Vice President Dick Cheney’s Remarks to the Council on Foreign Relations
Council on Foreign Relations
Friday, February 15, 2002
# 12
Click here for the Adobe PDF handout that accompanied this speech
Thank you, Les, and thank you all very much. I have a lot of old friends in the room, and it’s good to see all of you.
I want to thank the Council, and especially Hank Greenberg, for initiating the Center for Geoeconomic Studies. The Greenberg Center reflects the generosity and vision of a distinguished and very accomplished man. In the years to come, it will add much to the understanding of economic issues and their significance in world affairs.
I’ve been a member of the Council on Foreign Relations for many years, and served a while as a director. Throughout that time, most of our debates were defined by the Cold War. When America’s great enemy suddenly disappeared, many wondered what new direction our foreign policy would take. We spoke, as always, of long-term problems, and regional crises throughout the world. But there was no single, immediate, global threat that a roomful of experts could agree upon.
All of that changed five months and four days ago. The threat is known, and our role is clear. We face an enemy determined to kill Americans by any means, on any scale, and on our own soil.
We’re dealing with a terror network that has cells in 60 or more countries. Such a group cannot be held back by deterrence nor reasoned with by diplomats. For this reason, the war against terror will not end in a treaty. There will be no summit meeting or negotiations with the terrorists. This conflict can end only in their complete and utter destruction.
The attacks of 9/11 confront us with a whole new set of considerations – from our ongoing vulnerability to international terrorism, to the possibility that terrorists will gain access to weapons of mass destruction. In the rubble of Afghanistan we’ve found confirmation, if any were needed, that bin Laden and the al-Qaeda network were seriously interested in nuclear and radiological weapons, and in biological and chemical agents.
It’s one thing to have that sort of thing discussed in foreign policy seminars. It’s quite another to have in your hand documents clearly describing their aspirations and plans for acquiring these capabilities, so that they can use them against the United States and our friends and allies around the world.
We have a responsibility to answer this growing threat. With all the urgency that is required, we will work to prevent regimes that sponsor terror from threatening America or our friends and allies with chemical, biological, or nuclear weapons – or allowing them to provide those weapons to terrorists.
Many nations – throughout the West, in Asia, and in the Islamic world – are joined with us in a broad coalition against terror. The response we’ve seen is a model of diplomatic and military cooperation in the face of common danger – and a tribute to the determined leadership of the President of the United States. I have seen President Bush bring this coalition together with great steadiness and skill – working with old allies and seeking new ones, consulting every day with other leaders, laying the groundwork for a sustained, unified, and successful campaign.
America has friends and allies in this cause, but only we can lead it. Only we can rally the world in a task of this complexity, against an enemy so elusive and resourceful. The United States, and only the United States, can see this effort through to victory.
This responsibility did not come to us by chance. We are in a unique position because of our unique assets – the character of our people … the strength of our ideals … the might of our military, and the enormous economy that supports it. We cannot take these for granted. And President Bush does not.
He has proposed, as you know, the largest increase in spending for national security in a generation. The skill and bravery of our troops and the power of their equipment protect America and our friends. The precision of our weapons can spare the lives of innocent civilians. Yet modern warfare is expensive. In Afghanistan, the effort cost more than 30 million dollars every day. We must also remember that time frames run very long in the military. The forces that will defend us 10 or 20 years down the road must be planned and built today.
At the same time as our defense expenditures increase, we are confronting the effects of a serious downturn in the economy. Some presidents have faced sudden national emergencies; some have directed wars; others have dealt with economic recession. This President has had to face all three, in a very short space of time.
Before taking your questions this morning, I want to briefly explain the measures the President has proposed to get our economy moving again, and set it on a path to even more rapid growth in the long run.
The first sign of a slowdown appeared around 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 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 Advisors confirmed in an analysis released today, it did have that effect. Without the Tax Relief Act, third-quarter growth in 2001 would have 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 a percent instead of the advance estimate of 0.2 percent growth. The Tax Relief Act has raised the prospects of a solid recovery in 2002. By the end of this year, the President’s tax relief will have helped the private sector generate 800,000 more new jobs than would otherwise have occurred.
Even so, nothing could completely offset the terrible economic effects of September eleventh: Every foreign and domestic flight was cancelled for days, some for weeks. For a time, many hotels, shopping malls, and restaurants went practically empty. Stock trading was at a dead halt for six days, and the confidence of investors was deeply shaken. Hundreds of thousands of Americans were laid off, many of them still looking for work to this day. Overall, as estimated by the CEA, the attacks cost the economy about 120 billion dollars in the last few months of 2001 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 and rebuilding, for new emergency measures, for homeland security, and for military operations.
There is evidence, however, that the economy is poised for a non-inflationary 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 a recovery begins. This leaves many people still in need of help. Our Administration supports extending unemployment benefits and direct assistance for health care coverage for jobless Americans.
Government’s responsibility only begins there, however. Even with positive signs in the economy, we need an insurance policy to make certain that the recovery takes hold and builds momentum. That is the purpose of President Bush’s economic security plan – to secure the recovery, and lay the groundwork for sustained, long-term growth. The House passed a stimulus package again just yesterday. We’re disappointed in the Senate Democrats’ failure to pass the President’s plan, which would generate 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 doesn’t 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 new jobs. There will be another benefit. 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 in Washington, D.C.
The President’s budget commits most new spending to national security and homeland defense, and seeks to hold the rest of government to an increase of two percent. Were spending to grow without restraint, more billions would be diverted from the private sector, only limiting the economy’s ability to expand in the future.
We hear it suggested that tax relief might be making matters worse, and some urge its repeal. But I’ve yet to hear anyone explain exactly how higher taxes would help the economy grow. Economic growth is a direct consequence of millions of individual decisions to produce, save, and 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 thirty years, Alan Greenspan: “All taxes are a drag on the economy. It’s only a question of degree.”
Far from withdrawing tax relief, we should speed it up, and make it permanent. The effects will be strongly felt in the small business community. A full phase-in of the President’s tax cut will reduce taxes on more than ten million sole proprietorships and partnerships. To promote investment, our administration supports tax incentives for employers who buy new equipment.
Over the long term, we must do more to simplify the tax code. Under the President’s leadership, we’ve made progress by reducing marginal rates, improving tax fairness, and getting rid of the estate tax, which was one of the most dense and confusing sections in 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, keep the necessary records, and fill out all the forms. An awful lot of time is spent just planning tax strategies. Complexity also adds to the likelihood of errors, administrative costs for the government, and the number of disputes between taxpayers and the IRS. The costs of tax compliance run between 70 and 125 billion dollars a year. Our Administration, under the leadership of Secretary O’Neill, will investigate options for tax simplification.
There are other hindrances to economic growth. 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 in smaller firms. The total cost of federal regulation is now estimated at eight thousand dollars per household per year. Our policy is 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 and affordable supply of the fuels that make our economy go. I hardly need to explain to this audience the strategic dimension of energy policy. It is enough to say that virtually everything we do, make, and 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 America 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 increase energy production here at home. The President has proposed the first comprehensive energy plan in a generation. The plan has already passed in the House. We hope the Senate will follow the President’s lead and pass a comprehensive energy plan in the coming weeks.
Trade policy, I’m certain, will be a regular concern of the Greenberg Center in the decades to come, as it will be a concern of policymakers. That itself is a hopeful sign. Trade is 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 support more than 12 million American jobs, and these tend, on average, to be well-paying positions. The nation’s farmers and ranchers receive a quarter of their income from sales abroad, and 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 and faster economic growth. We’re seeing this today in the success of NAFTA.
America strongly supports a new round of global trade negotiations. We’re also working with nations in Central and South America to establish a Free Trade Area of the Americas by January of 2005. 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 on Trade Promotion Authority – the ability of a President to negotiate a trade agreement on behalf of the United States, and submit it to Congress for an up or down vote. The House has already given approval. It remains only for the Senate to pass Trade Promotion Authority, and the signs are good.
For the United States, every advance for global trade is an opportunity to expand an already great economy, and include more of our people in the nation’s prosperity. Our country 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 seen in Western Europe. The OECD has looked into the reason why productivity growth is consistently higher in the U.S. than 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 quicker resolution of bankruptcies. The European Commission itself recognizes this, reporting last fall that “Structural rigidities continue to sap the resilience and the 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 their first real hope for material uplift – all the more when economic reforms are joined with political freedoms.
We have seen before how commerce and open institutions can transform a nation – in Japan, South Korea, Chile, and other countries that were once poor, but are 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 been easy. But more of their people are prosperous, 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 can see, 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 and 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 again now, in the form of your questions.
Thank you very much.
