Press Briefing by Scott McClellan

James S. Brady Press Briefing Room

12:15 P.M. EST

MR. MCCLELLAN: Good afternoon, everyone. I want to begin by giving you an update on the President's schedule. Earlier today, the President called King Abdullah of Jordan. This was a conversation that lasted about 10 minutes. This was an opportunity for the President and the King to continue some of their conversations on important issues that we -- important priorities that we share. They talked about regional issues, such as Iraq, and then they also spent some time talking about the fight against Islamic radicalism. The President expressed his strong support for King Abdullah's leadership and his efforts to combat extremism.

And the second thing I'd like to focus on, before turning this over to our National Economic Adviser, Al Hubbard, is the President's remarks on Monday, in Kernersville, North Carolina.

The President looks forward to traveling to Kernersville, North Carolina, on Monday. When he gets there he's going to be visiting the Deere-Hitachi Construction Machinery plant, and he will take a tour of the plant. This is a business that is growing and expanding, having hired hundreds of new workers in the last couple of years.

The President will then make remarks to the workers at the plant. And I expect the President to expand on what he talked about earlier today in the Rose Garden. Today's jobs report shows that our economy is cooking along. We are seeing strong and sustained economic growth; nearly 4.5 million new jobs added since May of 2003; an unemployment rate that is at 5 percent, well below the averages of the '70s, '80s and '90s.

I expect the President in his remarks to praise the ingenuity and hard work and productivity of American workers and small business owners and entrepreneurs. They are exceeding expectations and overcoming challenges. And because of our workers and entrepreneurs and small business owners, and the President's sound economic policies of tax relief and spending restraint, our economy is strong.

The President will talk about some of the recent indicators that show our economy is in good shape, and I'll let Al talk about some of those in his remarks in just a minute. The President believes we must continue to act, though, on pro-growth policies to help our workers and families and small business owners do even better. And that's something he will talk about in his remarks. He will talk about the importance of making sure that health care is affordable and accessible. He'll talk about the importance of continuing to address the root causes of high energy prices. He'll continue to talk about the importance of expanding job training programs and improving education, to make sure workers are prepared for the high-paying, high-growth jobs of the 21st century.

And he'll continue to talk about the importance of expanding trade and making sure that trade is fair. We need to be opening markets to American workers and products -- that's the way to keep our economy growing -- not pursuing protectionist policies that would only hurt our economy. And that's some of what the President will talk about in his remarks on Monday in Kernersville, North Carolina.

And at this point, I look forward to turning over the briefing to our National Economic Adviser Al Hubbard, and he'll talk to you a little bit more about the state of the economy and then be glad to take your questions that you have. And following his time, I'll be glad to come back up here and take some questions on other topics.

Thank you.

DIRECTOR HUBBARD: Thanks, Scott. Obviously, this is another great day, in terms of the statistics on the American economy, creating 215,000 new jobs, unemployment rate staying at 5.0 percent, as Scott pointed out. We've created about almost 4.5 million jobs since May of '03, over 2 million jobs in the last year. And this is despite the high energy prices, despite Katrina and the other hurricanes, which, to be perfectly frank, we actually thought would -- that the hurricanes would temporarily have a bigger impact on the economy than it has. Then of course, the 4.3 percent revised numbers for the third quarter indicate that this economy is doing very, very well.

I'm happy to answer any questions you all might have. Just another point on the growth in the third quarter: it's 4.3 percent, but in terms of the -- because of the reduction -- if there hadn't been a reduction in the inventory, the reduction would have been at 4.7 percent. So, again, this economy is humming. We're creating new jobs, standard of living is improving, productivity is going up, and we feel very good about where we are. It is broad-based, it's sustainable, and we think '06 is going to be another great year.

Yes, sir.

Q: The good news today and yesterday, Alan Greenspan today mentions both the federal deficit -- the growing federal deficit is going to have severe economic impact if not addressed, and he referred to the trade deficit as unsustainable. Can we -- what can the White House do to keep this growth in the economy in the face of those two very, very bad systemic problems that are on the horizon?

DIRECTOR HUBBARD: Well, let me first address trade. What I read he said was, what's important is that we not become protectionists in the country -- in the world, that we keep open markets. This is what the President has been committed to from the beginning of his administration.

Rob Portman's work -- he's in Geneva right now working with other trade ministers on the Doha round in anticipation of the Hong Kong meeting in the middle of the month, to again reduce trade barriers, to open up more markets for American farmers, for American manufacturers, American business, which will raise the standard of living for all Americans and will raise the standard of living for the world. This President has resisted any efforts on the part of anyone in our country to set up protectionist barriers, and he will continue to do that. He believes in free trade, open markets and fair trade.

With respect to the budget deficit, obviously, this President has made it clear for a number of years that the budget deficit is too high; he's committed to reducing it, to cutting it in half by '09. Josh Bolten's projections indicate that we will -- that he will attain that goal. He's committed to it. As you know, the budget deficit last year actually ended up $100 billion less than it was originally anticipated. The most important thing to ensuring that the budget deficit continues to decline is to ensure that the economy continues to expand. That's why we were able to reduce the budget deficit by $100 billion more than anticipated, because tax revenues were $100 billion higher than anticipated because of a stronger economy than anticipated.

At the same time, the President is committed to reducing unnecessary spending. As you know, he proposed discretionary -- non-defense, non-security discretionary spending be below a freeze, which he's committed to, and there's a very real chance that's going to happen. Obviously, he's working with Congress on that. He's also working to reduce mandated benefits.

And, obviously, the other -- with respect to the budget deficit, you know, the biggest deficit we have is in entitlements, and that's an off-balance-sheet deficit, and that's why he was working so hard and continues to work hard on Social Security. Every year Social Security unfunded liability grows by $600 billion a year, and that's why the President is still committed and will always be committed to reforming Social Security.

Q: The question is can we sustain 4 percent growth in front of those two drags on the economy, long-term?

DIRECTOR HUBBARD: Well, 4 percent growth -- obviously, you don't continue at 4 percent growth when unemployment is at 5 percent. Will we continue to grow at a healthy pace? Absolutely. In the three's? Absolutely. The President is going to continue to work on keeping markets open and opening new markets. He's going to continue to work on reducing the budget deficit. He's committed to both.

Q: With respect to the entitlement cuts -- or savings, as you know that there's a debate right now in Congress over the $50 billion in Medicaid savings at the same time that they're trying to push through extending capital gains and dividend cuts, which don't expire until 2008. So I'm wondering what is the White House's position on entitlement? Should it be $35 billion, $50 billion? And why do you think these tax cuts that don't expire for several years should be extended right now?

DIRECTOR HUBBARD: Well, I'll first address the tax cuts and then Medicaid.

On the tax cuts, they don't expire until '08, but as you mentioned, we're talking about dividends and capital gains. Americans, fortunately, make long-term investments. It's very important when you're determining where to invest and how to invest your money what kind of return you can expect, what your long-term return is going to be. And '08 is not that far away, when you're investing now, almost in '06. It's very important that those be extended for two more years; we're very supportive of that initiative. And we're very hopeful that that's what will come out of the reconciliation conference.

With respect to Medicaid, what you're talking about is slowing the growth of Medicaid by a very small amount over the next five years. We're very supportive of that and we're -- you know, we're hopeful that we'll see a $50 billion savings from the slowdown in the growth rate of Medicaid.

Q: And with respect to the administration a few months ago saying that Katrina victims are your first priority, I was wondering, first of all, does the White House support the Katrina tax relief package that is one of the budget reconciliation versions? And, secondly, when you said the economy is humming and standard of living is improving, what does the administration plan to do to improve the standard of living and make the economy hum for the at least 200,000 homeless Katrina victims?

DIRECTOR HUBBARD: That was a long question. (Laughter.) I must admit, I'm -- hit me one more time with -- (laughter.)

Q: The Katrina relief package, do you support it?

DIRECTOR HUBBARD: Oh, yes, the tax bill for the Katrina relief. We're absolutely supportive of the tax bill for -- you know, the President, if you'll recall when he was in New Orleans at Jackson Square with his speech, a very important part of that was tax initiative and creating the Gulf Opportunity Zone and tax relief in order to encourage businesses to return to Louisiana, Mississippi and Alabama, as well as encourage new businesses to start up there. We're very supportive of that. We follow that very closely and are very hopeful that Congress will get that passed this year.

In terms of the Katrina victims, I was just down there yesterday, in both New Orleans and Mississippi. The President is very concerned about the recovery. They're making good progress, but there is a long, long ways to go. The President is never happy with how fast they're going, and he keeps pushing us, keeps pushing DHS, keeps pushing FEMA, keeps pushing the Corps to do it faster and sooner and quicker so that part of the country will recover more quickly.

Q: Energy and health care are two areas where Congress has had a lot of trouble accomplishing much over recent years. What is it that you realistically hope to get done on those fronts?

DIRECTOR HUBBARD: Well, I'll talk energy first. As you know, when the President was elected back in 2000, and took office in 2001, one of the very first things he did was ask the Vice President to develop an energy plan, energy policy. And a bill was submitted to Congress in '01. Unfortunately, it took four years to finally get that passed, which he signed a few months ago.

He has made it very clear not only to the American people, but to those of us who work on energy, that he is not satisfied with where we are with energy. He wants to address the root causes. He thinks we can do more. I'll use his phrase: "Hubbard, I want you and your team and Secretary Bodman to go back and push the envelope" on addressing the energy independence question, on addressing alternative energy supplies, on addressing more efficiency in the economy, in the consumption of energy, and also in addressing how we can achieve more -- find more oil and gas and conventional sources of energy, because he is not satisfied, despite the fact that gasoline prices have obviously fallen dramatically from where they peaked after Katrina. They're still too high. He's especially concerned about natural gas prices and the impact they're going to have on people's budgets this winter. And he is committed to presenting some very innovative energy ideas to Congress next year.

Yes, sir.

Q: Given that the economy --

Q: Can you talk about health care, though, as well?

DIRECTOR HUBBARD: Yes, sir.

Q: Health care was the other part of that.

DIRECTOR HUBBARD: Yes, the President is very concerned about health care. Obviously there are a number of problems in the health care arena -- the uninsured. But among the insured the health care system is not working. It is too expensive. The costs of keeping your insurance are growing rapidly every year. Your deductibles are going up, your co-pays are going up. And the cost of health care is too high. It's much higher than it is in other countries. The President is very much aware of this. He's very committed to, again, presenting ideas to Congress next year to address these concerns. He's concerned about cost, he's concerned about access. And I can assure you that you'll be seeing some ideas in these areas.

Yes, sir.

Q: Given that the economy is doing well right now, is the President still as committed to tax overhaul, tax reform, and changes that have been suggested, changes to major deductions, very popular deductions, that could have very uncertain effects on the economy?

DIRECTOR HUBBARD: Well, I can assure you the President is -- right at the top of his list, after national security, is ensuring that this economy continues to expand at a very healthy pace. And his tax cuts of '01 and '03 are big reasons why the economy is doing so well. You add that to the entrepreneurial and hardworking activity of the American people, and that's why we have such a strong and expanding economy.

At the same time, I think we all know that our tax system, our income tax system is broken. I spoke to 800-plus lawyers a few weeks ago, tax lawyers, and I asked them how many fill out their own forms each year: four, four out of 800. I mean, think about that -- and these are experts in taxes. It's too complicated. It's not fair. And it's not pro-economic growth, the way it should be.

So that's why the President created the tax panel. Their work was excellent. That's not to say that we're signing off on what their proposals are. They've been submitted to John Snow and the Department of Treasury, will be reviewed, and then submitted to the White House. In terms of timing, that will be left up to the President and what the priorities are next year. But I can assure you the President would not support any tax reforms that weren't pro-growth and make the system easier to understand and fairer.

Q: So is it unclear at this point whether tax reform is going to be an agenda item next year?

DIRECTOR HUBBARD: The timing is unclear. Obviously, it's something the President cares very much about. It's a big problem. The President believes in attacking big problems. That's why he was -- he believes that's why he was elected. So that will be something that he will continue to be concerned about, continue to be reviewing. But in terms of priorities next year, that's up -- I'm going to leave it up to him to share his priorities with the American people.

Q: Two questions. First, are you satisfied with the rate of wage growth, which is a number that a lot of people say is not nearly so positive as what -- the statistics that you cited?

DIRECTOR HUBBARD: Well, with respect to wage growth, obviously the problem there is compensation growth continues to -- the compensation for the American worker continues to grow. Wages, particularly for lower-income people, have not grown, and the reason they haven't grown is because a bigger and bigger portion of their compensation is going for benefits, especially health care. And that's why it's so important that this country tackle the escalating costs of health care.

The other thing that's so important to growing wages is productivity growth. And that's one of the -- if you guys are looking for something to talk about in the economic area that really is never talked about, I would encourage you to talk about productivity growth. Chairman Greenspan will tell you that's one of the two or three most important statistics he looks at. And what that does is -- you know what it does, it measures how much goods and services you can produce with the same amount of effort. And it is growing very rapidly. Since President Bush has been in office, it's grown at 3.5 percent. Just to give you a comparison, between 1973 and 1995, it grew at 1.4 percent. So we're growing more than twice as fast as back then, which means our standard of living over time will double faster -- twice as fast as it would under the slower productivity of the '70s, '80s and '90s.

And that's important because economists will show you that compensation growth is tied directly to productivity growth. There's often a lag -- right now there is a little lag -- but that will catch up, it always catches up. And that's what will provide the higher standard of living for all Americans.

Q: That leads to my second question, which is that there seems to be some disconnect between a lot of the economic numbers, certainly between the way you're portraying the economy right now, and the way a lot of Americans seem to view the President and his economic leadership. Whether you measure it by poll numbers, his approval ratings, people's view of whether or not the country is on the right track, all suggest that a lot of people out there don't feel that this economy is terribly good for them. What do you think accounts for that disconnect? And why do you think you have to get out here on a day when you've got a good, but not great, employment number, and sell it to the American people?

DIRECTOR HUBBARD: Well, I must admit, you give me 215,000 jobs every month and I'll call it a great number. I mean, that's a very -- just to give you a sense -- you know, job entrants, new job entrants each month are around 125,000. So anytime we're above 125,000, that means we're creating more jobs than job entrants, which over time is going to mean that the unemployment rate is drifting down.

So we're very excited about 215,000 new jobs. We're very excited about 4.3 percent growth rate for the third quarter, which is remarkable. At this point in the economic cycle, when we've been in an expansion phase for this number of years, to have that kind of growth rate is truly remarkable, to have this kind of job creation is truly remarkable.

So I guess I'd challenge you on --

Q: But why the disconnect?

DIRECTOR HUBBARD: I will address the disconnect. Number one, whenever you have higher energy prices, it makes people feel ill at ease, uncomfortable with their economic situation. That means they're losing control of their budget. We all budget, and there's a certain amount of money allocated for gasoline and utilities, et cetera. And when you lose control of that, when there's a doubling in the price of gasoline, that creates an unease. So there's no question that's contributed to the way people feel about it.

You know, Katrina also, that was a -- many people say, and I think I would concur, is probably the biggest natural disaster we've ever had. You know, people were very concerned about the effect that would have. But the most remarkable thing is that the economy has continued to expand, despite those two big challenges.

And this President -- I think you all know this; this has been his attitude since he started in politics -- he's more concerned about results than he is about polls, and what pleases him and pleases us in his administration is the fact that the economy is doing well, job creation is very strong, productivity growth is very strong -- it's going to lead to higher compensation for all Americans, and that's what we focus on.

The other thing is, to be perfectly honest, I probably have not been doing a good job -- I should be spending more time with all of you talking about how the economy is doing. So if you all will listen to me, I'll come down more often and talk about it.

Q: Next Friday, then? (Laughter.)

DIRECTOR HUBBARD: Pardon me? Next Friday? (Laughter.)

Q: Al, the auto industry is taking it on the chin lately. What do they need to do to improve?

DIRECTOR HUBBARD: Well, you know, auto sales actually overall have been down the last couple of months.

Q: I'm talking about --

DIRECTOR HUBBARD: But you're talking about General Motors and Ford.

Q: Yes.

DIRECTOR HUBBARD: Obviously, they have big challenges. Number one is they've been hit hard by the energy situation, because their product makes tends to be lower -- less fuel efficient than the products of the foreign manufacturers. So as prices of gasoline have gone up, people have moved away from the big issue to ease into more cars with higher miles per gallon.

Then they obviously have the legacy costs, which are big challenges, which they're attempting to address. So, you know, those are two great companies. They've provided great employment, great products for the American people for many, many years and we expect them to continue to do that.

Q: Al, can I ask you one? I can't remember the last time the President spoke about the national debt, which is now over $8 trillion. Is that something you guys worry about?

DIRECTOR HUBBARD: Well, I don't know where your $8 trillion comes from, but we --

Q: The public website.

DIRECTOR HUBBARD: Well, I guess it really depends on what you're including, but let me -- again, the President is most concerned about the economy and the budget. And a key component of that, as I have spoken earlier, is the budget deficit. And, you know, that's what contributes to the overall budget debt, the country's debt, and that's why it's so important to reduce the budget deficit and, hopefully, ultimately, eliminate the budget deficit.

Q: Does the magnitude of the national debt disturb you?

DIRECTOR HUBBARD: Actually, again, I don't know what numbers you're using, but the current budget debt is not a problem, but we do not want it to grow as a percentage of the GDP. That's the way you want to look at it, is the debt as a percentage of GDP. And our budget debt is lower than many other developed countries. The President is committed to keeping it low; that's why he wants to cut the budget deficit in half by 2009.

But, you know, the biggest -- and this is off-balance-sheet -- the biggest problem we face are the unfunded liabilities of our entitlements, of Social Security, Medicare, and Medicaid. For Social Security it's $11 trillion; for Medicare it's significantly higher than that. And that's why we've got to tackle entitlements. The longer we wait, the more difficult it's going to be, and that's why the President spent so much time last year talking about Social Security. That's why he will continue to talk about Social Security.

And that's why, unfortunately -- you know, I wish the Democrats were right, that we could avoid dealing with Social Security, but we can't. Every year it grows bigger by $600 billion, the problem. And the sooner we address it, the easier it's going to be to address, and that's why this President will never give up on reforming Social Security.

Thank you all.

Q: Check the Bureau of Public Debt website, you'll see the number there.

DIRECTOR HUBBARD: Okay, thank you.

Q: You bet.

MR. McCLELLAN: Speaking of can't remember, I can't remember the last time Mark Knoller came to a briefing. (Laughter.)

Q: Well, I'm leaving now. (Laughter.)

MR. McCLELLAN: It's a good point. Can I?

Q: He monitors everything very carefully.

MR. McCLELLAN: He does. And he probably knows the last time he came, too. (Laughter.)

Kelly.

Q: Can I ask, when the President came to the Rose Garden this morning, about 10:45 a.m., at that hour did the White House already know about this attack on the Marines in Fallujah?

MR. McCLELLAN: Yes, we did. The President was informed about the loss of the Marines last night, and those that were injured, and then he was briefed again this morning. We are saddened by the loss of life, whether it's one soldier who loses his or her life, or 10 or 11. We are saddened to hear that news. Our heart and prayers go out to the families. Their loved ones paid the ultimate sacrifice for an important cause, and we are forever grateful for their service and sacrifice.

Q: On a day when you're trying to trumpet what you describe as good economic news, the President comes out and minutes later it becomes public that these Marines were killed and injured. Does that undercut your good news?

MR. McCLELLAN: Well, I think you have to separate out the two issues. First of all, again, we are saddened to learn about the loss of life of these brave Marines, and we are concerned about those who have been wounded in the attack. Our thoughts and prayers will remain with their families. And we will be forever grateful for their sacrifice.

In terms of the news today on the economy, that's another issue. And it's not what we're trumpeting, it's what the facts show. The facts show that our economy is in good shape. This is the latest indication that our economy is showing sustained and strong economic expansion. And that's important -- that's an important priority for the American people.

Q: Do you think the President is getting the credit that you think he deserves regarding the economy when Iraq --

MR. McCLELLAN: And in terms of -- let me just mention, in terms of the announcement of the loss of life, I mean, that's determined by the military. And one thing that they do is make sure that the families are notified ahead of time, as well. And so that's something that they -- before those names are released. And so we leave the timing up to the military so that they can address those concerns and issues before making announcements public.

Q: With more than 20 either killed or wounded, do you think that that overshadows the President being able to get whatever credit he deserves for these kinds of economic numbers?

MR. McCLELLAN: Well, in terms of the economy, that's an important priority for the American people. Iraq is an important priority for the American people. The American people, I think most Americans want to see us prevail in Iraq, because they recognize it is critical to prevailing in the broader war on terrorism. And that's why the President talked this week about our clear plan for achieving victory in Iraq. That's the way to get our troops home. And I think the American people understand the importance of completing the mission. And that's why we will continue to talk about both these priorities. They are priorities that the President is focused on and they are priorities that the American people care about.

Q: Do you see a disconnect, though, between the public perception on the economy and the kinds of numbers you put out today?

MR. McCLELLAN: Well, I think the analysis is for others to -- you're talking about the analysis that we put out today? This was --

Q: No, I'm talking about --

MR. McCLELLAN: This was a jobs report.

Q: Picking up on Dick's question to Al, the sense that, by many standards, people don't seem to be as excited about the economy or the President's performance, and then you put out good numbers, do you see a disconnect?

MR. McCLELLAN: Well, Al talked about that a little in response to Dick's question. And it's important that we continue to talk about these priorities, and it's important that we continue to focus on the economy, and that's what the President is doing.

But if you look at what people are doing when it comes to action, they are spending more, consumer confidence is up. That's what we care most about, that people are being hired for new jobs, more than -- or nearly 4.5 million new jobs created since 2003. So we're focused on the policies and what the results are. And the results are very clear. And the results are also being shown by the American people. It's more of an interest to us what they're doing versus what they're telling pollsters. And if you look at what they're doing, they're spending more, their confidence is up, and I think those are important indications to look at.

Q: Secretary Rice is going to Europe next week, and one of the places she's going is Romania, where it's alleged that the CIA maintains a secret detention center. Do you think that these -- that it undermines the U.S. campaign for human rights and the advance of democracy, when the United States has these secret prisons where it's alleged that people are treated harshly or even severely?

MR. McCLELLAN: Well, you're talking about allegations of so-called secret prisons, and I'm not going to get into talk about national security matters. But what I will talk about is the war on terrorism that we're engaged in. We're sitting here talking about the war on terrorism. We remain a nation at war. And the President's highest responsibility is the safety and security of the American people. And he is going to continue to act in a way to better protect the American people, but he's going to do so consistent with our laws and our values and our international obligations. We made that very clear. And Secretary Rice has indicated that she will be responding to the letter from Foreign Secretary Straw in due course.

We are glad to talk about these issues. There are sometimes difficult issues you have to address when it comes to a war like this, because we face a different kind of enemy, an enemy that abides by no laws, that abides by no treaties, and an enemy that wears no uniform, and an enemy that seeks to kill innocent men, women and children throughout the civilized world. We're all engaged in the global war on terrorism. We all have a responsibility to take the fight to the terrorists and defeat them and prevent attacks from happening. All of us in elected office have a responsibility to do everything we can to protect our people.

But we also have a responsibility to respect the laws and the values and the treaty obligations that we have agreed to.

Q: Is what you've just said -- do you anticipate that that will be her answer to the criticism that she'll face in Europe over these alleged secret --

MR. McCLELLAN: Well, she'll be responding in due course. There's been an interagency input into her response, and that --

Q: What is that?

MR. McCLELLAN: What's that?

Q: What is that interagency response?

MR. McCLELLAN: Well, you'll hear more from her in due course.

Q: Scott, it was just this week, obviously, that the President made this major -- what you billed as a major speech introducing his plan for victory in Iraq. Do you think the deadly attacks, as we saw today, that take the lives of 10 Marines, wound 11 or more others, does that make it a more difficult sell to the American public to persuade them that this strategy is working?

MR. McCLELLAN: Well, what we're trying to do is lay the foundations of peace for our children and grandchildren. Others focus on the polls. We're focused on the safety and security of the American people. And that's what we will continue to do. That's what this is about. This is about the war on terrorism. The stakes are very high in Iraq. And we're going to continue to talk to the American people about what those stakes are, and the nature of the enemy that we're up against.

We're up against an enemy that has no regard for innocent human life; terrorists that seek to spread their hateful ideology across the broader Middle East. And that's why it's so important that we remain engaged in the Middle East and that we take the fight to the enemy, and that we work to spread freedom and democracy in the broader Middle East. The Iraqi people are determined to build a future that is based on freedom and democracy. They are getting ready to go to the polls here again in two weeks. And we recognize that the terrorists and the regime loyalists are going to try to do what they can to try to derail the transition to democracy. Every step of the way they have failed, and they will continue to fail, because everyone has a right to live in freedom. And the Iraqi people want to live in freedom.

And that's why we're there helping them. And what it will do is help inspire the rest of the Middle East and help lay the foundations of peace for generations to come. And that's why it's so important that we succeed. And that's what the President is talking about in his remarks. And that's why he's talking about, we've got a plan for victory. Most Americans want to see our troops succeed. They also want to see them come home. And the way they come home is to complete the mission and achieve victory, and deal a major blow to the terrorists right in the heart of the Middle East.

Q: Yes, but by the President's own account, the terrorists aren't the biggest part of the problem in Iraq, so --

MR. McCLELLAN: Let Kathleen finish up. Kathleen had a follow up.

Q: Sorry.

Q: But, again, Scott. You know, when you have such a --

MR. McCLELLAN: And that's wrong. I'll come back to that.

Q: When you have such a deadly attack, and say this is a ramp-up on the part of the insurgents there, leading up to the December 15th elections, if you have more and more deaths like this of U.S. service members, will this not make it harder to convince the American public that your plan is working?

MR. McCLELLAN: It's important to keep the American people informed about the war we're engaged in, in Afghanistan, in Iraq, and throughout the world. The President said after September 11th, this is going to be a long war. We are in a struggle against a radical ideology that is based on hatred and oppression and fear. And this is what we're up against. The President talked about this right after September 11th. And he learned the lessons of September 11th, which taught us that we need to take the fight to the enemy, and that we need to work to change the status quo in the broader Middle East.

And as we keep the American people informed, it's important to not only keep them informed about the clear plan we have for succeeding and prevailing in Iraq and defeating the terrorists, but it's also important to keep them informed about the challenges and the difficulties that remain. There's important progress that's being made. It's important not to ignore the progress that's being made on the ground.

And it's important to always remember the sacrifice of our men and women in uniform. And we will be forever grateful, and we will always honor their sacrifice in our -- and we will always provide comfort and support to their families. That's what this President has done. I've seen him visit time and time again with the families of the fallen, and hug them and console them, and remind them about the importance of what their loved one sacrificed for, whether it was in Afghanistan or Iraq. But the President said the other day that there are going to be tough days ahead. And, certainly, when you have a loss like you did with these Marines yesterday, that's a tough day. But what they're sacrificing for is peace for our children and grandchildren for years to come.

Q: Do you want to come back to this question, because, look --

MR. McCLELLAN: Yes, I'll come back to you.

Q: -- when you guys frame this, as you just did, it's always about the war on terror. But by the President's own account in his speech on Wednesday, the jihadists are the smallest of the three elements which are fighting U.S. forces in Iraq.

MR. McCLELLAN: What did he say about the jihadists?

Q: You know what he said about the jihadists.

MR. McCLELLAN: He said, the smallest, but most lethal.

Q: Well, yes, but you frame it as a war on terror, and it's about much more than that, as he, himself, said.

MR. McCLELLAN: It is about the war on terrorism. It's about much more than Iraq.

Q: It's about the rejection of the power that was held by the Sunni minority, it's about rejection of foreign presence in the country. It's about a lot of things in addition to the jihadists.

MR. McCLELLAN: It's about the broader war on terrorism, is what it's about, Bill. And maybe you have a different understanding about it, but the President understands clearly the stakes that are involved in this broader war on terrorism. That's why he takes a comprehensive view of how we succeed in this war on terrorism. And that's why he's taken the fight to the enemy. That's why he's supporting efforts to expand freedom and democracy in the heart of a dangerous region of the world. And we will continue to act. We will continue to support those who want to live in freedom. And Iraq will inspire the rest of the Middle East and help us lay the foundations of peace that I've been talking about.

And in terms of the terrorists, what he said the other day in his speech -- I must correct you -- was that they may be the smallest group, but they're the most lethal. These are people that have no regard for innocent human lives, and the people that they've targeted the most have been Iraqi civilians, innocent men, women and children.

Q: But you seem to frame it in that unique picture, when instead there are many other elements involved.

MR. McCLELLAN: Well, let's look at the letter that Zawahiri sent to Zarqawi. They said this is the central front in the war on terrorism. The terrorists recognize that; so do we. That's why it's so important we succeed there.

Go ahead, Sarah.

Q: Thank you, Scott. Now that 1,000 convicts have been executed since the Supreme Court restored the death penalty, what is the President's view on capital punishment?

MR. McCLELLAN: The President strongly supports the death penalty, because he believes, ultimately, it helps save innocent lives. When it's administered fairly and swiftly and surely, it serves as a deterrent and it saves innocent lives. And that's why the President has been a strong supporter of it.

Now, we've also proposed a DNA initiative. The President proposed that and we're moving forward on it to provide funding to make sure that innocent people are protected and to make sure that we can identify victims. And so that's important to keep in mind, as well.

Go ahead.

Q: One more. A major conflict tomorrow, the Army-Navy game. Is the President going? And, if so, which side is he going to be sitting on first?

MR. McCLELLAN: As a fan of college football, I'm sure the President will be tuning in to this great rivalry. The President has attended the game in the past, and I know he looks forward to seeing it tomorrow. I'm sure it will be a great game for all of us to watch. And there's some other good games on, as well, tomorrow.

Go ahead. For us Longhorns.

Q: Scott, a two-part question. I'm sure that I am not alone in being very grateful for the President and Mrs. Bush's invitation to what used to be the Christmas party for the media, but which now reads, "A Holiday Reception." And I hope -- my question is, I hope you and the President will understand, given the recent statement by Speaker Hastert emphasizing Christmas, why I am compelled to ask why the Bush White House has eliminated Christmas and replaced it with the world "holiday"?

MR. McCLELLAN: I don't know that that's accurate, that the Bush White House eliminated --

Q: It is. Yes, it's no longer Christmas. It says, "holiday."

MR. McCLELLAN: This is a time to welcome people of all faiths, and all those who are celebrating the holiday season. The President just yesterday dedicated the National Christmas Tree to our men and women in uniform.

Q: Christmas? Did you call it the Christmas, and not Holiday Tree?

MR. McCLELLAN: Yes, Les, just last night at the Pageant of Peace. And all of us can take part in different ways to celebrate the holiday season and remember those who are in harm's way and remember those who have lost their lives over the course of the past year.

Q: The Zionist Organization of America is appalled that the President's speech in Annapolis omitted any mention of Israel when he referred to countries that have been victims of Islamist terrorism. And my question: Why did the President do this, given 1,700 Israeli citizens murdered by Islamo-fascists, and 10,000 more maimed by then since 1993?

MR. McCLELLAN: Les, I think there's no stronger friend and supporter of Israel than the President and this administration. And we have stood by Israel, and we will continue to support Israel.

Q: Why did he not mention that with all those other countries?

MR. McCLELLAN: He talks about the Middle East often, he talks about Israel often.

Q: But why at Annapolis did he leave out Israel?

MR. McCLELLAN: Les, I don't think that's the way to look at it.

Q: You don't? Well --

MR. McCLELLAN: He often talks about our friend --

Q: Why did he miss at Navy -- and mention all those others?

MR. McCLELLAN: Les, I just answered it. And I don't think that's the way to look at it.

Go ahead.

Q: Getting back to the question --

MR. McCLELLAN: He didn't mention -- he didn't mention every single country that has been attacked by terrorists.

Go ahead.

Q: The President is traveling Monday to North Carolina to talk about the economy. As several people in the room have noted, there is a bit of a disconnect between the numbers that are coming out and people's perception of the economy. Is this something we're going to hear the President talking about more in the coming weeks?

MR. McCLELLAN: Oh, I expect he's going to continue to focus on our highest priorities. Our highest priorities are winning the war on terrorism and protecting the American people and making sure that we're continuing to act to strengthen our economy. There is a lot of good news about the economy. Certainly, we are concerned about people who have lost their jobs, particularly along the Gulf Coast region. And that's why we've been acting to make sure they get the help they need, and to get them back up on their feet and to get them back into jobs. As the President said earlier today, we're not going to rest until everybody who is looking for work can find a job. And that's why we must continue to act to keep our economy growing. And that's why we must continue to act on the root causes of high energy prices. That's why we must continue to act on making sure that health care is affordable and accessible.

We passed Medicare reforms just last year, and they are going -- two years ago, I'm sorry -- and they're going into effect, those reforms, come January 1st. And so seniors are going to start realizing significant savings on their prescription drugs and getting better quality of care. And low-income seniors are going to have virtually everything paid for. Those are important steps that we've taken.

There are additional steps we need to take. We need to move forward on medical liability reform to address rising health care costs. We need to move forward on association health plans, so that small businesses can pool their resources and provide greater accessibility to insurance for more Americans. And there are other ways we can help. For those that have lost their jobs, we need to continue to support community colleges and provide job training, and make sure we have an educated workforce to fill the jobs of this century.

Q: Is the President surprised that he isn't getting more credit for handling the economy, or that people don't --

MR. McCLELLAN: Well, look, I'll let others do the analysis and look at the media and do the analysis. There are media critics for those kind of things.

Q: Scott, the speech that you spoke about next week on the war on terror, are you counting that as one of the four looking ahead to the elections?

MR. McCLELLAN: I am.

Q: You are.

MR. McCLELLAN: Yes.

Q: Okay. And are you able to say yet which aspect of the President's plan that he's going to focus on in that --

MR. McCLELLAN: He will focus on one of the other aspects. He focused on the security track this side -- I mean, this time, in Annapolis, and the other tracks really are the political side and the economic side. And I think next week he'll focus more on some of the economic and reconstruction side of things.

Q: I wanted to also follow up on Terry's questions about the reports of secret prisons, and the rationale for not saying to the American people whether or not such places exist. Do you feel it somehow gives away something to the enemy to confirm or deny the existence of these places?

MR. McCLELLAN: I think the American people understand the importance of us using all available tools to win the war on terrorism and to try to prevent attacks from happening in the first place. But it's important for people to understand, also, that we have laws and values and international obligations that we believe very strongly in, and that we adhere to. And that's why we're talking about those issues. There are some difficult issues that you have to address when you're facing a different kind of enemy in a different kind of war. And those are discussions that we'll continue to have.

We're having discussions with members of Congress on some of these issues. We're working together. We all have some shared priorities, and we're talking about issues to help us make sure that we're doing everything within our power to try to disrupt and prevent attacks from happening in the first place, while also acting in a way that is consistent with those laws and those values.

Q: But my question has to do with whether or not you confirm the existence, regardless of what's happening there and what techniques are being used, whatever, how does that protect American security by not acknowledging --

MR. McCLELLAN: I'm not getting into confirming or denying anything. I think that when you're talking about -- I mean, some of the reports talk about people like Khalid Shaykh Muhammed and Bin al-Shibh. I mean, these are dangerous terrorists that have been responsible for the deaths of thousands of Americans. And I think the American people understand the importance of us getting valuable information that can help us to defeat the terrorists and prevent attacks from happening. This is about their safety and security.

But in terms of the issues related to this, yes, I think the American people understand the importance -- and this is not talking about any particular issue -- but they do understand the importance of the war on terrorism, of not talking about intelligence, because it could hurt our efforts to prevail.

Q: Scott, when you say, "using all available tools," and then you talk about laws, I think it is a little confusing for many of us Americans that all available tools means all available tools, if you won't confirm or deny the prisons overseas --

MR. McCLELLAN: No, I said consistent with our laws and our treaty obligations. The President has made it very clear that we do not torture, he would never condone torture or authorize the use of torture. If someone doesn't abide by our laws, they're held accountable, and we have done that.

That's the difference between us and others. When it comes to human rights, there is no greater leader than the United States of America, and we show that by holding people accountable when they break the law or they violate human rights. And we show that by supporting the advance of freedom and democracy and supporting those in countries that are having their human rights denied or violated, like North Korea. We show that by liberating people in Afghanistan and Iraq, some 50 million people. And no one has done more when it comes to human rights than the United States of America.

Q: It's still not clear --

MR. McCLELLAN: And I think -- and I disagree with you. I think the American people understand. I disagree with your characterization that you think most Americans don't.

Q: No, I'm not saying that. I think Americans certainly understand "all available tools," and understand the possibility of prisons overseas. I suppose my question really is, we still don't have a clear definition of what torture is. If we're going to stop imminent attacks --

MR. McCLELLAN: There are already laws on the books about torture that prevent -- that prohibit torture, and it spells out what those laws are and the treaty obligations. And we're parties to those treaties.

Q: But, yet, it hasn't been possible to get from you a confirmation when we've been very specific about what specific things might or might not be torture, what they are.

MR. McCLELLAN: I'm not going to talk about national security intelligence matters. I'm just not going to get into talking about that.

Go ahead, Paula.

Q: Last year, the President in his State of the Union address listed as his two top domestic priorities Social Security reform and tax reform. But a few moments ago, one of his economic advisers said he wasn't really sure of the timing this year on tax reform, or even how high a priority it is. So I'd like to know --

MR. McCLELLAN: I think what Al was saying was he was deferring to the President to lay out his priorities for next year in the State of the Union. We're going through a process right now where he's looking at some ideas and what he's going to be talking about, and also, in the course of the broader agenda for 2006. But this President has worked to make the tax code fair and simpler already by some of the action that we've taken and some of the tax relief that we've provided, and reducing the number of brackets in the tax code, and so forth.

He appointed the bipartisan advisory panel for a reason, to look at these issues so that we can continue to move forward on ways to make it simple and fairer, because it is a complicated mess. It remains a priority for the President. But what Al was doing was just not jumping ahead of the President at this point and what he may be focusing on at the beginning of next year.

Q: Well, he did5 indicate, though, that one area that the President wants to push the envelope on is innovative energy initiatives, and he said there would be something on that next year. So is that a top priority, as well as your pro-growth policies.

MR. McCLELLAN: Has been, that's why we passed a comprehensive national energy strategy, and it continues to be. There's more that we need to do. Congress can act by passing the ANWR provision and opening up a small portion of that to domestic exploration and production.

Thank you.

Q: Thank you.

END 1:04 P.M. EST