Monday, May 08, 2006

My Interview with President Bush

Here are a handful of noteworthy remarks the President delivered during our discussion last Friday at the White House.

On Tax Cuts and the Economic Boom:

PRESIDENT BUSH: [B]ack when I first came in here, the job market was falling off and a lot of Americans were wondering whether or not we'd ever get our footing back. We cut the taxes, and there was a big debate here in Washington, D.C., (with opponents arguing) "this won't help the economy."

So the 138,000 (job number) reminded me that not only are people working, which is good, but that the tax cuts are working, and the economy's strong and vibrant, and we need to keep it that way… if you look at the tax code after we cut taxes, for everybody who paid taxes, by the way, the tax code is more progressive. The richer people in America pay more of the tax load than they did prior to the tax cuts. That's a fact.

[M]ost small businesses pay tax at the individual income tax level. If you're subchapter S, or a limited partnership, you pay tax as if you're an individual. And so when you cut, when we cut all rates, you're really helping the small business sector grow and prosper, which has two benefits: One, most new jobs are created by small businesses, and so when the small business owner has got lower taxes, which means more capital to invest, that means that he or she is more likely to be able to expand the job base of their company.

And secondly, when you cut taxes and make it more beneficial for someone to own a small business, you really expand ownership in our society, and one of the wonderful things about America is the fact that we've got people owning something.

We've got more people owning a home than ever before. I want people owning and managing their own health care accounts through health saving accounts. And the idea of more small business owners is such an important part of a hopeful future for the country.

So the tax relief has not only benefited small business owners, it has benefited the economy as a whole; and at the same time has made our tax code more progressive...But I am still going to talk about the facts. Facts are stubborn things, and the American people have got to know that this economy is strong and we've got a plan to keep it strong.

Bush Itching to Veto

MR. KUDLOW: The Wall Street Journal has an editorial this morning talking about this huge overspending in the emergency budget bill in the U.S. Senate. They say this is a challenge to presidential manhood with respect to a veto. Will you veto it?


Bye-bye to the Ethanol Tariff?

MR. KUDLOW: Secretary Sam Bodman hinted that you might change position on the ethanol tariff, particularly with respect to Brazil. I guess there's a 54-cent tariff on that thing. And the market responded--gasoline futures dropped nine cents, a huge drop. If you had a few of those you'll be back to $2.25 at the pump. Will you drop the tariff on ethanol?

PRESIDENT BUSH: I do want to work with Congress on that. I think it makes sense to. When there's a time of shortage of a product that's needed, so that consumers can have a reasonable price, it seems to me to make sense to address those shortages, and dropping a tariff will enable the foreign export of ethanol into our markets, which will particularly help on our coasts.

On CEO Pay

MR. KUDLOW: Speaking of regulation and deregulation, let’s come back to the business front for a minute, you obviously were a former CEO. There's a lot of talk on Wall Street and among investors that executive compensation has gotten too high. In your view, sir, is there a role for government to play here?

PRESIDENT BUSH: No. I think the main governance for executive compensation ought to be at the board of director level. You know, I am staggered by some of the compensation levels, and I think it's very important for boards of directors to understand that they represent shareholders and that compensation packages need to be fully transparent, in easy-to-understand language, so that the shareholders can understand whether or not the compensation package is fair or not.

...[P]roxies are sometimes very difficult to understand, you have to really dig in and try to make calculations to determine exactly what the compensation package will look like. In my view, there ought to be a very straightforward, transparent explanation to the owners of the company—the shareholders—and let them come to their own conclusions. But the board of directors needs to represent the shareholders, not the management, when it comes to compensation.

On Backdated Options

MR. KUDLOW: This morning, on CNBC, it was reported that another company looks to be guilty of backdating stock options, which surely is not in the shareholder benefit. Your thoughts?

PRESIDENT BUSH: My thought is that there's a regulatory body that ought to hold them to account. It's very important for those of us in public office not to be expressing belief of guilt or innocence. That's up to an objective group of people. But we put a good man in the head of the SEC, in Chris Cox, and I'm sure he'll fully investigate that.

My point to corporate America is that people watch this and they know overcompensating or trying to backdate (stock options) is bad for America; and there ought to be consequences (for executives) when people don't tell the truth and are not transparent.

On United Flight 93

MR. KUDLOW: [T]he late Scott Beamer's dad, David, was on our program. He wrote a great article in The Wall Street Journal, and he said essentially, that when the passengers retook that plane, he called it the first counterattack for World War III.

PRESIDENT BUSH: I believe that. I believe that it was the first counterattack to World War III. It was unbelievably heroic of those folks on the airplane to recognize the danger and save lives.