July 7, 2005
JS-2625

Treasury Secretary John W. Snow
Prepared Remarks
Omaha, Nebraska Chamber of Commerce

Good morning. As we meet here in America's heartland, our hearts, our thoughts and prayers are with the victims and their families in London.

I have spoken to my friend and colleague, Chancellor Gordon Brown, and expressed these thoughts to him, and offered our help and assistance as they deal with this tragic situation.

As the President remarked this morning, these horrific acts stand in stark contrast to the compassionate work that is being done at the G8 summit in Gleneagles, Scotland. He noted how vivid the distinction, that while world leaders work together to alleviate poverty and improve the environment for all the world's people, others are bent on killing and destruction.

At the Treasury Department we are monitoring global markets.  I will stay in touch with world financial leaders.

Like our allies in Britain, the strength of our country can be found in our people, our beliefs in justice and the rule of law. In America, we embrace freedom and entrepreneurship. And while there are brutal killers who hate us for these humanitarian beliefs, the truth that freedom works is irrefutable.

Our freedom has led to a strong economy – the most dynamic and resilient in the world. We intend to keep it that way, and that is what I came to talk about, with all of you, today.

Right now, we have an historic opportunity and an obligation to strengthen the nation's retirement security system. It is an obligation because the program does impact our economy so profoundly, and because it would be irresponsible to burden younger generations with the problems of the program when we have the ability to deal with them now.

The President is showing real leadership in particular on Social Security.  He is providing our country with an unprecedented chance to save Social Security for current and near retirees and improve it for younger generations. Conversations like this are an important part of reaching decisions as to what, exactly, should be done. But I'm sure you agree with me that the Social Security surpluses must be locked away and not diverted to other purposes. That is the reason the President is pressing so hard for

personal accounts. They represent a "personal lock box."  They are the best way to make sure that Social Security funds are dedicated to the Social Security system and not used for other purposes.

Social Security and retirement security are such an important part of our economy - and the reform choices that are made in Washington will have such an impact - that I think it's important to start any discussion about Social Security with a look at our economy. Furthermore, the strength of our economy is largely owed to businesses like yours, so I want you to know just how much of a difference your hard work is making.

We've seen amazing economic times in the last few years. Well-timed tax cuts, combined with sound monetary policy set by the Federal Reserve Board, got our economy moving when we needed it most. They gave business like yours the room you needed to grow, and you took over from there.

As a result, economic growth was 4.4 percent last year, the strongest in five years. So far this year, growth is better than expected - at 3.8 percent for the first quarter of the year. This number illustrates that U.S. workers and businesses are producing more goods and services every day, and that is a terrific sign of economic health. This type of expansion means more opportunity for more American workers, particularly those who need jobs.

We have had terrific news on jobs - 24 straight months of job growth. The economy has created over 3.5 million new jobs since May 2003. That's great news - the best news - for more than 3.5 million families.

The President has made clear his commitment to strengthen our economy further. This includes reducing the budget deficit - as well as reforming Social Security and the tax system, reducing the regulatory burden on business, and passing energy legislation. As I mentioned already, tight controls on discretionary spending and increased revenue as a result of economic expansion are expected to cut the deficit to well under two percent of GDP, by fiscal year 2009.

The Treasury announced in May that we expect to pay down $42 billion in debt in the second quarter of this year, which is very good news and is primarily the result of higher individual tax receipts.

All of the strong economic indicators, and our ability to pay down debt, point to the fact that reducing the tax burden proved to be a successful economic stimulus. And when the economy is growing and spending is controlled, we can also reduce our deficit.

But the job of keeping our economy unencumbered is a never-ending one, indeed. From tax cuts to regulations and energy policy, we need to work on it every day, and we need to work on keeping it strong for the future, for the long-term. Reforming our Social Security and tax systems addresses some critical long-term economic issues.

The President is providing important leadership on tax reform and of course his leadership has made possible the national discussion on Social Security reform, and more largely on retirement security.

The time to make meaningful and permanent change to the system is now, and there are two important reasons why we should not delay.

First, waiting to fix the problem is terribly expensive, and I believe irresponsible considering that younger generations will be left paying the bill. Every year we delay permanently reforming the system, $600 billion is added to the shortfall - which, according to the non-partisan Social Security actuaries is $11.1 trillion on a permanent basis.

Second, our outstanding economic health presents us with an excellent opportunity to move forward with meaningful reform.

Saving and improving Social Security will mean a positive change, but a change of enormous proportions nonetheless. And significant change is best done from a position of economic strength like the one that we currently enjoy.

As business owners and operators, no one understands that reality better than you. If your business needs to undergo change, wouldn't you rather do it when you're doing well, financially?

Since the President raised this issue to the top of the nation's domestic policy agenda, a lot of terrific ideas have been discussed - at lunch counters and dinner tables, from college dining halls to the halls of Congress - and today we're getting much closer to having significant legislation move on Capitol Hill.

The President has welcomed all ideas - other than raising the payroll tax rate or changing benefits for those older than age 55 - to help solve the challenges facing the Social Security system.

He is strongly committed to giving workers the option of a voluntary personal account so they can save their own money in a nest egg - because it's the best way to ensure that Social Security money is spent on Social Security. As you all know, Social Security surplus funds are spent every day, by Congress, on everything under the sun other than Social Security.

This has to stop. We need to make sure that Social Security surpluses are not used for other purposes. We need to lock away the surpluses for Social Security.

The best way to do that is to establish the personal accounts. Once money is in a personal account it can't be used for other purposes. It becomes your money with your name attached to it. Personal accounts lock the money away; they secure it for the employee who has paid into the system. They make sure that money is there for you when you retire. It puts integrity back into the system. It makes sure the money is used only for its intended purposes.

This is the right way to save, protect and preserve Social Security. We need Congress to act today to protect those surpluses and to make sure they are there to fund your retirement and that of your children and grandchildren. Personal accounts accomplish that objective. That is why the President is firmly committed to them.

The President is encouraged, as I am, by the increasing pace of activity in Congress on how to save and strengthen Social Security for future generations. He appreciates the Members who have introduced legislation, and who have supported his objectives in this effort.

Your own Senator Nelson, for example, has been open in his acknowledgment that that Social Security has serious problems. There are still plenty of Members of Congress who still won't face up to the plain mathematical facts!

Senator Hagel has come forward with ideas like raising the retirement age for workers 44 or younger and establishing personal accounts, modeled after the Federal Thrift Savings Plan, for workers under the age of 45.

Utah Senator Robert Bennett introduced a bill a few weeks ago that contained progressive benefit growth, which is one of the elements of reform that the President has been promoting. Progressive benefit growth would mean that the lowest income seniors would have the fastest-growing benefits while benefits for those who are more well-off grow more slowly, with protection from inflation.

The President has also welcomed plans from other Members like Senator DeMint and Chairman Bill Thomas. Every time legislation is introduced, it advances this issue - and that is what the President wants.  Chairman Thomas has also advocated including along with Social Security reform the President's proposed pension reforms, along with incentives for greater retirement savings, like expanded 401Ks.  Congress needs to act on these pension reforms before the end of the year.  We need to make sure that when companies make pension promises to their workers, those promises are kept.

This is fascinating time in government history. Enacting real retirement security reforms this year - which I believe we will - holds great promise for generations of American workers and retirees. If done right, Social Security reform will benefit our economy and end the decades-long tradition of hiking payroll taxes every time the Social Security formula is off-balance.

Most importantly it will assure that the Social Security surplus is locked away and not diverted to other uses. Establishing personal accounts as the President has suggested is the best way to accomplish this objective.

I'm extremely proud to be helping the President as we seek to achieve a safe and promising financial future for all Americans.

Thanks again; I'd be happy to take your questions now.