Address to the Economic Club of New York

Thank you, it's a great pleasure to be here today. My friends, more than twenty-five years after Ronald Reagan rededicated our national energies to the principles of personal, political, and economic freedom, his legacy has helped to change the world profoundly.

We have proven that empowering free markets and free people is the bulwark of liberty and the surest means to prosperity. We have helped other countries embrace our free market principles, and they have flourished beyond their wildest imaginations. But the United States remains the most prosperous country on earth.

Ronald Reagan's generationâ€”the â€œgreatest generationâ€� fought the evils of despotism and bequeathed to us, at tremendous cost, a country free and secure. We have honored the sacrifices of our forebears by nurturing and protecting our inheritance, taking up the responsibilities of freedom, and building a nation and an economy that is the envy of the world.

While the world is freer, it is still dangerous. While it is more prosperous, there is still much that threatens the progress we have made both at home and abroad. America's national security and economic prosperity have always gone hand in hand. Fulfilling the promise of American greatness in a global economy rests on our ability to provide a safe and stable environment for working men and women, for innovators and entrepreneurs, and for our children on whom the world will soon depend, as they have depended on us, to advance the glorious cause of human freedom.

What would our parents, who fought and died in Europe and the Pacific to defeat totalitarianism, say about the challenges we face? They would answer, as it has been from the day we declared our independence, our peace and prosperity rest on our faithfulness to our ideals and our courage.

We have much to be hopeful about. The great promise of participating in the prosperous world economy has led nations to move toward freer and more open systems. But our success in building a world where people compete as entrepreneurs in the market place rather than as adversaries on battlefields, rests on the free world's ability to maintain peace and stability, secure the global commons for the exercise of liberty, and provide for the free flow of ideas, goods, and services. These goals are a central part of our nation's security, defense, and military strategies. But no security strategy can succeed without a firm economic foundation. My friends, we know that in war there is no substitute for victory. In peace there is no substitute for growth. All nations hold a stake in our economic progress. End growth in America and the lights go out all over the world.

Even so, America's greatness makes it a primary target for those who oppose the spread of the principles we cherish. Democracy, freedom, security, and prosperity are the four pillars of human progress. The strength of each depends greatly on that of the others, and the enemies of liberty know that.

Looking back to the events of 9/11, we cannot rid from our memories the terrible human tragedies that occurred â€“ the loss of life, devastation, and destruction. However, it is easy to forget the economic dimensions of that horrible day. Our enemies targeted the American economy and made the disruption of our financial markets one of their primary goals. The economy was, we now know, already in recession. Financial markets tumbled. Analysts worried that the risk-taking and entrepreneurship that have been the engine of our prosperity would be hampered by fear and uncertainty. For many, the only question was how far the economy would sink.

Yet a tremendous thing happened. As our nation rose to confront our enemies, American workers and entrepreneurs resumed their productivity with renewed confidence. Who in the world thought back then that the years ahead would deliver high growth, millions of new jobs, and soaring wealth? Americans did, my friends, Americans.

Our government must stand up resolutely for our ideals as the American people have whenever they have been tested â€” not only to discourage and defeat those who would attack us and challenge the cause of freedom, but to further empower Americans to take the risks and make the investments that will make our country stronger. Fulfilling our security responsibilities requires a sober and honest assessment of the threats to our security, reaching across boundaries to engage allies in our cause, and strategic thinking that anticipates the dangers posed in today's world and tomorrow's.

Just as we must anticipate and confront outside threats using all instruments of our national power, we must face the very real threats emanating from home that endanger our prosperity. Even in a world of political stability, our current economic policies will undermine our economic well-being.

A tsunami of entitlement spending is threatening our economy, while providing no real security to retirees. We have made promises that we cannot keep. Under moderately optimistic scenarios Social Security, Medicare and Medicaid will in the decades to come grow as large as the entire government is today. Someday the government will be forced to make drastic cuts in these programs, or crippling increases in taxes on workers â€“ or both. The longer we wait to make the hard choices necessary to repair these programs, the harder the problem becomes. My children and their children will not receive the benefits we will enjoy. That is an inescapable fact, and any politician who tells you otherwise, Democrat or Republican, is lying.

It is hardly statesmanship to ignore the obvious imperative of reducing the growth of spending for retiree income support, health care, and long-term care. And yet, year after year, our government fails to act. This failure has a real and distressing cost. Our workers make their retirement plans based on promised benefits that cannot be paid even if we burden our children with crippling taxes. If we fix the system now, people will have time to plan accordingly, to ensure that they still have a comfortable retirement. If we wait, we make the problem worse and, in effect, lie to Americans who we encouraged to put their trust in a broken system.

I have long supported supplementing the current Social Security system with personal accounts â€“ but not as a substitute for addressing benefit promises that cannot be kept. People of good faith in both parties agree that we must make the hard decisions to restore solvency to these programs and that personal accounts can ease the impact of slower benefit growth. But, too often, we prefer to nurture our own ambitions rather than defend the public interest. It is long past time for our two parties to sit down together and fix our pressing entitlement problems. And while it is a smaller problem than health care, we should start with Social Security because the fix is obvious in comparison, and much simpler.

While booming entitlement spending threatens us in the long run, our short term fiscal situation is terrible as well. In the past six years, government spending has gone from irresponsible to utterly indefensible. The numbers should shock us, and government's indifference to them should shame us. According to the latest figures, spending in the 2005 fiscal year was $683 billion higher than it was in 2000. If we had simply held spending growth in check we would not have a budget deficit today.

Some of this money has necessarily been spent on the war on terror that was unexpected and has been obviously and hugely expensive. While at the same time we know we must focus most of our defense spending on tomorrow's threats, not yesterday's. But when Ronald Reagan increased defense spending to win the Cold War, he slowed non-defense spending growth at the same time. This time, we have fallen again for that most alluring delusion, we have tried to have our cake and eat it too. Non-defense spending, often on the most unnecessary projects, is out of control.

Legislators pass pork-filled bills without the fear of public retribution or presidential veto. Federal spending, and the special interest earmarks that destroy the budget process and waste taxpayer dollars by the billions continues at a breakneck pace. Sadly, we haven't reformed the bankrupt â€œtax and spendâ€� policies decried by Ronald Reagan. We have, it is now evident, merely replaced them with a new and even more insidious scheme of â€œborrow and spend.â€�

We are fooling no one, my friends. Inevitably, the bill will come due. In the mean time, we rack up big debts. With those debts come higher and higher interest payments each year. Instead of spending the tax payers' dollars on real priorities, more and more of them will be devoted simply to keeping the bill collectors at bay. Bills that perpetuate wasteful spending should be vetoed â€“ not some of them, all of them.

I have always believed in the power of the American people, and the importance of keeping marginal tax rates low. But, tax cuts work best when accompanied by lower spending. In recent years I have opposed some Republican fiscal initiatives out of concern for the absence of spending restraint, and the higher deficits they cause, which hamstring our ability to respond to future crises. But the answer to these deficits is not to raise new taxes or repeal tax cuts but to restrain our spending habits. If the federal government can't be funded with current revenues than we must reduce its size. Higher taxes and greater spending discourage entrepreneurship, foster wasteful tax-planning and slow long-term growth.

Intelligently-formulated tax cuts and sensible tax reform will deliver much higher growth when they are accompanied by lower spending.

When the government's budget is tighter, the family budget won't have to be. If our government is forced to make more hard choices, our families will be forced to make fewer. Recent events have also made it clear that rising energy costs and our dangerous dependence on an unreliable supply from unstable parts of the world is potentially crippling to our economy. When Wall Street wants to limit risk, it diversifies. The obvious approach to resolve our energy problems is to increase and diversify our sources of power and look for ways to reduce our demand. We have promising technologies in development, but also proven alternatives at hand â€“ the most obvious of which is nuclear.

Genuine improvement in our energy security, must respect markets and avoid the temptations of nearsighted politics. While it is tempting to assail windfall profits and executive compensation, it is not a substitute for a viable and long-term energy strategy. We will never be fully independent of global energy markets. But we must work for the day that energy supply volatility no longer imperils our economy and our security.

A global rising tide of protectionism and a retreat from market-based economic policy is threatening the entrepreneurs of developed and developing countries alike. Free trade is the key to global economic growth, and a key to U.S. economic success. We need stand up for free trade with no ifs, ands or buts about it. We let trade and globalization be politicized at our own peril. Today, despite all the defeatist rhetoric, America is the world's biggest exporter, importer, producer, saver, investor, manufacturer and innovator. Americans do not shy from the challenge of competition: they welcome it. Because of that, we attract foreign investment from all over the world. Our government should welcome competition as the people do, and not resort to mindless protectionism. While we embrace free trade, it is important to recognize that trade can lead to painful dislocations for some individuals. We must remain committed to education, retraining, and help for displaced workers all the while reminding ourselves that our ability to change is a great strength of our nation. We cannot let fear and the appeals of protectionists lead us backward.

My friends, in the course of my lifetime our economy has undergone unbelievable changes. When I was a kid, our economy grew by producing more and more of the same. We now have an â€œideas economyâ€� where growth comes from making new things, not larger quantities of the old things. If you walked into my house when I was twenty years old, my parents would have proudly displayed the same appliances they had when I was ten years old. Today I walk into my own house and am awestruck by the marvels my family uses â€“ flash drives, Ipods and Tivos, things we never could have dreamed of, have become part of our every day lives.

Our economy is like that now. Advances in information technologies have made us better at discovery, quicker to find the new idea that works. In this world, America has succeeded because we have been more willing to embrace and encourage change than our competitors. And we have opened our doors to the best and brightest from other countries to seek the American dream. The transformation has been dramatic. Today, American firms spend more money each year researching new ideas and processes than they do on new buildings and machines.

As our economy has changed, too often, Washington has not kept pace. The business community understands the borderless world of the global economy far better than most policymakers and Washington has much to learn from you. Today, old industries dominate the trade debate, even while the intellectual property rights of our most innovative firms are ignored by some of our trading partners. An effective government must evolve with the economy and protect our ideas, and keep the new economy free of bureaucratic interference, restrictive red tape and unnecessary regulations.

The challenges are great, but the costs of failure even greater.

We now accept that the world where a worker can expect to stay with one employer, making one product, for the rest of his life, is gone forever. That willingness to change has brought us great wealth, but it has produced anxiety as well. While the economy is booming, surveys suggest that Americans are much more anxious about our future economic, political, and physical security.

Some of that anxiety is perhaps justified. Change can cause dislocation and fear, and the opportunities of economic growth are not always apparent to all Americans. These anxieties are exacerbated when those elected to govern spend more of our time on our own ambitions than their concerns. We face serious challenges, and many Americans worry that their government cannot be relied on to face them forthrightly. We have given them cause for that concern. But America's strength has always resided in its people â€“ in their industry, courage and imagination. A government accountable to such a people cannot forever ignore their priorities, burden their industry, impede their progress. It is a wonderful thing to be elected to high office in this great and good republic. But it is a shameful thing to cherish that office more than you value the public good. The times we live in pose difficult, but no greater challenges to us than we have faced in the past. Americans will meet them, as they always have, confident that a nation conceived in liberty will prove stronger, more decent and more enduring than any nation ordered to exalt the few at the expense of the many or made from a common race or culture or to preserve traditions that have no greater attribute than longevity.

Those of us privileged to serve such a people, must prove an equal faith in the strength and righteousness of our ideals, confident that we hold a greater privilege than high office, that we have the honorable distinction of being part of a people living as one nation, in a kinship of ideals, who are making of our power and wealth a civilization for the ages, a civilization in which all people might share in the blessings and responsibilities of freedom.