White House Gaggle

By Tony Fratto and Al Hubbard, Assistant to the President for Economic Policy and Director of National Economic Council
White House Gaggle
By: Tony Fratto and Al Hubbard

Aboard Air Force One

En Route Peoria, Illinois


9:46 A.M. EST

MR. FRATTO: Hi guys. We have the President's National Economic Advisor,
Al Hubbard, here with us today. I'm going to run through a few things.


Let me just tell you a little bit about the President's day. He had his
normal briefings this morning. On the airplane with us is Congressman
Ray LaHood. We'll be visiting his district today, in Peoria.

Something that wasn't on the schedule that went out -- I think you may
have it -- but our first stop is going to be a visit with business
leaders, breakfast meeting with business leaders in Peoria. It will be
an opportunity for the President to spend some time talking to some of
the local business leaders in the community and getting their sense of
how the economy and the region is going there. And then of course we go
the Caterpillar plant for a tour, and the President will make remarks to
Caterpillar employees, and then we'll head back.

I'm going to ask Al Hubbard to give us a rundown of some of the themes
the President will be discussing today, and maybe tomorrow, and then we
can come back to questions after.

DIRECTOR HUBBARD: Thanks, Tony. Obviously, he'll be highlighting how
strong this economy is, how truly remarkable it is, given the challenges
that we've faced over the last six years, starting with 9/11, and then
the recession, and Katrina, and the war in Iraq. And despite that, this
economy continues to expand and be very strong, unemployment at 4.5
percent. We've created over 7 million jobs since 2003, and there's
nothing to suggest that we won't continue to have a strong and
prosperous economy.

The President is going to be talking about what needs to be done to
ensure that we continue our growth. Obviously, keeping the taxes low and
making his tax cuts permanent are extremely important to that;
continuing to support free trade policies. Caterpillar is a great
example of how the American worker can compete with anyone on a level
playing field. Caterpillar is enormously successful -- over half the
products they manufacture are actually exported.

And every time we have a new free trade agreement with a country like
Chile or Australia, the sales of Caterpillar dramatically improve.
That's why the President is committed to continuing to expand our trade
agreements and support the Doha Round and the Doha agreement.

He'll also be talking about the major initiatives that he discussed in
his State of the Union -- health care reform, which is so important to
America, to American businesses, most importantly to all Americans. The
cost of health care has been growing at an unsustainable pace. It is too
expensive. And the President has some, as you all know, very important
reforms that would have a major impact on accessibility of health care,
affordability of health care, especially for the uninsured.

One little detail that I think I'd like to make clear about our health
care proposal: It helps every single working American, even those who
don't pay federal income taxes, because everyone would get the
opportunity to deduct on their payroll taxes, as well as their income
taxes. So for someone buying individual insurance who does not pay
federal income taxes, they would get an $1,125 tax credit, or a
reduction in their payroll taxes if they bought single coverage. They'd
get at $2,250 deduction if they bought family coverage. And that's for
people who do not pay federal income taxes, because the President's
proposal allows individuals who purchase health insurance to get the
same deductions as people who get their health insurance from their
employers.

He's also going to be talking about the importance of energy, and
reducing our dependence on foreign sources of energy, and his commitment
to reducing our dependence on gasoline by 20 percent within the next 10
years, which is very ambitious, but we believe that the ingenuity and
the commitment of the American people will make that happen.

He will continue to talk about the importance of education, and he'll
talk about that today at Caterpillar, because there's no question the
inequality between the skilled and unskilled, in terms of compensation,
has been growing over the last 25 years. The most important determinant
of one's wages is one's education, and that's why the President is
committed to No Child Left Behind, which is working. He's committed to
having it, what do you call it in Congress, reauthorized, because what's
important is that we dramatically increase the number of high school
graduates who are prepared for college, and we do that by improving our
K through 12 education system. And that's what the President is
committed to.

Q Is the CEO of Caterpillar going to be there today?

DIRECTOR HUBBARD: Yes.

Q He's been -- he was part of that industry group that came out for
carbon caps a week or two ago. Why is the administration not following
the lead of industry on the issue of addressing carbon dioxide
emissions?

DIRECTOR HUBBARD: Well, I think the President has talked about the
importance of global warming and climate, and the policies that he's
promoted, in terms of alternative fuel, will have a dramatic impact on
CO2 emissions. And within 10 years, assuming we meet our goals, we will
stop the growth of CO2 emissions from automobiles.

Q You talked about energy independence, and part of that being ethanol.
And the President is also going to talk about free trade today. What's
the rationale for imposing a tariff on imported ethanol? And why would
the administration not lift that, if those are two things that the
President aspires to?

DIRECTOR HUBBARD: Well, as you know, ethanol receives a -- my numbers
may not be perfect here -- $0.51 per gallon subsidy, and I think there's
a $0.54 per gallon import duty, and those offset one another. So there's
a reason behind the import duty, and the President's position is, that's
in law right now, and we see no reason to change that.

Q No reason to change the import tax on ethanol?

DIRECTOR HUBBARD: It's set to expire in 2009, and at that point in time
we think it's appropriate for Congress to revisit that.

Q Can you talk about how this speech will differ from tomorrow's speech?


DIRECTOR HUBBARD: Well, he's going to be using talking points today, and
tomorrow really it's a formal state of the economy, where he's going to
talk about where the economy is, the condition of the economy, what's
made us successful, and most importantly, what's important to ensure
that we continue to be successful.

Q Are new initiatives going to be unveiled today, and/or tomorrow?

DIRECTOR HUBBARD: I'll leave that up to the President.

Q Are you encouraged or discouraged by the latest talks about restarting
the Doha Round of trade talks? Is the President going to mention that
today?

DIRECTOR HUBBARD: Listen, the President mentions that every chance he
gets, just like he mentions entitlements every chance he gets, because
those are two initiatives that are so important to him, because he
thinks they are so important to the country. We are -- feel more
optimistic. We made a very, very bold proposal in October of '05, and we
continue to -- Susan Schwab representing the U.S. -- continues to lean
forward to work with our trading partners to work for an agreement. We
are waiting for them to meet us halfway, or not even halfway. And
hopefully that's a signal that the Europeans are going to be more
aggressive, like we are, in terms of negotiating the Doha Round.

Q Is the President going to call for a renewal of fast track authority
today?

DIRECTOR HUBBARD: We'll leave that up to him.

Q What if Congress doesn't renew fast track?

DIRECTOR HUBBARD: Again, TPA, we all know, is extremely important -- TPA
meaning Trade Promotion Authority, the fast track -- is very important
to passing any trade bill. And so that's been critical during this
administration, and it will be critical to future administrations.

Q What's your take on the minimum wage situation on Congress? Are the
tax break coupling -- is that a deal breaker if that doesn't happen?

DIRECTOR HUBBARD: We think it's important -- raising the minimum wage
will cost some jobs, and we think it's important to counter that with
tax breaks that will replace those jobs, so it will have a no-net impact
on the number of jobs in America. And what's most important to the
American worker is opportunity for work.

Q Is there any negotiating room?

DIRECTOR HUBBARD: Congress is working on it. I'm confident Congress will
make sure that -- and the Republicans will make certain that there are
appropriate tax breaks in the bill.

Q What sort of changes in the labor provisions are you guys seeking in
the already negotiated trade agreements with Peru and those countries?

DIRECTOR HUBBARD: I don't know the details, so I can't --

Q It's been mentioned in press reports that Henry Paulson is going to
take on a high profile role in the Doha negotiations. Is that true?

DIRECTOR HUBBARD: Susan Schwab will continue to be our leader in the
negotiations. At the same time, everyone in this administration is
involved, committed, and trying to help Susan and reinforcing her
positions with the foreign leaders with whom they meet. And Hank has
been enormously helpful. Condi Rice is being enormously helpful --
obviously, Secretary Johanns, Secretary Gutierrez. So it's important
that this is a team effort, but we're being led by Susan Schwab, and
we'll continue to be led by Susan Schwab.

MR. FRATTO: Thank you.

END