CNN LIVE EVENT/SPECIAL
Cheney Speaks to Council on Foreign Relations
Aired February 15, 2002 - 12:35 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BILL HEMMER, CNN ANCHOR: Now out of Washington, the vice president now speaking today. This is a speech we had anticipated for some time now at the Council of Foreign Relations there in Washington D.C.
Here's Dick Cheney.
DICK CHENEY, VICE PRESIDENT OF THE UNITED STATES: Before taking your questions today, I wanted to briefly explain the measures the president's proposed to get our economy moving again and to set it on a path of even more rapid growth in the long run.
The first sign of a slowdown appeared in the summer of 2000. Among the contributing factors were high and unpredictable energy prices, a steadily rising tax burden and a saturation in business investment. The stock market signaled trouble, as well.
By the time the president and I took office, business investment growth had halted and the economy had already lost 300,000 manufacturing jobs. The need for action was clear.
The tax cut enacted last year was intended to ensure the long- term prosperity of our economy, by stimulating savings and investment and by limiting the total amount of our national wealth controlled by the government. It was also fortuitous in anticipating the recession and countering the short-term effects of the economic downturn.
As Chairman Greenspan noted a few weeks ago, and as the Council of Economic Advisers confirmed in an analysis released just today, it did indeed have that effect. Without the Tax Relief Act, the third quarter growth last year would've been much worse, contracting by 2.5 percent instead of the reported 1.3 percent. In the fourth quarter, real GDP would have fallen by 1 percent instead of advancing slightly by 0.2 percent.
The Tax Relief Act has raised the prospects of solid recovery in 2002. By the end of the year, the Tax Relief program will have helped the private sector generate an additional 800,000 jobs that would not have otherwise occurred.
Even so, nothing could completely offset the terrible economic effects of September 11. Every foreign and domestic flight canceled for days, some for weeks. For a time many hotels, shopping malls, and restaurants were empty. Stock trading was at a dead halt for six days and the confidence of investors deeply shaken. Hundreds of thousands of Americans were laid off, many of them still looking for work to this day. And overall, as estimated by the Council of Economic Advisers, the attacks of September 11 cost the economy approximately $120 billion in the last few months of the year alone.
September 11 was also a tipping point for the federal government out of surplus and into deficit. The revenue stream slowed with the economy, while tens of billions of dollars were required for recovery, for rebuilding, for new emergency measures, for homeland security and for military operations. There is evidence, however, that the economy is now poised for noninflationary recovery.
Orders for durable goods have increased. Jobless claims have fallen. And consumer sentiment about the future has rebounded.
Unemployment may still go up for a short time, as it typically does for several months after the recovery begins. This still leaves many people in need of help. The administration supports extending unemployment benefits, and direct assistance for health care coverage for jobless Americans.
And government's responsibility only begins there however. Even with positive signs in the economy, we need an insurance policy to make certain that recovery does take hold and that it builds momentum through the year. That's why the president has supported an economic security plan to secure the recovery and to lay the groundwork for sustained long-term growth.
The House passed a stimulus package again for the third time just yesterday. We've been disappointed in the Senate's failure to pass the president's plan, which would generate an estimated 300,000 new private sector jobs. For many Americans still out of work, the Senate's failure to act simply means the recession will go on a while longer.
Where the economy is concerned, the federal government's responsibility is rather clear. Outside its own functions, government does not create jobs. Our responsibility is to create an environment in which employers want to hire more people, especially among small firms which are the source of two-thirds of all new jobs created in the economy.
But there'll be another benefit as well. As growth is restored and jobs are added, the revenues of government will rise. The return path to budget surpluses is not higher taxes on the American people. It is faster growth in the American economy and fiscal responsibility here in Washington.
The president's budget commits most new spending to national security and homeland defense, and seeks to hold the rest of government to a modest increase of no more than 2 percent. Were spending to grow without restraint, more billions would be diverted from the private sector, limiting the economy's ability to expand and grow in the future.
It's been suggested by some that tax relief might be making matters worse and some urge repeal, but I have yet to hear anyone explain exactly how higher taxes will help the economy grow.
Economic growth is a direct consequence of millions of individual decisions to produce, to save and to invest. Americans will have more incentives to do all three when they are left with more of their own earnings, when billions of extra dollars remain in the private economy, instead of going into the federal treasury.
Any added tax burden today would throw the economy back into reverse. To, again, invoke the wisdom of my friend of 30 years, Alan Greenspan, "All taxes are a drag on the economy. It's only a question of degree."
Far from withdrawing tax relief, we need to speed it up and make it permanent. The effects will be strongly felt in the business community. A full phase-in of the president's tax cut will reduce taxes on more than 10 million sole proprietorship and partnerships.
To promote investment, our administration supports tax incentives for employees who buy new equipment; a provision that was, again, in the stimulus package passed last night by the House.
Over the long term, we must do more to simplify the tax code, as well. Under the president's leadership, we made progress by reducing marginal rates, improving tax fairness and getting rid of the estate tax, one of the most dense and confusing sections of the law.
The tax code will always have some level of complexity because the economy itself is complex, as are the financial lives of individuals and firms. But it's an enormous challenge to understand the code, to keep the necessary records and to fill out all the forms. An awful lot of time is spent simply planning tax strategy. Complexity also adds to the likelihood of errors, administrative costs for the government and the number of disputes between taxpayers and the IRS. The cost of tax compliance run between $70 billion and $125 billion a year. Our administration, under the leadership of Secretary O'Neill, will investigate options for tax simplification.
There are other hindrances to economic growth, as well. Long ago, both parties reached a consensus in favor of reasonable federal regulation, standards of workplace and product safety, environmental stewardship and public health. In the case of 401(k)s and private pensions, the president is proposing additional protections for individuals. Yet some regulations serve no good purpose and consume resources that might otherwise go to productive uses, particularly for smaller companies.
The total cost of federal regulation is now estimated at some $8,000 per household, per year. We plan to hold every new regulation to a simple test: If it is not based on sound science, if it is not economically reasonable, if it does more harm than good, then it should not go on the books at all.
One of the most fundamental conditions of long-term growth is energy, a reliable affordable supply on the fuels that make our economy go. I hardly need to explain to this audience the strategic dimensions of energy policy. It's enough to say that virtually everything we do, make, sell depends on energy; even the clean, quiet operation of a computer is likely fueled down the line by burning coal.
I have no doubt that American will one day move beyond fossil fuels. We are working toward that goal with research into alternative energy sources to run our cars and light our homes, but they are not yet at hand. For the foreseeable future, if we are to avoid regular price spikes and chronic shortages, we must continue our progress in energy efficiency and conservation and we must increase energy production.
The president has proposed the first comprehensive energy plan in a generation. The plan has already passed the House. We hope the Senate will follow the president's lead and pass a comprehensive plan in coming weeks.
Trade policy, I'm certain, will be a regular concern of the Greenberg (ph) Center in the decades to come, as it will be of concern for policy-makers. That in itself is a hopeful sign. Trade is clearly one of the pursuits of nations at peace and the expansion of commerce can work to the good of all.
For our part, trade already accounts for 26 percent of our economy, exports alone support more than 12 million American jobs, and these tend on average to be high-paying positions. The nation's farmers and ranchers receive a quarter of their income from sales abroad, one out of every three acres is producing goods for export.
To make the case for global trade, we can point to our own history, which demonstrates the link between trade liberalization, faster economic growth, and we're seeing this today in the success of NAFTA. We believe that the nation must strongly support a new round of global trade negotiations. We're also working with nations in Central and South America to establish a free trade zone in the Americas by January of '05, and we have made great progress toward completing a free trade agreement with Chile this year. Still, out of 130 free trade agreements in the world today, the United States is party to only three.
All of our efforts to open new markets around the world will depend upon trade promotion authority, the ability of the president to negotiate a trade agreement on behalf of the United States and submit it to Congress for an up-or-down vote.
Once again, the House has already given approval. It remains only for the Senate to pass trade promotion authority, and we hope that that will happen soon.
For the United States, every advance for global trade is an opportunity to expand an already great economy and include more people in our nation's prosperity. Our nation is still the engine of economic growth for the rest of the world.
Fortunately, for all the impediments to growth in the United States, we've managed to resist the more extreme regulatory impulses sometimes seen overseas. The OACD has looked into the reason why productivity growth is consistently higher in the U.S. than it is in Western Europe. The answer, in part, lies in our higher level of job mobility and entrepreneurship, a well developed market for venture capital and the quick resolution of bankruptcies. The European Commission itself recognizes this, reporting last fall that, "structural rigidities continue to sap the resilience and potential growth of the euro-area economy."
The U.S. economy, on the other hand, remains a model of flexibility, having the capacity to generate new and higher paying jobs. And just as we stand to gain a great deal from wider trade, so do our trading partners, especially the less developed nations. For them, the stakes are even higher. Short-term grants and aid can only go so far. In the long term, open trade and investment can bring the first real hope for material uplift, all the more when economic reforms are joined with political freedom.
We've seen before how commerce and open institutions can transform a nation, in Japan, South Korea, Chile and other countries once poor but now stable and prosperous. We're seeing it today in the once-captive nations of Eastern Europe and the former Soviet Union. For Russia, Estonia, Hungary and others this past decade has not always been easy, but more of their people are prosperous today and their futures are brighter because they are on the path of democracy and economic freedom.
Many nations on the same path look to the United States as an example and an ally.
They rely on our support, our encouragement and our continued leadership in the world, and we must always provide it.
This is our vision of a world beyond the war on terror, where people in every region and culture in their own lifetimes rising levels of development, education and income; where the young can grow up free of the conditions that breed despair, hatred and violence. The same vision is shared by people everywhere, and perhaps nowhere more than by those who live under terror in tyranny. All who seek justice and dignity and the chance to live their own lives will have a friend and ally in the United States of America.
President Bush has called this a decisive decade in the history of liberty. We are passing through dangerous times requiring clear thinking and confident action. These are the qualities that our country's leadership has always found in the Council on Foreign Relations. I know that I can always rely on you for wise and willing counsel. And I have a feeling you'll share it right now in the form of your questions. Thank you very much.
MODERATOR: Thank you so much, Mr. Vice President.
HEMMER: We're going to relieve this event here with the Vice President Dick Cheney, the Council on Foreign Relations, talking about trade, and taxes and energy proposals.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com