with Small Investors
Charles Schwab & Company
February 12, 2003
2:13 P.M. EST
Thank you all for coming. Thanks for your interest in this country and its future.
We've got some big challenges ahead of us. We've got an opportunity to make
the world a more peaceful place, and a freer place. And I believe, as a result
of the resolve of the United States of America, the world will be more peaceful,
and the world will be more free. And here at home, we've got a challenge with
our economy. I mean, frankly, it's not strong enough; it is not robust enough.
Anytime somebody is looking for a job and can't find one means we've got to
work together to create jobs.
Now, the role of government is not to create wealth; the role of government
is to create an environment in which the entrepreneurial spirit can flourish,
in which people are encouraged to invest and save, in which there's confidence
in the future of the country. And that's what we're here to discuss today.
I want to thank John Snow for agreeing to serve in our administration. He came
at a pretty tough time. (Laughter.) Some people would have said, well, I don't
think I want to take on the job unless everything is precooked and the markets
will be surging. But he realized that this country needed all of us pulling
together. So I asked him; I said, would you be willing to leave the private
sector to serve America, and he said yes. And I'm thankful for that. I'm glad
to have him on my team.
His job is to talk about our program all around the country, and particularly
in the halls of Congress, and convince them about the wisdom of what we're proposing.
Speaking about halls of Congress, John mentioned George Allen, the Senator from
Virginia. I'm glad that George is here. And Don Manzullo from Illinois is here,
too. I'm honored both you guys came. I appreciate your interest. I look forward
to working with you and your colleagues, both Republicans and Democrats, to
do what's right for the American people.
I want to thank Chuck Schwab, as well, for coming. He's a -- he is a leading
entrepreneur in the country. Built his own business. Tomorrow, when I go down
to Florida, I'm going to talk about the dreams for small businesses that grow
to be big businesses. This is a guy that took a small business and grew it into
a big business. It's really what America is all about, is to have unlimited
horizons for people to take risk so they can achieve dreams, no matter what
their status in life may be. And the Schwab Company certainly is -- represents
the great entrepreneurial spirit of our country.
I also want to thank Susan Meisinger and David Hutchins who run the Society
for Human Resource Management. Thank you for opening up your hall. It's awfully
thoughtful of you to let us come in here. I fully recognize it's not easy to
host a presidential entourage. (Laughter.) But you did it. And thanks for giving
us a chance to come and talk about how we're going to address some of the big
challenges here at home.
My attitude about the economy is that, first, we've done a pretty remarkable
job here in America of overcoming some difficulties. The first three-quarters
of the year 2000 were recessionary. They were negative growth. Fortunately,
we passed tax relief, which -- based upon the principle, if people have more
of their own money, they're likely to spend it; and when they spend it, somebody's
likely to provide a good or service; and when somebody provides a good or service,
somebody's more likely to find work.
And I think most economists would tell you that the recession -- most objective
economists -- would tell you that the recession was shallower as a result of
the initial tax relief package that both the Republicans and Democrats voted
Then the terrorists hit us. And people of Virginia know full well the impact
of the terrorist attack on the Pentagon and this part of the world. Of course,
the people in the great city of New York understood the effect that it had,
the terrorist attack had on the New York economy. But it affected our whole
economy. The airline industry became -- had difficult times. We couldn't get
projects started -- real estate, big building projects going -- because of the
lack of terrorism insurance. We actually dealt with that issue in the halls
of Congress, and hopefully big construction projects which will put our hard-hats
back to work will get going.
The country was resilient, though, and strong, determined to defeat terror,
and determined to go about our life, no matter what the threat may be. And we
began to recover. And then it -- then we found out some of our fellow citizens,
a few of the many executives which run our companies thought they could lie
and cheat. And that created a lot of small investors -- and large investors,
for that matter -- began to wonder whether or not the numbers they were reading
were accurate. There was a loss of confidence in the markets because of the
And we dealt with that, and we're dealing with that. Pretty soon, a good man
named Bill Donaldson will become the Chairman of the SEC. He knows what his
charge is. His charge is to make sure that when an investor, a member of an
investor club opens up his or her portfolio or the balance sheet of a company
they've invested in, they know they're reading true numbers, so we can regain
Our economy is growing, in spite of all of what I've just described. But it's
not growing strong enough. And so I went back to the Congress and proposed a
plan that is an aggressive plan, no question about it. But the principle of
the plan says, we trust people in this administration. We trust the people to
make wise investments. We trust the people with their own money. We trust the
moms and dads to be able to save for their children. It's really the crux of
the economic plan. It says it's the people of America, it's the ingenuity and
hard work and wise investment capabilities of the American people that make
this economy strong and different and, therefore, the plan is a plan that puts
trust in people. It's a well-thought-out plan. As a matter of fact, over 200
economists today enthusiastically embraced it, said it's a good idea.
The first part of the plan has to do with your income tax levels. It says, everybody
who pays taxes ought to get relief. The role of the government is not to try
to pick and choose who the good taxpayers are and who the bad taxpayers are.
If you pay taxes, you ought to get relief.
Of course, that was already passed in the year 2001. We also are phasing --
we're increasing the child credit to $1,000, over a period of time; reducing
the marriage penalty over a period of time; reducing the bottom rate from 15
percent to 10 percent.
So what we've said to the Congress is, you've already passed all this. You've
already accepted the major principle involved in tax relief, which is, trust
American people with their money. You've already seen the effects of what a
tax relief plan can do. Just accelerate what you've already got on the books.
Take that which you have passed, and instead of phasing it in over three or
five years, let's move it this year. If the economy needs a little extra oomph,
if more money needs to go into the pockets of our people, so as to encourage
economic vitality, why wait? You've been through the debate, you've already
talked about the principles involved. Move it up.
This will affect 92 million Americans who will receive, on average, a tax relief
of $1,083. Now, some in Washington may say to us, that's paltry, that's not
enough. Uh-uh, $1,083 is a lot of money for people, particularly when you think
about the effect it will have on our economy when millions of Americans take
that and invest it, or buy things with it. It will have an effect that will
increase the economic vitality of America.
You hear a lot of talk about stimulative, what's stimulative, what's not stimulative.
We anticipate that this plan -- this aspect of the plan is over $50 billion
in the economy this year. You see, I plan to get them to not only accelerate
the tax relief, I'm going to ask Congress to make it retroactive to January
1st, so it will have an immediate effect on the economy. That's what's needed.
The timing of tax relief is important, just as important as tax relief is.
And so I'm optimistic that Congress was wise once, and they'll be wise again
on the same plan. This also will have an effect on small businesses. Tomorrow
I'm going to Florida to talk to small business owners and entrepreneurs, and
what Americans and Congress must understand -- I know George Allen understands
this, Don understands this -- is that most small businesses pay tax at the individual
When you hear somebody say, I'm a sole proprietorship, that means you're paying
information income taxes. If you're a sub-chapter S, or a limited partnership,
that means you're paying individual income taxes. And so when you reduce income
taxes, you're really putting capital in the hands of small business owners,
and capital, extra money, gives that person a more likely -- a chance to expand.
And expansion means jobs. And by far, the vast majority of new jobs in America
are created by small business owners. And so this tax plan not only helps our
fellow Americans save, it also helps small business owners with additional capital.
It's like a huge capital infusion into the small business sector of America.
On top of that, I'm asking Congress to allow small firms to write up to $75,000
worth of equipment in the year in which they spend it, as opposed to limiting
the deductions to $25,000. And that means a lot for small businesses. When a
person can deduct an additional $50,000 of capital investment, it means you
may have the small business person invest in one extra machine. But when that's
multiplied all across the country, all throughout America, it means the machine
manufacturer is more likely to be able to provide jobs. It means the business
that buys the machine becomes more efficient. It means somebody is probably
needed to operate the machine so that there's extra employment there. It will
have a ripple effect throughout our economy, which is very important for our
fellow Americans to understand.
The other thing I want to talk to you about is the dividend proposal. In America
today we tax corporate income profits -- which is fine, we should; it makes
sense. But then we take that profit and distribute it to a shareholder in the
form of a dividend -- one of the owners of the company. And then he gets taxed
again, and that doesn't make sense. You don't want to keep taxing capital. If
capital equals jobs, you really don't want to tax it but one time, it seems
like to me. It makes sense.
So when people in America hear us talk about the elimination of the double taxation
of dividends, they've got to understand we're doing so with two things in mind:
how do we improve the lot of our fellow Americans; and what do we do to increase
jobs. If somebody is looking for work out there, and capital equal jobs, therefore,
the more capital available for investment, the more likely it is he's going
to find work, or she's going to find work. And that's what we're here to talk
The idea of allowing people to keep more of their own money is particularly
important for many of our retired citizens. You've got a person who's worked
all their life, and they've got medical bills, maybe, piling up, particularly
since Medicare isn't all that effective these days for some. Or you're worried
about your grandkids' education. But really what you're worried about is you
want to make sure that you have got a comfortable existence.
Ten million senior Americans receive some sort of dividend income. It certainly
makes sense to me that if part of good policy is to encourage job creation with
more capital, it's a nice dividend, so to speak, to allow our seniors to have
more money, as well. So this relief plan will immediately give seniors $800,
on average a year more money, which is vital for their retirement. It's a plan
which affects people's lives in a positive way.
Secondly, this is a nation of investors. It used to be when you talk about stocks
and bonds -- it probably wasn't all that long ago -- you'd say, how's your portfolio?
And that would probably pertain to a handful of people that lived -- knew something
about Wall Street. There probably weren't a lot of them in Crawford, Texas,
all that long ago, saying, hey, my portfolio's good. How's yours? But now, America's
becoming a nation of owners and investors. We're a much more sophisticated country
when it comes to stocks and bonds. Eighty-four million Americans own a stock
directly and/or through a pension plan. And so, therefore, policy, public policy,
which affects stock ownership, public policy which affects those who own equities
and those -- public policy which encourages ownership, makes sense.
I mean, after all, we want a hundred percent of our people to be a part of the
ownership society. The more somebody owns, the more somebody is going to have
a stake in the future of the country. We want everybody to have their own home.
We want everybody to have their own balance sheet, their own savings, their
own plans. And excluding the double taxation of dividends rewards small investors;
it encourages stock ownership.
It also will have a positive effect when it comes to our corporate America.
And a lot of corporate America said, invest in me, the sky's the limit. A fantastic
growth potential, they say, you know? We may not be making any money, but, hey,
give me a shot. And that works in some cases. But it also makes sense to have
people say, invest in me because you're going to get a steady source of the
cash flow of my company, I'm going to share it with you. We're proud that you
took risk in us, and in return we're going to give you a steady flow of cash
-- of the cash coming into the company through the form of a dividend.
Eliminating the double taxation of dividends will encourage more of corporate
America to distribute profits and cash flow to their investors through dividends.
And that's good, that's a good corporate reform. It's also good for encouraging
the ownership society and it's good for enhancing the lifestyle of millions
of Americans all across the country.
The getting rid of the double taxation of dividends is good economic policy
for the short-term for America; it is good economic policy for the long-term
of America. And I urge the Congress to eliminate the double taxation of dividends.
One of the things we did before coming over here is we had a roundtable discussion,
sitting around a square table. (Laughter.) I like -- I appreciate Chuck providing
the square table -- (laughter) -- but I'm more appreciative of the members of
the roundtable who came to talk.
Now, we talked to Joan Hanover. She and her husband, George, were visiting with
us. They are near retirement -- retiring -- in the process of retiring, meaning
they're very smart, active, capable people who are retirement age and are retiring.
They receive $1,700 additional dollars a year when we get rid of the double
taxation of dividends. That is a significant amount of money for the Hanovers.
It's additional money that they can choose to do with what they -- they can
do with their own money.
Part of the dialogue, by the way, the money we're talking about today is not
the government's money -- see, that's the other important thing to remember.
It's an important principle when it comes to tax relief. It's your money we're
talking about. And the Hanovers are having more money to invest.
Joe Kemper will have an additional $1,600, he shared with us. The whole tax
relief will actually give him a $3,500 additional money in his own pocket, of
which $1,600 will be from getting rid of the double taxation of dividends. I
hope you didn't mind me saying that, Joe. But the point is, is that -- I think
Joe will tell you, he's not one of these super-rich in America. He's a guy who
served his country. He worked hard all his life -- $3,500 means something to
When you hear the debate about this kind of class warfare, rhetoric about, oh,
this is for the rich, only for the rich -- I want you to think about the Joe
Kempers of the world. I certainly will. A fellow who worked for our government,
and now a fellow who we trust with that $3,500, because it's his money. And
when he invests it, it's going to have a positive effect. All the Joe Kempers
of the world taking that extra money and investing it will mean somebody else
is likely to find a job, and that's important for our fellow Americans to understand.
We met with Tim Roberts and the Lanes, Brian and Wendy Lane. They were -- they
are younger parents. The tax relief plan will mean they will have more money
to invest for their children. When they set aside the -- some of the money that
they get in a child's education trust, for example, and that compounds over
time, it means it's more likely that that child is going to have a pretty good
nest egg. The more money they have, the more likely it is they'll be able to
save for their children's future.
If we get rid of the double taxation of dividends, it means that one of the
good investment vehicles for a child who is young today, will be a dividend
paying stock, because not only will the person be able to get the yield, the
person will get the appreciation of the company in which they invest.
These good couples work hard for their children. They make sacrifices for their
children. And it makes sense for our tax policy to reward them for their sacrifices.
The plan we've laid out is good for job creation. The plan we've laid out also
speaks to the aspirations of many of our citizens. And that's very important
for Congress to understand when they debate this plan. It speaks for the aspirations
of the senior citizen to have a comfortable lifestyle when they retire. It speaks
to the aspirations of the moms and dads to be able to invest for their children.
It speaks to the aspirations of a person looking for work today. It really speaks
to the hopes of our country that we want our economy to be as strong as it possibly
can be, as we take on some of the great challenges which this country has ever
This country will accomplish anything we set our mind to. We will achieve peace
in the world. We will work for freedom, not only here in America, a free and
just society. We believe in freedom around the world because everybody has got
worth. See, one of the great principles of America is everybody has dignity.
Everybody counts. Everybody matters. As I said in my State of the Union, liberty
is not America's gift to the world. It is God's gift to human -- mankind, and
that's what I believe.
And as we think about how to have a better society and a more peaceful world,
we've got to trust in the wisdom and strength of the American people. After
all, the American people is this country's greatest asset.
I boldly predict that with good policy this economy will be strong. I boldly
predict that with wise diplomatic policy the world will be more peaceful. And
I can predict that, because we happen to live in the greatest nation on the
face of the Earth.
Thank you all for coming. And may God bless America. (Applause.)