Remarks at the Economic Recovery and Job Creation Session
Baylor Law Center
Baylor University
Waco, Texas
August 13, 2002
9:23 A.M. CDT
THE PRESIDENT: Good morning. Sorry to interrupt. I was hoping to hear Phyllis. (Laughter.)

MS. SLATER: I was quoting you.

THE PRESIDENT: You were?

MS. SLATER: Yes, I was quoting you, "let no child be left behind."

THE PRESIDENT: There you go.

MS. SLATER: Education is key to keeping our -- in this country. And I especially want to look after those children in the rural and urban communities, because that's our future.

THE PRESIDENT: You bet.

MS. SLATER: And I thank you for that lead in.

THE PRESIDENT: Listen, thank you all for coming. So here's what happens. I come for 15 minutes and then go to another seminar -- the Vice President, as well. But I can assure you that any recommendations that come out of this discussion will make it to my desk. I look forward to hearing what you have to say.

I want to thank you all for coming. Welcome to central Texas, and I truly look forward to hearing what you have to say. I suspect I know what's on Doug's mind, and that's how to get people back to work. And that's on my mind. I mean, we ought to seize every opportunity to get our workers working.

In one case, Congress can do something about it, and should do something about it quickly. And that is to provide some terrorism insurance so that roughly $8 billion worth of projects move on. And that's $8 billion worth of work for somebody. I view that in human terms, not in balance sheet terms.

So I want to thank you all for coming to talk about ways to get the economy moving again. You know, we're pleased with some progress, but we've got more to do. And that's what we're really here to discuss. So any specific ideas that bubble up, you know, we'll give it a good look. But in the meantime, keep the conversation moving here -- I don't want to dominate.

SECRETARY O'NEILL: All right. Mr. President, thank you very much for joining us. We heard from Tom and we heard from Doug and we were just hearing from Phyllis -- and Phyllis, I'm not sure, were you through with your remarks?

MS. SLATER: I have -- (laughter.) We've got a lot to say.

SECRETARY O'NEILL: Great. How about let's hear from John Brooks.

MR. BROOKS: Mr. Secretary, my feelings are -- Mr. McCarron, on the security -- (off microphone) -- construction industry.

THE PRESIDENT: John, what do you do -- excuse me.

MR. BROOKS: I'm a business manager for the Carpenters.

THE PRESIDENT: Oh, good.

MR. BROOKS: -- we've entertained you --

THE PRESIDENT: Yes, you have; you certainly did.

MR. BROOKS: I was probably the first person you met.

THE PRESIDENT: That's right. Well, I didn't notice you; I didn't recognize you in a coat and tie. (Laughter.)

MR. BROOKS: My concern, certainly our pension monies that we're responsible for. And certainly Mr. McCarron has seen his way to giving me another 27 counties. I get into the pension fund because I sit on them, and certainly we invest in the inner structures in any way that we can; 25 percent of the fund is targeted for that reason.

But I'm noticing now that you look into the pension funds, more -- I'm talking the lines of construction industry -- the unfunded liability there, certainly we all here about cooking the books or whatever. A lot of times the details that they're using for the age limit -- I mean, personally, my pension fund uses 1994 tables. I'm looking into the area that I'm merging in with now and they're out there using '74 tables. And certainly you can take that number of the equation for you to be at the 6.5-7 -- you can keep raising the numbers and keep making that pension fund look like it's in the hole.

My curiosity, is there something the government can do to make sure everybody uses the right table and insist on it, instead of the actuary out there saying, well, you're in good hands my friend -- but you really aren't. And after this is all said and done, I think it's an injustice to the people that we support out there. That's basically the -- certainly, Mr. McCarron has talked about them certainly beyond -- 100 percent.

SECRETARY O'NEILL: John, we'll get that issue in front of Secretary Chao and the pension benefit Guarantee Corporation and take a hard look at what you're saying on this issue.

MR. BROOKS: I just think it would make the pension funds out there, instead of being $300 billion in the hole -- I'm not just talking about construction -- any of the pension funds.

SECRETARY O'NEILL: I understand. This is a good issue. I'm glad you raised it.

MR. BROOKS: Thank you.

SECRETARY O'NEILL: Mr. President, before we started, Van, who is sitting between us here, was telling me that her 92-year old grandmother is watching this on television. So I think we ought to give Van an opportunity to talk. (Laughter.)

THE PRESIDENT: Your grandmother and my mother. (Laughter.)

MS. EURE: First of all, I just -- I run a restaurant in Raleigh, North Carolina. We employ 240 people. the restaurant will seat 700 to 1,000 people a night. And we -- I want to thank you for the tax relief and the stimulus package. That really has helped and we did see a difference.

One thing that would really help restaurants, small, independent restaurants and, really, all restaurants, is the 100 percent business deductibility. Because when you are out of town and you are traveling, your travel -- you know, your air fare and your hotel and everything else is 100 percent, but where you're going to do your business, you do have to do it in a restaurant. So we would like to see that restored.

And one thing that I was personally affected by was the death tax -- twice -- because my father died first and then my mother died 14 years later. And had we not had life insurance plans and the ability to liquidate other assets, we probably would have lost the restaurant. And I feel -- what worries me is that people that can't do, you know, what I was able to do and do lose their businesses.

But overall, I have employees that feel great about their jobs. They are so happy to have jobs, and they are very much behind our country right now, and they're just very proud -- my staff is very proud of what you've done.

THE PRESIDENT: Thanks.

MS. EURE: And I'm just honored to be sitting beside one of my heroes. (Laughter.)

THE PRESIDENT: Who, O'Neill? (Laughter.)

SECRETARY O'NEILL: Mr. President, I'll take it. (Laughter.)

MS. EURE: Yes.

THE PRESIDENT: Thank you.

MS. EURE: You're welcome.

THE PRESIDENT: The thing about the death tax, the death tax is punitive on small business owners. It is very tough on farmers and ranchers. it's hard to be able to keep your farm and your family if you've got a big appraisal value when a loved one dies. I firmly believe the death tax is good for people from all walks of life all throughout our society. As the entrepreneurial spirit takes hold in communities all throughout America, the death tax is going to try to be very punitive on many minorities, minority-owned firms. And our view is that if you build up your asset base, you ought to leave it to somebody you want to leave it to, whether your kid or your cousin or whatever it is.

And so we've put the death tax on its way to extinction. However, as a result of a quirk in the law, it arises again 10 years from now. That's a hard one to explain. But, nevertheless, it does. And so we've got to make the repeal of the death tax permanent, for the good of the entrepreneurial spirit and for the good of our farmers and ranchers, and thank you for bringing that up.

SECRETARY O'NEILL: Sheri Orlowitz, I wonder if we could hear from you?

THE PRESIDENT: Where are you from, Sheri?

MS. ORLOWITZ: I'm from Washington, D.C.

THE PRESIDENT: Nothing wrong with that. Me, too. (Laughter.)

MS. ORLOWITZ: I haven't seen you around lately.

THE PRESIDENT: Well, I'm on a temporary basis there. (Laughter.)

MS. ORLOWITZ: It looks like you're going to be around for a long time.

I'd like to say, I'm a manufacturer. I've got manufacturing companies in New Jersey, Georgia and Oklahoma. And, as a result of a recession, which I became aware of very quickly in 2000, we have suffered great layoffs and, as a result of the layoffs, we have been able to succeed and stay alive. It was taking quick action during a time when it wasn't clear that we were in a recession.

And as we sit here today, I believe that that the economy is stabilizing, and I believe that the government has taken wonderful action, and I think that action has solidified the bottom. We may have little dips. I think July and August is probably nervous for every business owner.

I believe that the economy is very fragile. But I took a poll of my customers and my vendors all day yesterday and the same message came through. We're very fragile, we expect a little bit more of a down side, but the government has taken action and the question now is focus and patience.

One of the problems that we have gotten caught up in and what we're suffering from today, I believe, is an economic hangover. And I am borrowing those words from Ed Mathias, who is the head of the Carlyle Group, who's one of the people I spoke with yesterday.

And the issues of this economic hangover are that we want a quick fix, and there just isn't a quick fix. We have to be patient.

A perfect statistic is that in 1960, the average stockholder held onto stock for eight years. Today, we hold onto stocks for less than a year. There is no jump-back in the economy, there is no immediate gratification to be had. CEOs make salaries that over a lifetime people would not ever dream of seeing, and they make it in one year.

So I -- the issues that I think everyone has suggested, and with equal weight, that have undermined the confidence, and that I think that this government needs to focus on is terrorism. And as you say, you're doing that with terrorism insurance. And I'd like to include that other insurance costs are very important to the running of a company. And I found it to be very difficult to deal with the health insurance and general casualty insurance.

The second thing are the accounting issues. And with all due respect, people feel that the government is not moving quick enough to take punitive actions against those CEOs who have destroyed the public trust in our institutions and in our public markets and -- not only here, but abroad. CEO excesses have got to be stopped. I sit here as a CEO today, and I know that I cut my salary -- I took no salary for 15 months so that my people continue to work.

The scandals have got to come through. I think that the package -- I think that the August 14th deadline, I believe that is the deadline -- needs to hold. These people -- the CEOs of large companies need to be accountable. And I think it should be pushed down to the operating heads of all the various divisions, because one CEO can't possibly know -- I have a little company, I'm 250 people, and it's very hard for me to know what goes on in division to division. I think that the CEOs have got to also hold their people accountable, and I encourage CEOs of large public companies to push that kind of certification down on their operating heads.

And, finally, the last thing is the portfolio losses that I think everybody has suffered. And everyone wants the stock market to return to 11,000 and the NASDAQ to return to 5,000. And we all want to be happy and get all our money back again. Well, it's just not going to happen, and I think it's about time that we sit back and let the many measures that you have taken take hold. We don't need that much more regulation. I think there could be a regulatory backlash. I think you've taken great measures, and now it's focus and patience.

And these kinds of forums -- I'm thrilled to be here today, Mr. President, and I think this is exactly what needs to happen. The more we focus on our economy and our domestic economy, I think the more we will start to see improvements. Thank you very much.

THE PRESIDENT: Well, thanks, Sheri. That's very articulate. A couple of points. We are going to find those who have broken the law and arrest them and prosecute them. And the SEC actually has done quite a bit of work. Some of it, I guess hasn't received wide publicity. But 80 different officers have been punished in a year's period of time. I think it is a year's period of time.

SECRETARY O'NEILL: That's right.

THE PRESIDENT: We've increased the SEC budget so that they've got more capacity now to move through the system. Part of what you say requires a board of directors and a compensation committee for understanding their responsibilities. I mean, you're right, excessive executive pay sends confusing signals, I mean when a guy makes a merger or a company makes a merger, the executive makes a lot of money, the shareholders lose, something is wrong.

Independent members of boards need to be tough in their responsibilities. I don't think it's right for a government to regulate pay, I don't think that's a role for the federal government. It is a role for the federal government, however, to bring those to justice who break clear law, and we will. And we will.

The other thing that you mentioned is the recession. We were -- history now has shown, we had three quarters of recession, three quarters of negative growth, and now we've had three quarters of positive growth, so the trend is in the right direction, which is important for Americans to understand. But nevertheless, there's a lot more to do. One of the key things, as you mentioned, is this business about insurance. We've got to get these projects going. We want these workers working. We want McCarron to quit calling me on the phone saying what are you doing about this insurance bill.

SECRETARY O'NEILL: Mr. Johnston, I wonder if we could hear from you. You're in a business that touches every American everyday in the grocery business, Mr. President, so maybe we could hear from you.

THE PRESIDENT: Yes.

MR. JOHNSTON: Well, thank you, Mr. Secretary, Mr. President. There are no businesses closer to America's heartbeat than the neighborhood grocery and drugstores, which I am representing here today. In addition, the retailing sector, which we're a part of, creates one in every five jobs in our economy, and they're good paying jobs too.

At Albertsons, my company, we invest nearly $2 billion a year in new stores. So this mission that you talked about, Doug, is very close to us. We host 1.4 billion consumer shopping trips a year, and our 200,000 associates hear 24 hours a day what's on the minds of consumers. And I can tell you, they're genuinely concerned about our economy, there's no doubt about that. As a CEO, I try and listen to those messages, and I think it's the way to find out what America's heartbeat really is.

And recently, here's what I hear. Consumer confidence is weakening, there's no doubt about that. Consumers are gun shy. We see it in their buying behavior, we see it in them buying private label products instead of branded products. We see them buying things like hamburger instead of steak. Those are very basic things that are going on out there today. So, you know, to keep the positive GDP growth moving, I think we need to do several things. First of all, we've got to stick to our plans for tax relief and put more dollars back into consumers' pockets. I think reversal there would be deadly, absolutely deadly.

We've got to invest heavily in homeland security. I know I take that very seriously as one of my jobs to protect the food chain, and I think our government has to take it very seriously, as you are, Mr. President, to protect our homeland.

We've got to do everything possible working together to continue creating new jobs. And I think winning programs, like the welfare to work tax credit, the work opportunity tax credit are creating self confidence in our work force as we simultaneously remove costs from the welfare system and put people back to work. That's a win-win situation for our economy. And I know at Albertsons we create over 100,000 jobs a year, and programs like those are very, very important to our associates and to the communities that we do business in.

We need terrorist insurance, we need tort reform, we need pension protection for our workers now, not later. Those are very positive signs, I think, that will bring the economy steaming back. And I think all those programs, linked with the homeland security investment, are where we need to spend. And I think as Sheri said, the focus right now is very, very important.

And, finally, and maybe most importantly, we've got to restore confidence in America's corporations and public markets. As I talk to consumers every day, right down on the floor of a grocery store, people are concerned about this issue. And that's my job, as a CEO, and my fellow CEOs in this country. Now is not the time to hide. It's the time to be out in front. It's the time to put criminals in jail, to invest in the economy, and to stay visible and to certify our financials. That's exactly what I'm going to do. And it's our most important job as we create shareholder value and do it with integrity.

I think today we're in a very transparent world. We have to realize that, and this is one of the most important things that we can do. So I commend the administration for moving fast on this legislation and corporate responsibility. I think it's had a big impact.

So in summary, we've got to get moving. And I think working together, we can make it happen.

THE PRESIDENT: Thanks, thanks for coming.

SECRETARY O'NEILL: Mr. President, you have to go.

THE PRESIDENT: Yes, well, that's the life of the President, always has to go. But I do want to thank you all for coming. This is -- I appreciate, Sheri, your talking about this summit in positive terms. That's how I view it, too. You'll be amazed, when you go to lunch today, to see the quality of the folks that have come -- got some of the world's leading economists here with you, in your panel, national labor union leader. I mean, we've got really fine people who have agreed to come and share their insights and share some thoughts with us.

I think one of the things you'll hear is that even though times are kind of tough right now, that we're America. I'm incredibly optimistic about the future of this country, because I understand the strength of the country. And the strength of the country is our people. We've got the highest productivity in the world, we've got the best farmers and ranchers in the world. We've got the best manufactures in the world. We've got the hardest working people in the world. We've got the best tax policy in the world.

I mean, we've got a lot going for us. And I think when the American investor -- one thing I do want to comment on, I was at an earlier seminar, and I, too, am concerned about the language of Wall Street not being clear so that the average investor can understand what's going on. And we talked to Chuck Schwab about that. And Wall Street has got to understand that fancy footwork, when it comes to financial instruments, needs to -- need to be totally open and transparent, so everybody understands what's happening.

And you're right about making sure that the average investor feels confident in what he or she reads. A lot of folks in this part of the world aren't real -- I would call it suspicious about some of the fine print. And there needs to be better disclosure, so that people feel confident that they're not being led down the primrose path of fancy financial footwork, let me put it to you that way.

And the government can do some of this, but the industry itself, the investment advisors, and the people -- I call them Wall Street -- they need to -- there needs to be some self-policing mechanism as well, so that people are confident in the numbers. More and more people invest, a lot of Doug's workers invest, all of a sudden become pretty sophisticated relative to their father and fore fathers.

But you can't be that sophisticated if you're fighting off lawyers and accountants that are trying to put the dark cloud over reality. And that's one of the things we've got to just make sure does not happen anymore. Part of it is to put these people in jail. But part of it is to insist that the advisory world not have conflicts of interest and everybody understands what's going on. And I think you're going to find some pretty interesting ideas come out of this summit along those lines.

But, anyway, thank you all for coming. Hope you've enjoyed central Texas -- you're 45 minutes away from Crawford. (Laughter.) No Albertsons yet, but we do have a stoplight. (Laughter.)

Thank you all for your time.

END 9:44 A.M. CDT