were helping to finance the Iraqi insurgency, as well as al Qaida. That action followed on the heels of last month's designation by the Treasury of Sulayman Khalid Darwish. Darwish was helping support Zarqawi, who has launched violent acts against our troops, coalition partners and the Iraqi people
Identifying financial operatives and choking off the flow of blood money moves us closer to our ultimate goal of fracturing the financial backbone of the Iraqi insurgency and al Qaida.
As you know, the financial war on terror is ongoing and it is not easy. But since we must continue to be vigilant, Treasury is always looking for ways to provide you with more and better information about our regulations, for example those out of FinCEN. So let's keep up the dialogue… let us know when we're confusing you, or when we can do better – because the better our regulations are understood by you, the more successful our critical enforcement efforts will be.
Our country must be safe in order to be prosperous and create jobs. I emphasized loans for small-business start-ups and expansions because that leads to job creation, which is the ultimate goal of a strong economy.
Credit unions have been there for entrepreneurs when they needed you most. You understand their needs, and our President does, too. When small business needed tax relief to grow and create new jobs, President Bush responded with reduced marginal rates, an increase in expensing and a whack at the death tax. Sure enough, job creation started to pick up. Since May of 2003, the economy has created 2.7 million jobs. The steady pace of job creation has been an unmistakable sign of an economy that has recovered from very tough times, and is now expanding.
The first time I spoke to this group, you may remember, our economy was struggling. But look at the
Our economic recovery was swift and strong and you were part of it. More Americans have jobs today thanks to the recovery, and you should take great pride in this fact.
Our economic challenges are not over, of course; we still have plenty of work to do. Historic work has begun on reforming our federal tax code – something that I believe will stimulate and strengthen our economy over the long term. The President's Advisory Panel on Tax Reform is holding meetings, gathering information and examining the current code as they work toward developing recommendations for a new code that would be simpler, more fair and encourage economic growth.
The work on tax reform is exciting, and I believe this administration will make history on fundamental tax reform this year. In the mean time, we need to keep taxes low and government spending in check in order to reduce our budget deficits. That's why President Bush submitted a very lean, very responsible budget to Congress this month.
We also need to address our long-term financial deficits. As you know, the President has made reforming the nation's Social Security system a top priority of his second term. Taking on this challenge has been a profound act of political leadership and moral courage. I'm proud to work with him as we talk with the Congress and with taxpayers all over the country about the serious problems facing the Social Security system.
Congress should follow the President's political courage and leadership when it comes to saving Social Security for future generations. Because our children's retirement security is more important that partisan politics.
It is important to keep in mind that Social Security will not be changed for those 55 or older (anyone born before 1950). For the more than 45 million Americans who are currently receiving Social Security benefits, and those nearing retirement, benefits are secure and will not change in any way, period.
I believe we'll make real progress on Social Security once everyone agrees that the demographic future of the system makes it unsustainable. Simply put, there are fewer workers to support our retirees. People are living longer and having fewer children. As a result we have seen a dramatic change in the number of workers supporting each retiree's benefits. We had 16 workers paying into a system for every one beneficiary in 1950, and today we have just three workers for every beneficiary. That ratio will drop to two-to-one by the time today's young workers retire.
Just three years from now, in 2008, the first baby boomers will begin to retire. In 2018, 13 years from now, the government will begin to pay out more in Social Security benefits than it collects in payroll taxes. By 2042, when younger workers begin to retire, the system will be bankrupt. Under the current system, today's 30-year-old worker will face a 27 percent benefit cut when he or she reaches normal retirement age.
We must make Social Security better for younger workers.
If we do not act to fix the system, the only solutions available for younger generations will be dramatically higher taxes, massive new borrowing or sudden and severe cuts in benefits or other government programs.
Dramatically higher taxes are ruinous for an economy - even one as resilient and strong as ours.
What the President would rather see for future generations is an ability to save some of their payroll taxes, to build a nest egg that belongs to the worker, not to the government. A nest egg that would have a real return on investment, far better than the rapidly-weakening promise of Social Security benefits.
With voluntary personal accounts, younger workers would be able to learn about their financial choices, build a nest egg and benefit from sound long-term investment in the free market system without disrupting the system of benefits for their parents and other generations of retired beneficiaries.
Social Security reform that doesn't raise payroll tax rates, that protects benefits for today's seniors, and that improves the system dramatically for your children and grandchildren can be achieved. We can choose to leave a reformed, healthy system to our heirs rather than a looming financial crisis.
Social Security reform will be hard work, but something this important must not be put off for another day.
Before I leave, I do want to take a moment to encourage you, if you aren't already, to offer a new product to your customers. It's something that I think has huge market potential, and is of particular interest to your small-business customers.
I'm talking about Health Savings Accounts, HSAs. Last year's Medicare prescription drug bill created HSAs, an innovative new program to empower consumers to make better health care choices. HSAs are really super-charged IRAs that put patients back in charge of their health care. You own it, you control it, you can leave it to your heirs.
It's a new option for health coverage that is good news for individuals and employers who are struggling with their health-care costs.
One of the most common complaints we hear from consumers is that they can't find a local bank that offers these accounts. So I am confident that the market is there for you, that consumers are anxious for you to add this to your product line. It is also possible that demand for HSAs might take off very soon in
And there is good news for credit unions when it comes to offering this new product: first, any bank or credit union is automatically allowed to offer HSAs to your customers as either a trust or a custodial account. Second, the reporting on these accounts is minimal.
You only need to report on them once a year – to the customer and the IRS – one form to report contributions to the account and another form to report the amount that has been taken out of the account.
Best of all: you won't need any new forms. Treasury has model forms that you can use, or you can adapt the forms you use for IRAs for HSAs.
HSAs are a critical step toward increasing the availability and affordability of health insurance for all Americans. They are also helping to put individuals in charge of their own health care… and that's something that is good news both for the American family and for the American economy as a whole.
As you know, the President supports this type individual control and ownership in many areas. He wants to see as many Americans as possible own their own homes, their own businesses if they want, their own health care and their own retirement savings.
As credit union operators, you are also dedicated to individual ownership and savings, so I know the concept is not a new one to you.
You understand as well as anyone in the financial community the benefits that come from financial ownership and independence. It's one of the reasons you've been such a great partner in the effort to increase financial literacy in this country.
You are closer to your customers than a lot of financial institutions are. You therefore have an opportunity to contribute in a unique way to financial literacy and ownership.
In terms of financial literacy, I think we have a tremendous opportunity to start fresh with a new generation… to ensure that tomorrow's young adults understand how important it is to save, and how to protect themselves from identity theft, in the same way that they understand the basics of physical health or road safety.
There is a tremendous interest on the part of students to learn the financial facts of life: how to manage credit wisely, how to save and invest, how important it is to save for retirement at the beginning of a career, not at the end.
You and your staff are uniquely positioned to reach out to these groups and others in need of financial education to help bring them into the financial mainstream, where they can safely build up their assets, invest and save for their futures and their children's futures.
As with so many other things, we accomplish the most when we work together. Whether it's fighting terrorists, or teaching teenagers about financial responsibility, or helping entrepreneurs pursue their American Dreams.
I'm glad to work with the nation's credit unions on all these efforts.
I thank you for the work you do, and the chance to speak to you today.
Have a great conference.