Press Gaggle by Trent Duffy and Al Hubbard, Chairman of the National Economic Council

Aboard Air Force One

En route Chicago, Illinois

10:58 A.M. EST

MR. DUFFY: Happy New Year to everyone, again -- for those of you who weren't on the New Year's Day trip.

Let me go through the President's schedule, then I'll turn it over to the Chairman of the National Economic Council for his comments on the President's speech.

This morning the President taped his radio address, about our strong economic growth and job creation. He then had his normal briefings. He is traveling now to Chicago, Illinois, where he will tour the Chicago Board of Trade, as we all know, and then make remarks to the Economic Club of Chicago, at the Hilton, and then return to the White House later this afternoon. And he will spend the weekend at Camp David.

With that, let me turn it over to Al Hubbard for remarks about the speech.

CHAIRMAN HUBBARD: Thanks. Obviously, the President is talking about the economy and how pleased he is, how pleased we all are with continued economic growth. Obviously, the numbers today confirm that: over 400,000 jobs in the last two months, and the unemployment rate dropping to 4.9 percent, which, as you know, was lower than it was on average in the '70s, the '80s or the '90s. He's going to talk about the fact that this economic - positive economic record is tied directly to the tax cuts of '01 and '03 and the importance of keeping those tax cuts, making them permanent, preventing certain folks in Congress from trying to raise those taxes so we can ensure that the economy continues to grow robustly in the future.

He's then going to talk about the importance of continuing to be very earnest and keeping spending under control, keeping the deficits under control, encouraging Congress to pass the reconciliation spending bill which will reduce mandatory spending growth, or entitlement spending growth by about $40 billion. The President is going to encourage Congress to get that done.

And he's going to talk about how it's very important to him, and to all Americans, that every American be given the opportunity to enjoy the benefits of this strong, robust economy. And the way to do that is to make sure every American has an opportunity for an excellent education; and for those Americans who are already adults, to have an opportunity for job training that fits the needs of the marketplace, and fits the needs of employment opportunities.

As you all know, the most important factor in determining one's compensation is your education. And that's why the President from the beginning has talked about the importance of education; that's why he supported No Child Left Behind. No Child Left Behind is working and he's going to talk about the importance of expanding on that.

And, finally, he's going to remind people how important trade is to America, how important it is to the people of Illinois -- a large number of people in Illinois who depend on exporting industries; and make the point that he's made over and over again, that he's confident that when there's free and open markets and when there's fair trade and a level playing field, that the American worker can out-compete anyone in the world. And so that that's why he's working so hard, with Rob Portman as his Trade Representative, to open up markets to American products, American services, so there will be even more economic growth in the future.

Q: Do you find no cause for concern that the December jobs report was much lower than economists had predicted? I know you're looking at the two-month average, but --

CHAIRMAN HUBBARD: Well, look -- and, by the way, we really look at trends more than an individual month, or even two months. And the important thing is that we've grown by -- since May of '03, I think we've created about 4.6 million jobs. We continue to create jobs at about 175,000 a month, on average. That is very healthy. That's faster than the new job entrants, and that's why the unemployment rate is continuing to drift down.

You know, these numbers are -- these estimates are always around 175,000, plus or minus 150,000. These are -- there are huge variations from month to month, and the important thing to look at is what the trends are. And the trends are very positive. We think we're on a very sustainable path, and that '06 will be a good year economically.

Q: Are you concerned at all that interest rates are going to rise to a level that will choke off the expansion that's going on right now?

CHAIRMAN HUBBARD: You know, the President and all of us on his team have an enormous amount of confidence in Chairman Greenspan and the Federal Reserve Board, and soon to be Chairman Bernanke. We're confident that they will keep inflation under control in a way that provides opportunity for the economy to continue to expand robustly.

Q: Despite the fairly consistently strong growth and the pretty good jobs numbers, and good productivity numbers, there's still a lot of people who look at wage growth, and say it just hasn't been what you'd expect to see in this kind of economy. Why do you think that is, and to what extent can policy do anything about that?

CHAIRMAN HUBBARD: Obviously, that's a big concern to the President. If you look at wage growth, there are a couple of factors that are important. Number one, compensation has continued to appreciate, but because of rising health care costs, a bigger portion of compensation increases have been going to support health care than in the past. And that's why the President is very concerned about the escalating cost of health care. He's going to refer to that today, and I think that's something he'll be talking more about in the future.

Secondly -- and this is something I mentioned earlier -- it's the people with lower skills and less education who are not enjoying the wage appreciation like others. And that's why it's so important that we give everyone in America the opportunity to have an excellent education and to have job training opportunities. You know, the average American, believe it or not -- and the President is going to mention this; my numbers aren't perfect here -- but between the ages of like 18 and 40, change jobs 10 times. And that's why it's important that we be -- how many times have you changed jobs? (Laughter.)

Q: Zero.

CHAIRMAN HUBBARD: But there may be an opportunity in the future. (Laughter.)

MR. DUFFY: No, no, we hope not.

CHAIRMAN HUBBARD: That's why it's so important that we have -- that all Americans are well educated and have the opportunity for job training, so we can be prepared for our future economy.

MR. DUFFY: -- and productivity and wage growth.

CHAIRMAN HUBBARD: Yes, that's another very important point, thank you. You know, probably the most remarkable statistic about this administration is the productivity growth. Between '73 and '95, productivity grew at 1.4 percent per year, which means -- and by the way, over the long haul, compensation is tied directly to productivity growth. So when it's growing at 1.4 percent a year, it takes 50 years to double your standard of living.

Since the President has been in office, we -- productivity growth has been approximately 3.5 percent a year, more than twice what it was between '73 and '95. Now, we don't think that's sustainable, but we do think that it's sustainable to productivity growth to continue in the high two's, which means our standard of living should be doubling every 25 to 28 years, as opposed to every 50 years. And that's because of the -- the reason productivity growth has improved is, one, we're a more flexible economy; two, the lower tax rates, leaving more money in the hands of the private sector, so the private sector can decide how to spend that money, so the private sector can decide how to invest that money; lowering the cost of capital, which means more investment and new technology, which provides for higher productivity, which then allows for higher compensation for all Americans.

Q: You mentioned taxes, spending, and trade as three policy areas in which the President is going to call for more progress on the agenda that he's laid out. Could you draw a clearer distinction between the Democratic views on those issues and where the President is, and what the implications would be for the economy should the Democratic positions prevail? In other words, what's at stake here?

CHAIRMAN HUBBARD: There's an enormous amount at stake here. The growth rate of the economy, without question -- and I encourage you to talk to business people around the country. The lower tax rates have had a very, very positive impact on economic growth. It's had a positive impact on investment, which has resulted in higher productivity. It's had a positive impact on cost of capital, which again results in more investment and more economic growth.

The President's fear is -- and to be perfectly frank, many Democrats on Capitol Hill have even said they want to raise taxes on the American people. That would be extremely harmful to the economy. And equally as important is, it would mean that hard working Americans are having to give up their hard-earned money, and give it to the government. And that's not fair. They ought to be allowed to keep that money. And the wonderful thing is, by keeping that money, it has a very positive impact on the economy. Q: Where does the money come from for additional job training and for additional education?

CHAIRMAN HUBBARD: Well, it ultimately comes from the American taxpayer. And --

Q: So how do you figure that out when you're also trying to cut non-discretionary spending -- how do you reallocate what's already there?

CHAIRMAN HUBBARD: Well, the President is going to mention in his speech that in our most recent budget we eliminated and dramatically cut over 90 programs in government. I can tell you he -- we've just been through the budget process with Josh Bolten, the President has, and Josh and OMB are aggressively looking at other ways to cut spending and to make sure that we are allocating spending to the highest priorities, where we get the most bang for the buck, and cutting unnecessary spending. And holding spending, the growth of spending. You know, the growth of non-security, discretionary spending has dropped every year that the President has been in office. It was actually negative last year. Obviously, I'm not going to preempt what the budget is going to say for this year, but I can assure you the President -- and I've been in meetings where he's made it clear to Josh and the budget team that it is important to keep spending under control.

Now the biggest challenge, and the President is going to mention it today, are entitlements -- you know, Social Security, Medicare -- because the growth of entitlements are really contributing the bulk of the growth in government, even today. It's a significant problem today. And the problem is going to grow bigger and bigger. And entitlements are growing faster than the economy, and they're growing on a non-sustainable pace. And that's why we have got to address them. That's why the President made it -- made a big push on Social Security last year. Unfortunately, the Democrats were not willing to come to the table. But he's not going to walk away from that, because, unfortunately, it's a problem that's not going to go away until it's addressed by government leaders.

Q: As interest rates go up this year, and consumers face higher energy costs, that's going to sap the economy of one of its main growth engines. What's going to be the catalyst for growth this year?

CHAIRMAN HUBBARD: Well, the business investment -- the forecasts on business investment are quite healthy for '06. There's an enormous amount of opportunity for business expansion. And the consumer, despite the so-called savings rate, which is a very technical term, is really in quite good shape. I mean, the net worth -- the household net worth is at an all-time high; it's up 22 percent over when the President came into office, and it's at $51 trillion. Consumer debt is at a reasonable level, and we expect the consumer to continue to be a source of stimulation for the economy.

Q: Thank you.

Q: Anything more on Sharon?

MR. DUFFY: Obviously, the President continues to pray for the recovery of Prime Minister Sharon. And we hope he has a full recovery. The President spoke about him yesterday and what a historic figure he is, as far as bringing peace to the Middle Eastern region. And our thoughts and prayers continue to be with him.

Q: Do you have anything to say about what Pat Robertson said about Sharon and it being some sort of divine retribution for his Gaza pullout?

MR. DUFFY: I think those comments were wholly inappropriate and offensive, and really don't have a place in this or any other debate.

Q: The Prime Minister's condition seems to be -- well, it is growing more critical. How is the President being kept up to date, by whom, and where is he getting his information from? I mean, even while we're on this flight, is he in touch with anybody?

MR. DUFFY: The way he normally gets information, through top U.S. government staff and the information system that we have in place.

Q: Is the President going to meet with Speaker Hastert today?

MR. DUFFY: Yes, sorry, I should have mentioned that at the top. Speaker Hastert and Senator Durbin will be joining the President on Marine One when we fly from here to the Chicago Board of Trade.

Q: Is there going to be any discussion about where Republicans can get their leadership after Tom DeLay, or does the President still support Tom DeLay and his leadership ability in the House?

MR. DUFFY: Scott has addressed that several times, there's nothing new to add on that. The President has great confidence in Speaker Hastert and the leadership team to deliver on continued accomplishments for the American people. We're talking about one today, one of the strongest economies in recent memory, that's created 4.6 million new jobs; and continuing to win the war on terrorism and protect the American people. We've got other items to accomplish, like in health care and education and in strengthening our pension system. And the President looks forward to working with Speaker Hastert and with Senator Frist and the Republican leadership on continuing to deliver on behalf of the American people.

Q: Let me try that more directly. Does the President think it's time for DeLay to give up any hope of returning as Majority Leader, and does he think the House Republicans ought to hold an election within the next month or so to elect someone new?

MR. DUFFY: The President is the President of the United States. He is not a member of Congress, and he will leave that decision up to the members of Congress.

Q: He's the leader of his party.

MR. DUFFY: He's the President of the United States, he's not a member of Congress.

Q: One more on Sharon. Why is the White House so reluctant to talk about a post-Sharon era? I mean, everybody has said it's clear he won't be taking office again. Are you making plans for what happens when he -- what comes next? It seems like you say he's in your thoughts and prayers, but are you making no plans for the future?

MR. DUFFY: Secretary Rice addressed that directly yesterday, Patsy. She said that we pray for his full recovery; he is a man of peace. She also said, as Scott McClellan did yesterday in his briefing, that the United States' view of the Middle East is that the desire for peace and progress in that area runs wide and deep, and is not limited to the Israelis; that there are those on the Palestinian side, of course, that want peace. And so there is progress taking place.

Q: So it doesn't really matter whether it's a Prime Minister Sharon or a Prime Minister Olmert or a Prime Minister Netanyahu -- the road map continues, as far as U.S. foreign policy and Israel is concerned?

MR. DUFFY: I didn't say anything of the sort, Rosiland. I said that we pray for Prime Minister Sharon's recovery, but that the feelings and the desire for peace and progress in that region are wide and deep.

Q: It's been nearly four years since the President outlined the road map. What concern is there within the administration that making progress on a strategy that has been, by many analysts' view very slow going, could be disrupted because Sharon would no longer be able to shepherd the Israelis as the negotiations go forward?

MR. DUFFY: You're asking me to speculate. There may be a time for those discussions; now is not that time.

Q: Is he going to Camp David today, or waiting until tomorrow?

MR. DUFFY: Not going to Camp David, at the White House this weekend, I believe.

Q: I thought you said earlier he was going --

MR. DUFFY: Did I say that? I mis-spoke, I apologize. He is going to be at the White House this weekend. My apologies.

Oh, Week ahead. Monday, January 9th, the President will have breakfast with Supreme Court nominee Samuel A. Alito, at the White House. Then he will later hold remarks at the No Child Left Behind Act at the North Glen Elementary School in Glen Burnie, Maryland. Mrs. Bush is currently scheduled to attend that with him.

On Tuesday, January 10th, the President will make remarks on the global war on terror at the Omni Shoreham Hotel in Washington, D.C. Later he will have a photo opportunity with the 2005 Little League Softball World Series Champions. That's in the Oval Office at the White House. As you may recall, the event was originally scheduled for Thursday, January 5th, but had to be changed.

Wednesday, January 11th, he will have a discussion on the global war on terror in Louisville, Kentucky.

Thursday, January 12th, the President will travel to New Orleans, Louisiana, where he will make remarks on Gulf Coast reconstruction and later attend a Republican National Committee dinner at a private residence.**

Friday, January 13th, the President will meet with the Chancellor of Germany at the White House. He will have a joint press availability with the Chancellor of Germany in the East Room, and will later meet with business leaders on Central American relief and reconstruction efforts in the Oval Office.

And finally, today, I've got some bittersweet news. The White House's chief White House cameraman, the honorable Percy Arrington, is going to be retiring after 39 years at NBC News. Percy traveled with us to Crawford for the holiday break on one of his last presidential trips before he departs for greener pastures. He's been working at NBC since June of 1967, and has been working at the White House unit since President Reagan. I've only known Percy for a little over two years, but given our shared appreciation for British literature and "Old No. 7," I consider him a very good friend. And we're going to miss him very dearly. Thanks a lot, Percy. (Applause.)

Q: One thing on the schedule. Is the Wednesday/Thursday an overnight trip, Louisville and New Orleans?

MR. DUFFY: No.

** The Republican National Committee dinner is at a private residence in Palm Beach, Florida.

END 11:19 A.M. EST