U.S. Department of the Treasury

(Archived Content)

FROM THE OFFICE OF PUBLIC AFFAIRS

Good afternoon.   Before Lou and I begin our dialogue with you, I would like to make a few opening comments about the current state of the U.S. economy, and where I think we're going.

Here's the landscape: GDP rose by 1.9% in the first quarter of 2003, better than the growth late last year.   But I think the real pick-up is going to happen in the second half of this year, as the President's jobs and growth provisions kick-in.   In fact, I think we're going to see annualized growth rates near 3.5% by the later part of this year.

I know a lot of people in the investment community have been heartened by the passage of President Bush's Jobs and Growth plan.   We're starting to see an impact in the markets, as higher tax-adjusted returns on dividends and capital gains are factored into stock prices.  

In many ways, the focus of the President's plan is on reducing the cost of capital for businesses, small and large.   We've tried to create conditions for higher potential growth in the long-term, and I think the plan has succeeded in that.  

Thanks to the plan, all businesses now qualify for greater expensing of new equipment investments, which is lowering the cost of making those investments.   While it's too early to be definitive there are signs that new incentive is cracking the ice in terms of capital spending decisions.  

Small businesses that are taxed as pass-through entities are going to see more disposable income for new investment and new jobs, thanks to marginal rate cuts.  

Larger businesses that pay dividends will be able to raise equity capital more cheaply, as dividend paying stocks become more attractive to shareholders.   A lower cost of capital means more capital formation, more investment, and more jobs.

Obviously, the tax plan does a lot for the demand side as well, with lower marginal rates for all taxpayers and immediate child tax credits for families, for example.   Americans are going to see lower withholding from their paychecks right away - money they can save or spend right now with the new withholding tables going out this week.

I'm confident that the plan is going to have a serious impact on overall economic growth and job creation in the United States this year.   Bottom line is: I am confident we're going to see those `help wanted' signs go up again in greater and greater numbers.

Conditions for this recovery are looking better and better.   Let me put it in a way that those living through the Northeastern weather this year can appreciate: this recovery has been soggy, but it's definitely drying up.  

Our trade deficit has narrowed, consumer sentiment is up with the end of the war, interest rates have stayed low keeping the housing market strong, and corporate profits are rebounding.   Productivity has stayed strong, which bodes well for future income growth and living standards.   There are signs of renewed capital spending too.

Another reason for increasing confidence in the markets is the SEC's steady hand, which has been routing out the vestiges of bubble-era malfeasance, and setting a tone of accountability for public companies and investment firms.   We're proud of their work.   With the SEC setting clear rules of the road, businessmen can get back to focusing on running their businesses, producing good returns for shareholders, opening up new markets, developing new products, serving customers well and making the big and important decisions that are so critical to the future success of their enterprises.

Of course, the most important economic indicator for the President is employment.   Stock indices are not jobs, but companies that are doing well, that are making investments, are going to start hiring.  

I think the markers are all there for a strengthening labor market as growth accelerates this year.  

We've also taken steps to help folks who are out of work, looking for those new jobs to come through.   We've extending unemployment coverage, and put forward some exciting, innovative programs like the Health Coverage Tax Credit, which I introduced in Pittsburgh yesterday.   This program has great potential for aiding the uninsured.  

Before I take your questions, a word about global growth prospects.   Today the industrialized nations of the world are growing far too slowly and everyone suffers as a consequence.   This was one of President Bush's key messages at the G8 summit earlier this month: that the United States wishes economic success for all its partners, and that the developing world in particular needs faster growth from all of the more advanced economies.   It has been the policy of his administration to encourage economic growth at home and abroad.  

Nowhere is this more important than in the leading industrialized nations, which through their trade and investment activities support growth throughout the rest of the world.   Our challenge today is that the leading economies are suffering from a growth deficit - their potential far exceeds their performance.   Returning these economies to high growth performance has been and will continue to be our focus.   We expect others to take bold actions themselves - including fundamental structural reforms where necessary - to spur growth, create jobs and contribute to global prosperity.

That's my quick take on the economy - we've come a long way from the beginning of this year, and we've seen a big victory on the home front.   This is a hopeful time for America.

I'm looking forward to your questions.

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