but that debt only takes into account a small portion of the actual ended this that this country faces. if you want to look at the way debt is calculated there are three types of debt that this interfaces. the first and most widely considered is debt held by the public. this is debt that the government owes people and institutions in this country or other countries. it is the bond coming essentially, that the government owes the people have them in their portfolios and china holds them in japan holds them. this is sort of the of the book most real death toll if you will, probably about $11 trillion roughly at this point. the second type of debt that goes into the public debt is called intergovernmental that.

this is that in essence that the government owes itself were to its various trust funds and entities. over 100 of these trust funds and resolving it to our roving accounts. the two largest leaf, and they talked about of the social security trust fund of the medicare trust fund. also on highway trust fund, also the gulf oil spill and all sorts of these things. and the number to $74 trillion. now, that is the sum was a little softer than debt held by the public, but ultimately it has to be repaid and therefore is a very real debt that the government will ultimately have to come up with money with which to pay. you add that for chilean to the 11 trillion you get about $15 trillion. there is a third type of debt as well. this is the implicit federal unfunded obligation that the government goes to programs such

as medicare, social security going forward. we're able to look to these programs and we know roughly what they're going to have to spend in the future under current law. assuming that we pay the benefits, just as we are promised to do under current law, we know how much those will cost and we are able to project going forward how much revenue is expected to come in from the taxes that directly supports these programs, the payroll tax and so forth. so we are able, therefore, to make a projection of the shortfall between what we projected in terms of spending and the projections and will we expect taken in terms of revenue. the shortfall of these programs as up to somewhere in the area of 100-$405 trillion. that is trillion with the tea. meaning that our total unfunded obligation is somewhere in excess of

$1,208,000,000,000,000. as i said earlier, we're broke. now, just to put this in perspective, a couple of slides, and the think it will be very hard to read these because of the riding in the room, but if you want to look at the second bar over there, this is the unfunded obligations for various countries, just talking about the total indebtedness that i was just mentioning them as a percentage of the gross domestic product in those countries. the second from the left below the second tallest one is greece. and we all know that greece is in trouble. you can't pick up a newspaper these days without reading about the great crisis and how the eurozone will ever bailout greece. you're absolutely right. over 800 percent, 860 percent of their gross domestic product fell. when you think about it, they awaited a half times the value of everything that is produced

in the country over the course of the year. .. the one country i didn't mention was alaska, over on the far right, the tallest brighter. that is the united states. we owe about 900% gdp in terms of our unfunded obligation, nine

times the value of everything produced in this country. our unfunded obligations in this country are now higher than any of the european countries, including that of greece. clearly, we're broke. one other point i want to make is for all the attention that debt is getting on the deficit and unfunded obligation and a terrible number i just gave you, the reality is that it is merely a symptom of the disease. it is a symptom of the size of government. this is a projection from the congressional budget office wrote in government. traditionally governed in this country has been about 21% of federal government, 21% of gdp impacts was the budget deficit. in fact promotion because of the recession and things are down

now. government is now down 25% of gdp in terms of federal spending. state and local spending on top of that were about 35% of gdp spent by governments at all levels. going forward, it is projected with the over 60 cents of gdp than that of the century. government at all levels will be 60 cents of every dollar in this country. whether that is financed through taxes or data, that is unsustainable level of government and you're unlikely to hear anything in either the state of the union tonight it is going to seriously impact the projected growth in government. just to show you for that leave us, the size of government today in e.u. countries. again, you can find in both

these countries can the government is spending somewhere between 50% to gdp of government spending at all levels. a member of the far right over there as the united states will be in 2050. so we would have a larger government in 2050 in any e.u. country has today. but we would be a bigger welfare state than france or greece or italy or spain and so forth. we are clearly growing at an unsustainable level. now i know when everything's things still here tonight is that we can solve all of those foa do is raise taxes on the rich. dan mitchelson will talk more about what am i. that's not going to work. i just have one site to show you. this is a site to illustrate the

dark spot over there on the far right and the total unfunded liability we are facing for the various programs i mentioned. the straight red hair is held by the public and actual debt to gdp is on top of the other. you look at our actual debt of a little over 900%. the gray bar on the far left is the well of every millionaire in alien air in america. if you win out and confiscated every penny owned by every millionaire and billionaire, you would not make a dent in what this country does. leaving aside the fact that you couldn't do it a second time and the senate that you would have a slight impact on our economy if you did that, you wouldn't make a dent in the debt. so something like a buffet will,

which is supposed to kishi $16 billion over the next 10 years is not going to solve our debt problem. simply put, state of the union is growth and we can't tax our way out of it. but that it will turn to dan mitchell who will fill you in on a taxing issue. >> zero, thank you, michael. and the president's box or whatever you call it sitting with a shallow, will be warren buffett, secretary at least according to news reports. i think it gives us an idea what type of rhetoric we might expect in terms of tax policy i think it's going to be class warfare all the time. what i want to do is talk a little bit about some of the tax issues and define what is good tax policy and then measure that against what the president is doing. i suppose before i start on

that, let me get out once that good but i think it's critical that you want to save me from the president and i got republicans will be competent enough to bring it up themselves. at least based on the cbo numbers are not sharing i don't think they would be to get when they come out with new numbers this year, according to congressional budget office numbers, we could balance the budget by the year 2021 if we simply limited the growth of government spending to 2% a year. another is, if you look at the so-called feedline that they describe, the revenue base fine, just by the way it is, the revenue base fine -- it's a joke. we can say is arkansas. the revenue base fine is having this will increase by 6% to 7% a year. maybe cbo's run over to meeting or underestimating, but that's the consensus forecast. obviously if revenues are

growing 67%, you can grow by less than that by definition of the cbo numbers last year if he simply limited the growth at 2% the year companies saw saw the entire problem. and as mike explained, writing isn't really the problem, a symptom of the problem. the problem is big government. even if it do to virtuous things at the same time by controlling the growth of government spending. what is obama can he do on tax policy? this chart rate here is you can't be because it's too far erasures the impact of double taxation. this is the importance for those of you watched the republican debate last night. gingrich and armey fighting with themselves about the capital gains tax rates should be. what this church loses degree type greenbacks as your income that you learn. then you have a blue box. you take tax on your income, up to 35%. the second green boxes are

adequate tax income. to do two things you can do with your after-tax income? you can either spend it right away or save an investor after-tax income so you can spend it in the future. on the left side of the screen you see what happens if you spend your after-tax income right away. the federal government via much leaves you alone. yes there's an excise tax on gasoline and things like that, but if you spend your after-tax income right away, the federal government does not molest you. what happens if you save an investor after-tax income? opacity with every single year he can even and marxism, every theory of economic that you have to have saving investment of higher economic growth and higher living standards in the future? if you save and invest in the federal government between the corporate income tax and a q. text from a, diffidence .txt the

subject to as many as four different levels of taxation. why does this matter for the state of the union? the president wants almost all of those taxes to go up. we want increased double taxation on dividends, and chris double on capital gains. he said he restored the death tax. so we are doing with our tax code as we are punishing the very behavior that you need for economic growth in the country. but it is not just that tax policy with high tax rates on income that is saved and invested. this is a chart showing the number of additional provisions added to the tax code on a year-to-year basis. you can see that every single time congress meets, the problem gets worse. i am not just saying that congress is full. a lot of the loopholes, shelters and deductions are put in as a result of president asking for them. what this chart rate here is from the congress clearinghouse. it shows the number of pages in

the tax law. at the very top is on the tax code first began. at the bottom is where we are right now. 72,000 pages. in hong kong, dave had a flat tax for 60 years. even after 60 years, the entire tax code, at least the last count i saw was 167 pages. 157 versus 172,000. i was given this example about the tax brings in the u.s. being stacked up and the economics professor says here is our tax code. she pullback to show something that looks like a magazine. i said well chimeric taher income tax is the size of a magazine? she said no, no, this is our entire excise taxes so on and so forth to show that the magazine and had like 20 pages. this is our income tax. you can have a simple and sayre

and non-corrupt tax system, but not when i fully expect obama will make this problem worse tonight who use the tax code is a tool of social engineering company with them to reward friends, publish enemies and garner campaign contributions. that is not what we want if we want a better and more competitive system. i want to make one last point. maybe more than one last point. the one last big point. when the president says he wants higher taxes on the rich, what he really wants is higher tax rates on the rich. but higher tax rates are not necessarily the same thing is higher revenue. i'm going to skip forward and show you some data. this is data that i took in the statistics of income published by the irs every year. in 1980, according to the irs

statistics of income, we had about 117,000 which people in america to find a $200,000 a year or about. this 117,000 british people reported about $36 million to irs cannot stand that $19 billion in revenue. this is when we had a top tax rate of 70%. the kind of tax system that people want to move america back towards. so a 70% tax rate than the government at $19 billion in tax revenue. by 1988, reagan had reduced the top tax rate all the way down to 20%. what happened to revenue from the rich? did it fall proportionally down to about 8 billion or something? i don't know. i'm not that good at math. the default to 15 billion? did it stay the same? what actually happened to revenues from the rich? what do you know? in 1988 all of a sudden we had

724,000 rich people. i think that's a good thing. we want by rich people. i hope to be one of those someday. those rich people reported $353 billion of income to the irs and the government got $99.7 billion. in other words, when tax rates go 70% on a 20%, the government that five times as much revenue. that's just my lack of term. that's on steroids. they broke into the locker room at the gym to get that much additional revenue. now let's be fair. i may give you some caveats. we at ford are sent plus inflation during this period. with 40% population growth. even going back to the end of the carter years and transportation deregulation. so we have no idea whether cutting tax rates cause revenues to increase by two times commit

three times, for his times. we don't know. ask economists u.k. opinions. but there is no question that when you try to tax the rich, taxable income is going to fall from the rich and the government will have a hard time collect enough much revenue. maybe in the short run they can't, but in the long run of people attacked their behavior is not going to work and not by the class warfare approach is unsuccessful. let me make one final point about the value added tax. might give you all of those horrifying numbers for the growth of the welfare's date and expanded version of government in america. the only way that will be possible, the only way we will become another crease as if somehow congress makes the mistake of giving the president a new source of revenue. the only big source of revenue that actually would work with the a bat, a european firm with a national sales tax but it's hidden in the price of goods.

even the "washington post," which asserted the company paper of big government in town, even the "washington post" understands this is a good idea. this cartoon shows uncle sam, junior, portugal and greece in a waterfall. why on earth would we want to copy the fiscal policy for nations that are in the middle of going bankrupt and disintegrating with social disarray and an enormous fiscal problem? we are already heading in that direction based on our current entitlement program structure, which is why we need to reform. why would we want to make it possible for politicians to keep those programs in place and leaders of the chaos by giving them a bat? it would be a big mistake. thank you very much. [applause] >> good afternoon. thanks for having me. thanks for coming out.

unlike my colleagues, i do not have a powerpoint. in fact, i think powerpoint is unconstitutional. among the very many things that are going on. i kind of feel like we are coming to the end of the empire strikes back. you know, it's always darkest before the dawn or until it gets pitch black i suppose. but i like to think of myself as an optimist. the cons hashish and it's on the news now in public discourse. unlike it has been in decades. that is of course good for those of us did make a living talking about the constitution and current affairs. but the healthy development for the republic as a whole because people have to say and i disagree that policy lets talk about the economic costs and benefits is something that the president or congress proposes. they say where does the government have the power to do that? but eminently healthy response and one that all members of congress and all citizens need to remember and go back to.

certainly this congress, at least the house took a small, mostly symbolic, but also important step with these constitutional authority statement. if the things that were put in at the beginning of last year even gave one member paz irwin piece of legislation accuracy would introduce because they didn't know when the constitution he or she had the power to do that, then it's worth the implementation. we've come a long way when you remember nancy pelosi was asked for the government had the power to require people to buy health insurance. she said are you serious? of course the constitution is the last refuge of the scoundrel but as noted policy arguments to make. and indeed, obamacare as we've seen has not gone away. you know, i can't claim to have read it all. i think tnr is the only person in the entire country to have read it. he told me once he might've had

a drink or two in the only skimmed the intimate parts of it. anyhow, we have now collectively read it and is now collectively more or less understood it in makes even less economic sense industry than it is even more unconstitutional than we feared. the cases before the supreme court that will be argued at the end of march decided by june or only the tip of the iceberg. the individual mandate is the biggest problem animals the whole thing together. sure you could have a freestanding taxon indoor tanning services, the smoky tax on the farm waste and fraud accounting provisions of the medicare. but that wasn't the purpose of legislation. the purpose of legislation was to fund a reformed health care paid to paraphrase joe biden was a big deal, right? [laughter] and not mandate is unprecedented. none not in the sense of reforming health care, but the government for the great society or civil war has ever require people to buy them thing.

any part of the government can do this, there are principled limits on federal power. and we will see what the government's lawyers have to say at the supreme court heard so far the best they've been able to come up with his health care unique. massena.at it now makes her house tonight. that's good as a matter of policy. as a matter of constitutional law, that's not good enough. until next time the congress on stability out of her financial or other industry, they say welcome to the reform scheme only works if we require people to buy something or do something else that we otherwise think of is unconstitutional. also the medicaid coercion to transform their medicaid, health care bureaucracies. not at the cost of additional funds that obamacare is providing, that the cost of all medicaid funds. the states are quite literally between a rock and a hard place and this is coercive. but it's not a course this use

of government, i'm not sure what is. there's lots of other things. what has been derided as a death panel, independent payment advisory board. you have on the let it, unaccountable freestanding new bureaucracy that is going to decide which procedures are going to be worth paying for and therefore for the person that can't otherwise afford them. there's arbitrary waivers. gourmet restaurants a whole host of other businesses in nancy pelosi's san francisco district have gotten waivers from obamacare. also the whole state of nevada. but he was the senator from there. as states like indiana and louisiana have been denied. but again, obamacare is like a constitutional seminar. i'm running out of time. as a whole host of economic liberty of law issues from the bailout yesterday a settlement was announced to the losses without foreclosures in mortgage

breakdowns work apparently there might be an executive order. requiring banks to write down their bad mortgages is a subversion accreditors rates. if you like sarbanes-oxley, which cost the economy so much more than essays in preventing abuses, sub 10 has a whole host of separation power problems creating new agencies and bureaucracies in the senate that congress can even touch. there the road legislators, judges and juries give the consumer finance protection board is one of those agencies and we can even get its leadership in a constitutional manner. these recess appointments when there is no research. on the energy front, keystone xl. i'm not going to argue environmental economics. but on the face of the law, the president was not allowed to delay implementation of the project for the reason he gave, what is there needs to be more environmental impact studies.

by the last was addressed in in the compromise of the debt ceiling, congress put in a lot in the president signed that would not be a reason in it. shutting down that problem. deepwater horizon, the federal judge cited the government and contempt for implementing its moratorium on drilling for no good reason. the legalese is so striking and strong. the government was cited for contempt by that court. we think democrats are in power, so civil liberties are doing well. unlike these other things. the drug war has only intensified. the marijuana arrests are red. fast and furious, giving guns to travelers. i don't know what the theory was, but we wouldn't have that without the drug war in the first place. gabby gifford has announce she's resigning. but for some aspect of a gun-control message coming down regardless of what the supreme court is now set about the

second amendment to the right to bear arms. religious liberty immigration reform. but if the last time you heard the president talk about immigration reform? great savior immigrants and the poor or how just yesterday the supreme court unanimously, unanimously ruled against the government's position in how the police can survey people by attaching gps tracking devices to their cars for a month or 24 hours a day been everywhere they can go without a warrant. delicious whether they could do it in the first place. that great left-wing aclu card-carrying member antonin scalia said this is ridiculous. even under basic concepts of the government trespassing on the car, that great civil libertarian or sam alito, the alternative view presented was just reasonable expectation of privacy that were violated, not

the search of the car. we have to debate about exactly to what extent have the government was violating our civil liberties. obviously to the constitution. we've got to look at this legislation is to be working for members of congress may constitutional points of order and talk about this to your constituents because people understand that and ultimately the first amendment is there to check these abuses of government power. like i said, i'm optimistic. i think we can turn this around. we'll see what the core rule is obamacare, on a whole host of big issues before the court this year. hello, constitution is in play. the law matters. it's not just a matter of which he respected dan and mike, dollars and cents. if we get rid of this staff, a lot of the bad dollars and cents goes away. thank you.

[applause] well, if dan can invoke an arkansas powerpoint, i am going to use the italian powerpoint, which i will speak very loudly for five minutes, pound on occasion when i want to make a point. as mentioned earlier i run or area sony to visit vegas this kind does a neat little state of the union for me because i'm not used with the exception of the last few years thinking mortgage financing and then union but it will be talked about. you don't need to look at how foreclosures or any of these numbers. they say that our housing market or markets market and much. and again, the bigger issue on the economy is twofold. one would need less housing wealth. we feel poorer. we spend less and that reduces consumer spending. we also look in terms of anything that is the labor market. 40% of job losses during this downturn for a direct result of

the housing market because of the construction workers commercial stations, not even talking about the second area. so from the president's perspective, from anyone's guess, the housing market is going to be issue number one. so i expect the president talk about it at the housing market and i expect him to talk a lot about how we want to do the mortgage market. one of the big failure is an expansion of refinance the. ilya to develop why that's important in the harm that would do. of course i want to talk quickly about the two fundamental problems with refinance in everybody's mortgage and underwater essentially means you are more in the mortgage the house is worth. the first guess i could write down your mortgage. you would have more money, spend more time you would be wealthier. but in doing that is someone else's expense. let's keep in mind a the market is one person playability. it is another person that sent. or simply making one person

better off on making another person were soft. despite the fact i think this administration enough in the last administration to respect you for somehow the redistribution of wealth is the creation of wealth, we should learn over the last couple of years the transfer of payment, reducers duchenne above doesn't turn the economy around. this does not do anything for the economy, but it will do something in terms of politics. one of the teams will hear tonight is fighting for them in a class for republicans to defend bankers and defend the 1%. one of the things we are going to hear is a friend in the middle classes refinancing everybody's mortgage because you played ray, played by the rules. not your fault the housing prices in town, so the government has to underlie and guarantee to liability for you. so not only does it do nothing for the economy because as i mentioned that the transfer of wealth from one person to the other. even worse, it does nothing for the housing market.

if i refinance you into a lower rate than the market you have, guess what? are less likely to go buy another house. why? when you look at and think what to buy this house come up with a market should be 5%, not for come you are actually reducing home sales in the future rather than increasing them. the way it ain't about it in the way you have to think about our housing market is we have the week demand and excess supply. any policy that does not increase demand for reduced the supply of housing is simply a joke and is simply a diversion. and be very clear, what we've heard so far it will be here tonight will do very little in that regard on either front yet again, it should be kept in mind that anyone who has had become what no one knows if you have access supply and insufficient mankind is only one way to effectively cure that. to that crisis fall to clear the market. absolutely there is no other way. and again, maybe i should see

the positive is that despite the best efforts of this administration in the last administration, housing prices have fallen over 30% nationally. i personally believe we are about 90% through the depreciation in the housing market. the unfortunate part of that is we attracted out. we would've been far better at stake to 30% or six months rather than three years the ways that? my friends at the homebuilders continue to add to supply the fungus filled prices above construction cost of which is what we've done. instead of taking a whole and work enough inventory we have, we have the additional supply already make a. this reflects perspective on the part of the white house that the problem is not the bursting the bubble. the problem is we need to build a bridge to the next bubble. we see that cannot come back a little later about the federal reserve. the attitude is if you simply replace one asset with another

and make us all wealthier. of course that is not something that's going to work in the long run. ideally i would like to hear the president talk tonight about his plan for ending freddie and fannie. that should be on top of the agenda. the other subsidies for the market. however, expect him to do a very good job at talking about but were freddie and fannie can do what he fails to mention the $170 billion for putting to bailing out freddie and fannie. at the end of the day, according to cbo and the regulator, we are looking at as much as $300 billion to bail outside and creamy. we are only going to her freddie and fannie would do more. and again, as does mention, the regulator for freddie and fannie said yesterday that if we get this sort of write-downs of the cost is another hundred billion. let's keep in mind this is the taxpayer to borrowers who have mortgages that are over there head. the worst part of this visit is

regressive. homeowners are wealthier than renters. why should renters be forced to subsidize homeowners? this is supposed to be progressive administration. they pretend to be fighting for the 99%. yet we will see a plan that says that they can give money to people who don't need it. there's nothing that hurts you because your mortgage is worth more than your house. anybody with a car that probably has evolved worth more than the underlying asset. that does not mandate a government you love. that said, unfortunately despite the discussion that we will hear no talk about the bailout, in all likelihood this will not be the only bailout. we will probably my opinion have to deal the federal housing administration, fha. we could be put in its much as another 50 billion into sha. i pose to target those are bad things do come and but for the most part the auditors to aig has gotten most of the money back he would not get the money

back from freddie and fannie and will not get money back from fha. the are costs that will simply and again we will not recover them. these are not investments. these are simply transfers. i think it is one thing that is lost is because one of the things we'll hear tonight is rhetoric against the banking industry. quite frankly if you really want to stick it to the banking industry, let's get rid of him and freddie and sha. ultimately waster transfer credit risk to taxpayer. if you want to stick it to the banks, let's make them take the credit risk. that is what they are therefore rather than making us take a hit every time the market goes south. as is mentioned to refinancing, we may see a question about reducing the principal. let's say you've got a 20% down on your mortgage in the value declined 30%, so we will give you a 10% freitas would make the value of your house with your mortgage. i should say i have nothing against and i greatly encourage any lender who were to sit down

with any barber to voluntarily work something out, more power to them. that's free markets are about is coming to mutually beneficial exchanges. it is not for other than taking from the taxpayer taken from the investor. let's keep in mind would ever return the settlement today, whatever these things look like, it is often this picture the thinking being a. that's actually not the case. they are two separate entities. more often you see the banker come to the table and say yes, i located this money in these investors overhear pension plans. our retirement, that is what takes a hit. the banker works of a pretty clean. we get hit on this. again, it is a transfer from taxpayers and investors and why that should be the case is hardly been illustrated. so again, i will argue and see the this repeated pretense that redistribution of wealth creation is the one of the things that has harmed our

economy rather than turned it around. i will also note as well that the primary driver of defaults in the mortgage market as it is in almost any credit market is because you're unemployed. if you are this quote unquote responsible homeowners to put 20% down another two as 30% can be really 10% underwater. if you lost your job, that's going to do nothing for you. so in a sense, what we really see is the pitching of benefits of subsidies from the redistribution of wealth and the vast underclass who don't think it on training day. i'm going to stiffen their pension fund lower your mortgage payment and make you think somehow you're better off in that case. so again, there's nothing that can be done in that regard though turn on the housing market. ultimately with the housing market will depend on is the labor market and things like obamacare have only made in the fifth -- it's quite interesting if you look at benefits across total compensation, was ignored in a quality discussion about

wages. if you include benefits come at simply not the case. we've increased the cost of hiring people at the last supper years. no wonder there's a lot of hiring going in because it's more expensive to hire people. so again, if it made easier and cheaper to hire people, a return or the housing market around. ilya mentioned consumer financial protection bureau. i think the recess appoint was clearly unconstitutional. i don't expect the president to really make the case for saying why this is, if you should know. i expect him to say the senate has instructed me from work and my will and the will of the people and i will not this is despite the fact that of all of the nominations submitted to the senate in 2011, 97% of those nominations were ultimately confirmed by the senate. this pocket of nominations is simply not correct. i encourage any of you to go to tomas or ils and that the

website. the overwhelming vast majority of nominees have been confirmed in the senate. one or two or a handful that have been held up as the reason for the president chooses rip up the constitution. we'll hear lots night about implementation of dodd-frank and chuck's position of republicans are representing wall street and president of the most innovative and say forget the fact that holding hands of anybody tim geithner another golden people in my administration. i'm really the one fighting on the middle class. and of course despite the many obvious feelings of dodd-frank, we'll hear some defense that you need to reelect me as if you like someone else we will see repeal of dodd-frank and we'll be back to the wild days of thinking deep regulation, which of course never happened when actually be doing with cost of the financial crisis. the other side is if republicans took at the white house, we all need to hold them accountable to address the causes of the financial crisis. dodd-frank did not do it and do it and i would say simply

repealing dodd-frank is insufficient. we have to go further. i think we need to be able to bring back some market discipline. to me if you're going to try to achieve one single thing with financial reform, you need to bring back market discipline, particularly on the part of creditors. people who want financial institutions must believe that their money is at risk. the importance of this is that a properly, freely functioning financial market, the price asked to grade, irresponsible, criminal, reckless or simply. when you have a management that doesn't know if they're doing, they are following a bad strategy. other market participants will raise the cost of borrowing and limit their exposure. creditors just added to the most important monitors and regulation we have in our financial markets. unfortunately, decades of government intervention has severed this point. we say to creditors today, don't worry.

if you land a too big to fill b. to prostitution will bail you out. of course they done that for depositors so you have little to worry about. 90 plus% of the funding of any financial institution comes from creditors. we simply cannot rely on management alone to monitor. the government strategy has been as will create has her and protect creditors, but the government will come in and substitute for the honor of creditors. the repeated financial crises we've had is pretty good evidence that speculators are simply not up to the task. they are not sufficient to substitute that for regulations by creditors. i think we have replaced weak incentives, which is a good bank regulator and the banks you regulate cell when they transfer you somewhere. worse is not going to fire you because that would be too much to ask. we have very weak incentives. one of the primary bank raid villagers during this crisis was the then president of the federal reserve, tim geithner

said falling out of the java to get get a promotion? so these weekend incentives if we put those was very strong incentives predators have been of creditors that listen if you don't monitor, you take a hit from you take a life. again, we need to do is reimpose that market discipline of creditors to bring actual real effects of regulation and market regulation of behavior rather than the government regulation we have that has incredibly failed every time. i should also mention that i think one of the largest sources of moral hazard -- one of the largest sources of bailouts and our financial markets are the ones that are less transparent. yes we've seen tarpon we've seen these programs for the federal reserve, but even just importantly every time the financial markets get in trouble come the federal reserve cannot give you cheap money to drive

the value of assets so that you speculators in the financial markets are better off by pushing the value of your assets. it doesn't matter this tries to create inflation to the rest of the economy. this blunderbuss reserve for resort for the liquidity bailout is constantly there. i think this is something that absolutely needs to be addressed. the fed is trying to do the same thing for households. after with the.com bubble burst, the reaction to the federal reserve as we are all a little bit poorer a trillion dollars at the stockmarket burst. so let's create a housing market bubble. let's try to make people wealthier because they will spend again. you've even seen it recently over the last several years where interest rates have pushed up stock markets, pushed up commodity prices and it demonstrates you make people with passes the wealthy are supposed by mark. it is not an economy were hustled out of based on fundamental investment and fundamentals of productivity. the constant manipulation of consumer spending via asset prices driven by monetary policy

is incredibly dangerous and has led us to one bubble after another that's been incredibly costly. it has distorted relative prices. you've invested in the wrong things and reduced efficiency of our economy, which ultimately means we are poor, now wealthier. i guess i should say on the one hand i've been relatively optimistic as a lot of credit goes to ron paul for making all the republican nominees have to talk about the federal reserve. if any thing i expected the government to say he will have ben bernanke on the back and told him what a great job he's been doing. this has to be something put on the table in the debates in any serious discussion of our state of the union would look at the value of our money and the value of price stability and that we should do in that regard. of course there's a lot of interim things you can do, whether it's removing the name date, having some sort of inflation targeting. ultimately we cannot continue to believe that prosperity is

brought to us via asset bubbles and manage the real growth in this country that is again brought by real investment determined by real prices and not distortions. i look forward to your questions. thank you. [applause] >> great. we have time for question-and-answer period i will note that you guys will be sharing two microphones or as markets its own. we only have one mike for questioners. i ask you guys repeat the question and ask for questioners ask questions. so with that, go ahead and start. [inaudible] -- to understate the problems in the small enough economy that can be bailed out.

we are so big that nobody is going to bail us out. and so, the fact that we are just a little bit greater in terms of percentage of gross national product, are dead to me doesn't capture how that entire period did not x-ray. it works both ways in terms of the size of economy of greece relative to the u.s. the factory bigger economy makes this a slightly bigger risk, which is why people are still the preferential currency and people are still willing to lend us money at very low rates. that is essentially what is keeping us going. the problem comes down the road china and others decide we are not such a great risk anymore in interest rates begin to approach anything at the historic levels. we are at historic lows in terms of what we're firing 94. were the indian actors side suggested if we go back anything approaching the 900% goes

through the roof. it's already pretty high, but it's an unbelievable level totally unsustainable if you get close to those levels historically. on the other hand, there is no germany. germany pigs are bailing out grease. there's no germany waiting to bail us out from us we may have to face up to these problems in an entirely different way. >> if i could add wanting add one thing to what mike said. one way we are benefiting from chaos and rest of the world. part of keeping our interest rates artificially low. and as mike said, at some point you hit the wall, fall off the cliff, whatever metaphor you want to use and then we are an even deeper trouble in this brings us back to the message that we both had. the problem is spending. [inaudible] -- i am a lawyer and law and

retired i think it's somewhat cynical of the judges said supreme court and besides they're not much on updates. could you please talk about justice kennedy? and was supposed to do bush people of both that it's unconstitutional for democratic say we are going to end when republican as well, that it is constitutional, local kennedy do? what did he do in the marijuana case in california? >> kennedy, you're talking of course about the individual mandate of the atomic hair and the conventional wisdom with which i agree is that kennedy is a sweet though. some people point to scalia with this and the marijuana case reach, but that was scalia's drug war exception to the constitution and is also had writing it from before that make him a safe bet. but kennedy also had a concurrency couple years ago in

this case, interpreting necessary and proper clause that does not oppose the use of the commerce clause power to regulate interstate commerce. worry case to come up with we had to interpret a cause on the commerce clause context, there it have to be heightened scrutiny. and i'll see you at the opinion for unanimous court last term in the bond case talking how federal mr. mayor not just as a vindication of what james madison under princeton are applied political theory or whatnot, but ultimately they are to support and protect individual liberty, federalism and structural provisions there. his writings on lopez, although the presidential cases that he's been on leave me to be optimistic about him. without any spin i say it's more likely than not that the supreme court by a site for vocal straight down the individual mandate. what they'll take what that is a the greater question. the government called as a

severability issue. can it be severed from the rest of the legislation were from parts of it? the government itself has conceded to its credit, but couldn't do otherwise that the community breeding and guaranteed issue provisions requiring insurers to cover people regardless of preexisting conditions and assessing premiums not an individualized risk for a complicated formula. those are inextricably tied to the individual mandate. the decision will be somewhere between that and the whole thing. we filed a brief not taking position on the whole thing, the same that clearly title i, which is the individual marketing title ii, which is medicaid are completely tied together and not the basis that the national reform. i think that paul clement in the their respective recent severability have made a devastating case for why quite obviously nothing would've passed without it as i was saying in my remarks. sounds like they were going to separately pass medicare, with

certain fraud and indian reservation health reform in things like that as whole big package. it didn't chief justice roberts was probably the thing that would severability. >> was part of a discussion held earlier today at the cato institute on what libertarians want to hear from tonight's state of the union address. we will re-air the event in its entirety later tonight at 11:00 eastern here on c-span 2. >> president obama delivers the annual state of the union address tonight and it's expected to focus on economic and domestic issues.

>> this part of the speech is 35 minutes. >> from ma >> the president of the united states. [cheers and applause]

[applause] [applause] [applause] [cheers and applause]

art [applause] [cheers and applause]

[cheers and applause] >> members of the congress, i have the high privilege and the distinct honor of presenting to you the president of the united states. [cheers and applause] >> thank you very much. thank you. [applause] [cheers and applause]

>> mr. speaker, mr. president, distinguished members of the congress, honored guests and fellow citizens, once again, in keeping the time-honored tradition, i have come to report to you on the state of the union. and i am pleased to report that america is much improved and there's good reason to believe that improvement will continue through the days ahead. [applause] you and i have had some honest and open differences in the year past, but they didn't keep us from joining hands in bipartisan cooperation to stop a long decline that had drained this nations. and he rooted its host. there is renewed energy and not to missed them throughout the land. america is back, standing tall and looking to the 80s with

courage, confidence and hope you are the problems overcome another heritage 1% from a party or even one generation. it is just the tendency of government to grow. for practices and programs to become the nearest thing to eternal life we'll ever see on this earth. and that's always the well-intentioned chorus of voices saying with a little more power and a little more money we could do so much for the people. for a time, we forgot the american dream isn't one of making government bigger. it is keeping faith with the mighty spirit of three people under god. [applause] as we camped the decade of the 80s, we faced the worst crisis in our postwar history. in the 70s, were years of rising problems and falling congress, there is a feeling government had grown beyond the

consent of the government. families felt helpless in the face of sound team taxes that reduced reward for her work trip to the risk-taking. all of this was overlaid by an ever-growing web of rules and regulations. on the international scene, we had an uncomfortable feeling we lost the respect of friend and foes. some question whether we have been built to defend peace and freedom. america is too great for small dreams. there is a hunger in the land for spiritual revivalists and if he will come at a crusade renewal. the american people said let us look to the future with confidence, both at home and abroad. let us give freedom a chance. americans are ready to make a new beginning and together, we have done that. we are confronting our problems one by one. hope is alive tonight for millions of young families and senior free from unfair tax

increases and crushing inflation. .. [applause]

>> today a working family earning $25,000 has $1100 more in purchasing power than if tax and inflation rates were still up. real percent income increased 5% last year and transportation offered more choices to consumers and new changes or chances for entrepreneurs and protecting safety. tonight, we can report and be proud of one of the best recoveries in decades. send away the hand ringers and doubting thomass, hope is reborn for those wanting to own homes, risk and vision to create tomorrow's opportunities. the spirit of enterprise is sparked by the sunrise industries of high-tech and small business people with big ideas. people like barbara proctor who rose from the ghetto to build a

billionaire agency in chicago. like one who turned a dream into an importing business in florida. people like these are heros for the 80s. they helped 4 million americans find jobs in 1983. more people are drawing paychecks tonight than ever before, and congress helps -- or progress helps everyone -- well, congress does too. [laughter] [applause] in 1983, women filled 73% of all the new jobs in managerial, professional, and tech technical kneeleds, but we know many are still out of work wondering what will come of their hopes and dreams. can we love america, and not reach out to tell them you are

not forgotten, we will not rest until each of you can reach as high as your god-given talents will take you. [applause] part of america is strong, it's good and true. the cynics were wrong. america never was a sick society. we're seeing rededication to bedrock values of faith, family, work, neighborhood, peace, and freedom. values that brought us together as one people from the youngest child to the most senior citizen. the congress deserves america's thanks for helping us restore pride and connect to our military, and i hope you're as proud as i am of the young men and women in uniform who defend the ramparts and freedom and whose dedication and skill increases our chance of living

in a world of peace. [applause] people everywhere hunger for peace and a better life, but the tide of the future is a freedom tide, and our struggle for democracy cannot and will not be denied. this -- [applause] this nation champions peace and liberty for every individual. america's new strength, confidence, and purpose carry hope and opportunity far from our shores. a world economic recovery is under way. it began here. we journeyed far, but we have further to go. franklin roosevelt told us 50

years ago this month that civilization cannot go back, must not standstill. we have undertaken new methods. it's our task to perfect, improve, alter when necessary, but in all cases, to go forward. it is -- [applause] it's time to move forward again and take freedom's next step. let us unite tonight behind four goals to keep america free, secure, and at peace in the 80s together. we can ensure steady economic growth. we can develop america's next frontier. we can strengthen our traditional values, and we can build a meaningful peace to protect our loved ones in this shining star of faith that's guided millions from tyranny to the safe harbor of freedom, progress, and hope.

doing these things open wider the gates of opportunity, provide greater security for all with no barriers of bigotry or discrimination. the key to a dynamic decade is vigorous growth, our first great goal. we might well begin with common sense in federal budgeting. government spending no more than government takes in. [applause] we must bring federal deficits down. [cheers and applause] [applause] but how we do that makes all the difference. [cheers and applause]

we can begin by limiting the size and scope of government. [cheers and applause] under the leadership of vice president bush, we have reduced the growth of federal regulations by more than 25% and cut well over 300 million hours of government required paperwork every year saving the public more than $150 billion over the next ten years. [applause] the grace commission has given us some 2500 recommendations for reducing wasteful spending and they're being examined throughout the administration. federal spending growth is cut from 17.4% in 1980 to less than

half of that today, and we have already achieved over $300 billion in budget savings for the period of 1982-86, but that's only a little more than half of what we sought. government is still spending too large a percentage of the total economy. [applause] now, some insist that any further budget savings must be obtained by reducing the portions spent on defense. well -- [applause] this ignores the fact that national defense is sole responsibility of the federal government, indeed, it is its prime responsibility. [applause] yet, defense spending is less than a third of the total budget. in the years of president kennedy and before that, defense

was almost half the total budget, and then came several years in which our military capability was allowed to deteriorate to a dangerous degree. we're just now restoring through the essential modernization of our con vaitional and strategic forces our ability to meet our present and security future needs. we dare now shirk our responsibility to keep america free, secure, and at peace. [applause] last decade saw spending surge out of control, but the basis for spending was laid in previous years. a pattern of over spending has been in place for half a century. as the national debt grew, we were told not to worry that we owed it to ourselves. now we know that deficits are a cause for worry, but there's a

difference of opinion as to whether taxes should be increased, spending cut, or some of both. fear's expressed that government borrowing to fund the deficit could up -- inhibit the recovery. well, i think that debate is missing an important point. whether government borrows or increases taxes, it will be taken the same amount of money from the private sector, and either way, that's too much. [applause] government must not raise taxes on families struggling to pay their bills. the root of the problem is that guest share is more than we can afford if we are to have a sound economy. we must bring down the deficits to ensure continued economic growth. in the budget i'll submit on february 1, i'll recommend

measures that will reduce the deficit over the next five years. many of these will be unfinished business from last year's budget. some could be enacted quickly if we join in a serious effort to address the problem. i spoke today with speaker of the house o'neill, senator baker, byrd, and senate minority leader mike asking if they would designate representatives to meet with representatives of the administration to try to reach prompt agreement on a bipartisan deficit reduction plan. i know it takes 5 long hard struggle to agree on a full scale plan, so what i proposed is that we first see if we can agree on a down payment. now, i believe there is basis for such an agreement, one that could reduce the deficits by about $100 billion over the next three years, focus on the less con ten, cuts pending before

congress to be combined with measures to close tax loopholes, members that the treasury department has been said to be worthy of support, and in addition, we can examine the possibility of achieving further outlay savings based on the work of the grace commission. if the congressional leadership is willing, my representatives will be prepared to meet with theirs at the earliest possible time. i hope the leadership might agree on an expedited timetable in which to develop and enact that down payment, but a down payment alone is not enough to break us out of the deficit problem. it could help start on the right path, yet, we must do more, so i propose we explore how to make structural reforms to cut the built in growth of spending and propose improvements in the budgets process. some 43 of the 50 states grant

governors the right to veto particular items within a bill without vetoing the entire bill. california is one of those states. as governor, i found this veto as a powerful tool against wasteful spending. it works in 43 states. let's put it to work in washington for all the people. [applause] it would be most effective if done by constitutional amendment. the majority of americans approve of such an amendment just as they and i approve of an amendment mandating a balanced federal budget. many -- [applause]

many states have this protection in their constitutions. the talk of the meeting the present situation by increasing taxes is a band aid solution that does nothing to cure an illness that's been coming on for half a century, says nothing of the fact it poses a threat to economic recovery. let's remember a substantial amount of income tax is presently old app not paid by people of the underground economy. it would be immoral to make those who are paying taxes pay more to compensate for those who are not paying their share. [applause] there's a better way. let us go forward with a historic reform for fairness, simplicity, and incentives for growth. i'm asking for a plan of action

to simplify the entire tax code so all taxpayers, big and small, are treated more fairly, and i believe such a plan could result in the underground economy being brought into the sunlight of honest tax compliance making the base broader so personal tax rates could come down, not go up. [applause] i've asked a specific recommendation consistent with those objectives be presented to me by september 19th, 1984. our second goal is to build on our pioneer spirit -- [laughter] i said something funny? [laughter] i said america's next frontier, and that's to develop that frontier, a sparkling economy spurs initiatives, sunrise, industry, and makes older ones

more competitive. no one is this more important than our next frontier, space. nowhere that we so effectively dmon straight our -- demonstrate our leadership and potential to make life better on earth. the space age is barely a quarter of a century old, but we push civilization forward with our advances in science and technology. opportunities and jobs will multiply as we cross new thresholds of knowledge and reach into the unknown. our progress in space, taking giant steps for all mankind, is a tribute to american team work and excellence. our fine ition minds in government, industry, and ac deem that, have all pulled together, and we can be proud to say we're first, we are the best, and we are so because we're free. [applause]

america has always been greatest when we dare to be great. we can reach for greatness again. we can follow our dreams to distant stars, living and working in space for peaceful economic and scientific gain. tonight, i'm directing nasa to develop a permanently manned space station and to do it within a decade. [applause] the space station will produce quantum leaps in research in science, communications, and medicines that can be manufactured only in space. we want our friends. to help us meet these challenges and share in their benefits. nasa will invite other countries 20 participate so we can strengthen peace, build prosperity, and expand freedom for all who share our goals. just as the oceans opened up a

new world for clipper ships and traders, space holds enormous potential for commerce today. the market for space transportation could surpass our capacity to develop it. companies interested in putting payloads into space must have ready ac -- access to private sector launch services, they'll help launch services industry off the ground. we'll implement a number of executive initiatives, developing proposals to ease constraints, and with nasa's help, promote private sector investment in space, and as we develop space, let us remember our responsibility to preserve older resources here on earth. preservation of the environment is not a liberal or conservative challenge. it's common sense. this is a time of budget constraints. i have requested for epa, one of

the largest percentage budget increases of any agency beginning the long necessary effort to clean up a area and national resource, the chesapeake bay. [applause] reduce the threat by abandoned waste dumps, epa will spend $410 million, and i will request a subtle increase of $50 million and because the super fund law expires 2341985 -- in 1985, i asked for a proposal for extension so there's additional time to complete this important task. on the question of acid rain which concerns people in many areas of the united states and canada, i'm proposing a research program that doubles our current funding and we'll take additional action to restore our lakes and develop new technology

to reduce pollution that causes acid rain. [applause] we have greatly improved the conditions of our natural resources. we'll ask the congress for $157 million beginning in 1985 to acquire new park and conservation lands. the department of the interior will encourage careful, selective exploration and production on vital resources in the 200 mile limit off the coast, but with strict adherence to laws and full public and state participation. our most precious resources, our greatest hope for the fiche are the minds and hearts of our people, especially our children. we can help them build tomorrow by strengthening our community of shared values. this must be our third great

goal. for us, faith, work, family, neighed, freedom, and peace are not just words. they are expressions of what america means, definitions of what makes us a good and loving people. families stand at the center of society, and every family has a personal stake in promoting dplens -- excellence in education. it does not begin in washington. an increase between 1960 and 19 # 80 was accompanied by a steady decline in aptitude test scores. excellence must begin in the homes and neighborhood schools where it's the responsibility of every parent and teacher and the right of every child. our children come first, and that's why i established a bipartisan national commission on excellence in education to help us chart a common sense course for better education, and already, communities are

implementing the commission's recommendations. schools reporting progress in math and reading skills, but we must do more to restore discipline to schools, and we must encourage new basics, enforce tougher standards, and put our parents back in charge. i will -- [applause] i will continue to press for tuition tax credits to expand opportunities for families and soften the double payment for those pays public school taxes and private school tuition targeting assistance to low and middle income families. just as more insentives are needed within the schools, greater competition is needed among our schools. without standards and competition, there can be no champions, no records broken, no excellence in education or any

other walk of life. while i'm on this subject, each day you members observe a 200-year-old tradition meant to signify america is one nation under god. i must ask if you can begin your day with a member of the clergy standing right here leading you in prayer, then why can't freedom to acknowledge god be enjoyed again by children in every school across this land? [applause]

[applause] america was founded by those who believed god was their rock of safety. he is ours. i recognize we must be cautious in claiming that god is on our side, but i think it's all right to keep asking if we're on his side. [applause] during our first three years, we have joined bipartisan efforts to restore protection of the law to unborn children. now, i know this issue is very controversial, but unless and until it can be proven that an unborn child is not a living human being, can we justify assuming without proof that it's not? no one has yet offered the proof. indeed, all the evidence is to the contrary.

we should rise above bitterness and reproach, and if americans come together in a spirit of understanding and helping, then we could find positive solutions to the tragedy of abortion. [applause] economic recovery, better education, dedicated and rededication to values show the spirit of renewal gaining the upper hand, and all with improved family life in the 80s, but families need more. they need assurance that they and their loved ones can walk the streets of america without being afraid. parents need to know their children will not be victims of child pornography and abduction. this year, we'll intensify the drive against these and other horrible crimes like sexual

abuse and violence. our efforts to crack down on career criminals, organized crime, drug pushers, and to enforce tougher sentences and paroles are having effect. in 1982, the crime rate dropped by 4.3%, the biggest decline since 1972. protecting victims is just as important as safeguarding the rights of defendants. opportunities for all americans. [applause] opportunities for all americans will increase if we move forward in fair housing and work to ensure women's rights, provide for equitable treatment in pension benefits and individual retirement accounts, facilitate child care, and enforce deling went parents enforced payments. it's not just the home and workplace community that shape our values and shape our future. i ask you're help in assisting

more communities to break the bondage of dependency. help us to free enterprise by permitting debate and voting yes on the proposal for enterprise zones in america. this has been before you for two years. the passage can help high unemployed areas by creating jobs and restoring neighborhoods. [applause] a society bursting with opportunities, reaching to the future with confidence, sustained by faith, fair play, and a conviction that good and courageous people will furrish when they are free, these are the secrets of a strong and prosperous america at peace with itself and the world. a lasting and meaningful peace is our 4th grade goal, our highest aspiration, and our record is clear. americans resort to force only when we must. we have never been aggressors.

we always struggle to defend freedom and democracy. we have no territorial ambitions. we occupy no countries. we build no walls to lock people in. americans build the future, and our vision of a better life for farmers, merchants, and working people from begins with a simple premise. the future is decided by ballots, not bullets. [applause] >> tonight, america's current commander in chief, barack obama, heads to the capitol to diver the state of the union address, the last one before this year's election. live coverage gips at 8 p.m. eastern including the speech, the republican response given by mitch daniels, and, of course, your phone calls and comments.

it all begins live at 8 p.m. eastern. you can also watch online or listen on c-span radio. during tonight's state of the union address, follow tweets and facebook posts from members of congress, reporters, and other viewers by using a special web page we put together at c-span.org/screen2. but now, it's back to state of the union speeches from the past starting in about 45 minutes, we'll show you remarks from bill clinton in 1996. after that, george w. bush delivers the annual address from 2005. first, we'll take you back 20 years to 1992 with comments from george h. w. bush. here's part of 245 -- that speech. [applause]

[applause] [applause]

[applause] [applause] [applause]

[applause] [inaudible conversations] >> members of the congress, i have the high privilege and the distinct honor of presenting to you the president of the united states.

[cheers and applause] [applause] [applause] [applause] >> mr. president, mr. speaker, mr. president, distinguished members of congress, honored guests and fellow citizens,

thank you very much for that warm reception. you know, it's a big buildup this address has had. i want to make sure it was going to be a big hit, but i couldn't convince barbara to deliver it for me. [laughter] [applause] i see the speaker and vice president are laughing. [laughter] they saw what i did in japan, and they are just happy they're sitting behind me. [laughter] [applause] i mean to speak tonight of big

things, big changes and the promises they hold, and there's big problems and how to the we can solve them and move our country forward as the undisputed leader of the age, and we gather -- [applause] we gather tonight at a dramatic and deeply promising time in our history and in the history of man on earth for the in the past 12 months, the world has known changes of almost biblical proportions, and even now, months after the failed cue doomed to fail system, i'm not sure we absorbed the full impact, the full import of what happened, but communism died this year. [applause] and -- [applause]

even as president with the most fascinating possible advantage point, there were times when i was so busy managing progress and helping the league change that i didn't always show joy that was in my heart, but the biggest thing that's happened in the world in my life, in our lives is this. by the grace of god, america won the cold war. [applause] i mean to speak this evening of the changes that can take place in our country now that we can stop making the sacrifices we

had to make when we had an enemy that was a super power, and now we can look homeward even more and move to set right what needs to be set right. i will speak of those things. it's the role call of honor for the cold war didn't end; it was won. i think of those who won it in places like korea and vietnam and some of them didn't come back, and back then, they were hero, but this year, they were victors. [applause] the long roll call, all the gio's and janes and who fought for freedom, hit the ground,

sucked the dust and knew their share of horror, it seems frivolous, but it's not. the world saw not only their special valor, but their style, their ram bun bravery unhampered by class or region, what a group we put forth for generations now for the ones who wrote kill roy here on the walls of the germans to the signs in the iraqi desert that said i saw elvis. what a group of kids we sent out into the world. [applause] there's another to be singled

out, and i'm talking about the american taxpayer. no one ever thinks to thank the people who pays a country's bill or an alliance's bill, but for half a century now, the american people have shouldered the burden and paid taxes that were higher than they would have been to support a defense that bigger than it would have been if imperial communism never existed, but it did. it doesn't anymore. [applause] here's a fact that i wouldn't mind the world acknowledges, the world taxpayer bore the brunt of the burden and they deserve a chunk of the glory, and 10 now -- [applause] and so now for the first time in 35 years, our strategic bombers stand down, no longer are they

on around the clock alert. tomorrow our children will go to school and study history and how plants grow, and they won't have, as my children did, air raid drills 24 -- in which they crawled under the dresks in case of nuclear war. my grandchildren don't have to do that or have the bad dreams children had once and in decades past. there's threats, but the long drawn out dread is over. a year ago -- [applause] a year ago tonight, aspoke in a moment of high payroll, american forces unleashed operation desert storm, and after 40 days in the desert skies and four days on the ground, the men and women of america's armed forces and our allies accomplished the goals i declared and that you endorsed.

we liberated kuwait. [applause] soon after, the arab world and israel sat down to talk seriously and comprehensively about peace and historic firsts, and soon after that at christmas, the last american hostages came home. our policies were vindicated. [applause] much good can come from the prudent use of power, and many good can come of this. a world once divided in the two armed camps now recognizes one sole and preimminent power, the united states of america. [applause]

they regard this with no dread for the world trusts us with power and the world is right. they trust us to be fair and restrained, and they trust us to be on the side of decency, and they trust us to do what's right, and i use those words advisedly. a few days after the war began, i received a telegram from joeann, the wife of the first pilot killed in the gulf, and even in her grief, she wanted me to know that someday when her children were old enough, she'd tell them that their father went away to war because it was the right thing to do and they said it all, it was the right thing to do, and we did it together. there were honest differences right here in the chamber, but

when the war began, you put partisanship aside, and we supported our troops, and this is still a time for pride, but this is no time to boast for problems face us, and we must stand together once again and solve them and not let our country down. [applause] two yores ago i planned cuts in military spending to reflect the changes of the new era, but now this year with imperial communism gone, that process can be accelerated. tonight, i can tell you of dramatic changes in our strategic nuclear force. these are actions we're taking on our own because they are the right thing to do. after completing 20 planes for which we have begun procurement,

we'll shut down further production of the b-2 bomber. [applause] we'll cancel the small program, cease production of new warheads for our sea based ballistic missiles, stop all new production of the peacekeeper missile, and we'll not purchase anymore advanced cruise missiles. this weekend, i will meet at camp david with borris from the russian federation, and i informed him that if the commonwealth, the former soviet union will eliminate all land based multiple warhead ballistic missiles, i'll do the following. we'll eliminate all peacekeeper missiles, reduce the number of warheads on minutemen missiles to one, and reduce the number of warheads on sea based missiles

by about one-third and reduce a strategic portion of bombers to primarily conventional use. his early response has been very positive, and i expect our talks at camp david to be fruitful. i want you to know that for half a century, american presidents have long to make such decisions and say such words, but even in the midst of celebration, we must keep caution as a friend for the world is still a dangerous place. only the dead has seen the end of conflict, and though yesterday's challenges are behind us, tomorrow's are being born. the secretary of defense recommended these cuts after consultation with the joint chiefs of staff, and i make them with confidence, but do not

misunderstand me. the reductions i have approved will save us an additional $50 billion over the next five years. by 1997, we will have cut defense by 30% since i took office. these cuts are deep, and you must know my resolve. this deep and no deeper. [applause] to do less would be insensible to progress, but to do more would be ignorant of history. we must not go back to the days of the hallow army. we cannot repeat the mistakes made twice in this century when armlessness was followed by wrecklessness and the world was

purged as if it was permanently safe. i remind you this evening that i've asked for your support in funding a program to protect our country from limited nuclear missile attack. we must have this protection because too many people in too many countries have access to nuclear arms, and i -- [applause] and i urge you to pass the strategic defense initiative, sdi. [applause] there are those who say that now we can turn away from the world, that we have no special role, no special place, but we are the united states of america, the leader of the west that's become the leader of the world, and as long as i am president, i'll continue to lead in support of

freedom everywhere, not out of arrogance, not out of altruism, but for the safety and security of our children. [applause] this is a fact. strength and the pursuit of peace is no vice. isolationism in the pursuit of security is no virtue. [applause] now to our troubles at home. they are not all economic. the primary problem is our economy, and there's some good signs. inflation, that thief, is down, and interest rates are down, but unemployment is too high, some

industries are trouble and growth is not what it should be, and let me tell you right from the start and right from the heart, i know we're in hard times, but i know something else. 24 will not stand. [applause] in this chamber, we can bring the same courage and sense of common purpose to the economy that we brought to desert storm and defeat hard times together. i believe you'll help. win reason is that you're patriots, and you want the best for your country, and i believe in your hearts, you want to put partisanship aside getting the job done because it's the right thing to do. the power of america rests in a stirring, but simple idea that people will do great things if

only you set them free. well, we're beginning to set the economy free for it's this age of miracles and wonders that taught us anything is that if we can change the world, we can change america. we must encourage investment. we must make it easier for people to invest money and create new products, new industry, and new jobs. we must clear away the obstacles to growth, high taxes, high regulation, red tape, and, yes, wasteful government spending. [applause] none of this happens with the snap of the fingers, but it will happen, and the test of a plan is not whether it's called new or dazzling, but the american people are not impressed by

gimmicks. they are smarter on this score than all of us in this room. the only test of a plan is is it sound, and will it work? we must have a short term plan to address our immediate needs and heat up the economy, and then we need a longer term plan to keep combustion going and guarantee our place in the world economy. there's certain things that a president can do without congress, and i'm going to do them. i have asked major cabinet departments and federal agencies to institute a 90-day moratorium on any new federal regulations that could hinder growth. [applause] in those 90 days, they'll carry out a top to bottom review of

all regular lags, old and new, to stop the ones that hurt growth and speed up those that will help growth. further, for the untold number of hard working responsible american workers and businessmen and women who have been forced to go without unneeded bank loans, the banking credit crunch must ends, and i -- [applause] i won't neglect my responsibility for sound regulations that serve the public good, but regulatory overkill must be stopped. [applause] i instructed the government regulators to stop it. [applause] i directed cabinet departments and federal agencies to speed up

pro-growth expendstures as quickly as possible putting an extra $10 billion in the economy in the next six months and our new transportation bill provides more than $150 billion for construction and maintenance projects that are vital to our growth and well being. that means jobs building roads, jobs building bridges, and jobs building railways. i have directed the secretary of the treasury to change the federal tax withholding tables. with this change, millions of americans from whom the government withholds more than necessary can now choose to have the government withhold less from their paychecks. something tells me a number of taxpayers may check us up on this one. this initiative could return about $25 billion back into our economy over the next 12 months.

money people can use to help pay for clothing, college, or to get a new car. finally, working with the federal reserve, we'll continue to support monetary policy that keeps both interest rates and inflation down. now, these are the things i can do, and now, members of congress, let me tell you what you can do for your country. [applause] you must -- [applause] you must pass the other elements of my plan to meet our needs. everyone knows investment spurs recovery, and i'm proposing this evening a change in the alternative minimum tax and the creation of a new 15% investment tax allowance. [applause]

this encourages businesses to accelerate in business and bring people back to work. real estate led our economy out of almost all the tough times we've ever had. once building starts, carpenters and plumbers work, people buy homes and take out mortgages. my plan modifies the lost rule for active real estate developers. [applause] it makes a easier for symptom plans to purchase real estate. for those americans who dream of buying a first home, and who can want quite afford it, my plan allows first time home buyers to withdraw savings from iras without penalty and provide a $5,000 tax credit for the first

purchase of that home. [applause] finally, my immediate plan carls on congress to give crucial help to people who own a home to everyone who has a business, a farm, or a single investment. in time at this -- this time at this hour, i cannot take no for an answer. you must cut the capital gains tax on the people of our country. [applause]

never has an issue been more demagogue by opponents, but the demagogues are wrong. they are wrong, and they know it. 60% of the people who benefit from lower capital gains have incomes under $50,000. a cut in the capital gains tax increases jobs and helps just about everyone in our country, and -- [applause] and so i'm asking you to cut the capital gains tax to a maximum of 15.4%. [applause] i'll tell you, i'll tell you, those who say, oh, no, someone who is comfortable my benefit from that. you remind me of the old

definition of the purr tans who couldn't sleep at night worrying that somehow, someone, somewhere was out having a good time. [laughter] [applause] the opponents of this measure and those who offered various so-called soak the rich bills floating around the chamber should be reminded of something. when they aim at the big guy, they usually hit the little guy, and maybe it's time that stumped. [applause] this, then, is my short term plan, your part, members of congress, requires an enaccountment of the --

enactment of the proposals with a required effect on the economy without breaking the budget agreement or without raising tax rates. [applause] while my plan is being passed and kicking in, we've got to care for those in trouble today. i provide the for up to $4.4 billion in the budget to extend federal unemployment benefits, and i asked for congressional action right away, and i thank the committee. [cheers and applause] well, at last -- [applause] ..

my aim is to increase our nation's good, and i'm doing what i think is right, and i am proposing what i know will help. [applause]

[applause] i pride myself that i may prudent man and i believe patients is a virtue but a understand that politics is for some in game and sometimes the game is to stop all progress and then deploy the lack of improvement. but let me tell you, let me tell you far more important than my political future and far more important than yours is the well-being of our country. and members of this chamber -- [applause]

members of this chamber are practical people coming and i know you will present some practical level ice. when people put their party's fortunes -- whatever the party, whatever this side of the all -- before the public good the court defeat, not only for their country, but for themselves. and they will certainly deserve it. [applause] and i submit my plan tomorrow. and i'm asking you to pass it by march 20 at. and i ask -- [applause] and i asked the american people to let you know they want this action by march 20th. from the day after that, if it must be, the battle is joined. and you know, when principal was at stake i relish a good and fair fight.

[applause] i said my plan has two parts, and it does. and it's the second part that is part of the matter. it's not enough to get in the media burst. we need a long-term improvement in our economic position. we all know that the key to our economic future is to ensure america continue as an economic leader of the world. we have that in our power. here then is my long term plan to guarantee our future. first, trade. we will work to break down the walls that stop world trade. we will work to open markets everywhere. and in our major trade negotiations i will continue pushing to eliminate tariffs and subsidies that damage america's farmers and workers. [applause]

we get more good american jobs within our own hemisphere through the north american free trade and the enterprise for the americas initiative. but changes are here. and more are coming. the work force of the future will demand more highly skilled workers than ever. more people who are computer literate, highly educated, and we must be the world's leader in education, and we must revolutionize american's schools. [applause] mauney america 2000 strategy will help us reach that goal. my plan will give parents more choice, give teachers more flexibility and help communities create new american schools. [applause]

30 states across the nation have established america 2000 programs. hundreds of cities and towns have joined in. and now congress must join this great movement, pass my proposals for new american schools. that was my second longer-term proposal and here is the third. we must make common sense investments that will help us compete long-term in the marketplace. we must encourage research and development. my plan is to make the r&d tax cut permanent and to provide a record levels of support. over $76 billion this year alone for people who will explore the promise of emerging technology. [applause]

fourth, we must do something about crime and drugs. [applause] and it is time for a major renewed investment in the fighting violent street crimes. saps our strength and hurts our faith in our society and in our future together. surely a tie your woman on her way to work at 6 o'clock in the morning on the subway to deserves the right to get there safely. [applause] and surely it is true that everyone who changes his or her life because of crime when for those afraid to go out at night, for those afraid to walk in the parts they pay for thought surely these people have been

denied a sixth of all right -- civil right. [applause] it is time to restore it. congress passed the comprehensive crime bill. [applause] it is tough on criminals and supportive of police and it has been languishing in these hallowed halls for years now. pass it. help your country. [applause] fifth, i ask you tonight to fund our hope housing proposal and pass my enterprise zone legislation which will get businesses into the inner city. we must empower the poor with the pride that comes from owning a home, getting a job, becoming a part of things.

[applause] my plan would encourage real estate construction by extending tax incentives for mortgage revenue bonds and low-income housing. [applause] and i ask tonight for record expenditures for the program that helps children born into what movant excellence head start. [applause] step six, we must reform our health care system. [applause] for this bares little or not we can compete in the world.

american health costs have been exploding. this year america will spend over $800 billion on health and that is expected to grow to 1.6 trillion by the end of the decade. we simply cannot afford this. the cost of health care shows up not only in your family budget, but in the price of everything we buy and everything we sell. when health coverage for the alana assembly line costs thousands of dollars, the cost goes into the products he makes. and you pay the bill. we must make a choice to win some pretend we can have it both ways. they call it a play or pay, but that extensive approaches on stable. will mean higher taxes, fewer jobs, and eventually a system

under complete government control. really, there are only two options putative and we can move towards a nationalized system which will restrict patient choice. [applause] [laughter] restrict patient choice and a doctor and force the government to ration services arbor turley. what we will get is patients in long lines in different services and a huge new tax burden. or, we can reform our own private health care system, which still gives us for all of its walls, the best quality health care in the world. [applause] let's build on our strengths. my plan provides insurance security for all americans while preserving an increasing the idea of choice.

we make basic health insurance affordable for all low-income people not now covered. and we do it by providing a health insurance tax credit of up to $4,750 for each mullen come family. the middle class gets help to. and by reforming the health insurance market, my plan assures that americans will have access to basic health insurance, even if they change jobs or developed serious health problems. we must bring costs under control, preserve quality, preserve choice and reduce the people snagging daily worry about health insurance. my plan, the details of which i will announce shortly, does just that. seventh, we must get the federal deficit under control. [applause]

we now have until all enforceable spending caps, and the requirement that we pay for the programs we create. there are those in congress who woodies that discipline now. but i cannot let them do it. and i won't. [applause] my plan would freeze all domestic discretionary budget before the, which means no more next year than this year. [applause] and i will not tamper with social security. [applause] but i would put real caps on the growth of uncontrolled spending. and i would also freeze federal domestic government employment.

[applause] and with the help of congress, my plan will get rid of 246 programs that don't deserve federal funding. some of them have noble titles, but none of them is indispensable. we can get rid of each and every one of them. you know, it's time we discovered a home truitt the american people have never forgotten: this government is too big and spends too much. [applause]

now we continue our look at the past state of the union addresses. so far we have heard speeches from president ronald reagan and george herbert walker bush dealing mostly with domestic issues and the u.s. economy.

we continued that theme and about 40 minutes with george w. bush delivering the the 2005 state of the union. but first, bill clinton from 1996. he came to the house chamber to deliver his third state of the union address right as he was beginning his bid for another term. here is part of that speech. mr. speaker, the president of the united states. [applause] [applause]

[applause] [applause] [applause]

[applause] [applause] [applause]

[applause] members of congress, have the privilege and distinct honor of presenting to you the speaker of the united states. [applause]

[applause] thank you very much. mr. speaker, mr. vice president, members of the 104th congress, distinguished guests, my fellow americans all across the land. let me begin tonight by saying to our men and women in uniform around the world, and especially

those helping the group in bosnia and to their families, i think you. america is very proud of you. [applause] my duty tonight is to report on the state of the union, not the state of our government, but of our american community. and to set forth our responsibilities in the words of our founders to perform a more perfect union. the state of the union is strong. our economy has been in decades. [applause] our economy is the healthiest it has been in the three decades.

we have the lowest rate of unemployment and inflation in 27 years. we have completed, created nearly 8 million new jobs, over a million of them in the basic industries like construction and automobiles. america is selling more cars than japan for the first time since the 1970's, and for three years a narrow, we have had a record number of new businesses started in our country. [applause] our leadership in the world is also strong bringing hope for new peace. and perhaps most important, we are gaining ground and restoring our fundamental value. the crime rate, the welfare and food stamp rolls, the poverty rate and the teen pregnancy rates are all down. and as they go down, prospects

for america's future go up. [applause] we live in an age of possibility. 100 years ago we move from farms to factories. now we move to an age of technology, information and global competition. these changes have opened vast new opportunities for our people come but they have also presented them with stiff challenges. while more americans are living better, too many of our fellow citizens are working harder just to keep up and they are rightly concerned about the security of their families. we must answer here three fundamental questions. first, how do we make the american dream of opportunity for all a reality for all americans who are willing to work for it. second, how do we preserve our old and enduring values as we

move into the future? and third, how we meet these challenges together, as one america? we know the government does not have all the answers. we know there's not a program for every problem. [applause] we know and we have worked to give the american people a smaller, less bureaucratic government in washington. we have to give the american people one that lives within its means. [applause] the era of big government is over. [applause] bought -- but we cannot go back to the time when our citizens

were left to fend for themselves. [applause] instead, we must go forward as one america, one nation working together to meet the challenges we face together. self-reliance and teamwork are not opposing virtues. we must have both. [applause] i believe our new, smaller government must work in an old-fashioned american wheat. together with all of our citizens, through state and local government, in the workplace, and religious, charitable and civic associations. our goal must be to enable all of our people to make the most of their own lives -- with stronger families, more

educational opportunities, economic security, see for streets, cleaner environment in a safer world. to improve the state of our union, we must ask more of ourselves, we must expect more of each other come in and we must face our children just to get there. [applause] here in this place our responsibility begins with balancing the budget in a way that is fair to all americans. [applause] there is now broad bipartisan agreement that person to become partisan deficit spending must come to an end. [applause] i compliment the republican

leadership and the membership for the energy and determination to have brought to this task of balancing the budget to the [applause] and i think the democrats for passing the largest deficit reduction plan in history in 1993 which has already cut the deficit nearly in half in three years. [applause] since 1993 we have all begun to see the benefits of deficit-reduction. lower interest rates have made it easier for businesses to borrow and to invest and create new jobs. vlore interest rates have brought down the cost of home mortgages, car payments and credit card rates to ordinary

citizens. now, it is time to finish the job and balance the budget. [applause] though differences remain among us, which are significant, the combined total of the proposed savings that are common to both plans is more than enough, using of the numbers from your congressional budget office to balance the budget in seven years and to provide a modest tax cut. these cuts are real, they will require sacrifice from everyone. but these cuts do not undermine our fundamental obligations to our parents, our children and our future. by in danger in medicare or medicaid or education or the environment or by raising taxes on working families. [applause]

i have said before and let me say again many good ideas have come out of our negotiations. i have learned a lot of at about the way both republicans and democrats view the debate before us. i have learned a lot about the good ideas that we could all embrace. we ought to resolve our remaining differences. i am willing to work to resolve them. i am ready to meet tomorrow. but i ask you to consider that we should at least enact these savings that both plans have in common and give the american people their balanced budget, tax cuts, lower interest rates and a brighter future. we should do that now and make permanent deficits yesterday's legacy. [applause]

now it is time for us to look also to the challenges of today and tomorrow, beyond the burden of yesterday. the challenges are significant, but our nation was built on challenges. america was built on challenges, not promises. and when we work together to meet them, we never failed. that is the key to a more perfect union. our individual dreams must be realized by our common efforts. tonight i want to speak to you about the challenges we all face as a people. our first challenge is to chair short children and strengthen america's families. family is the foundation of american life. if we have stronger families, we will have a stronger america. before i go on, i would like to

take just a moment to thank my own family, and to thank the person who has taught me more than anyone else over 25 years about the importance of families and children, a wonderful wife, a magnificent mother, and a great first lady. thank you, hilary. [applause] [applause] all strong families began with taking more responsibility for our children.

i have heard mrs. gore say that it's hard to be a parent today, but it's even harder to be a child. so, all of us, not just as parents but in our other roles, our media, our schools, our teachers, our communities, our churches and synagogues, our businesses, our government, all of us have a responsibility to help our children to make it and make the most of their lives and god-given capacities. to the media, i say you should create movies and cds and television shows. he would want your own children and grandchildren to enjoy. [applause] i call on congress to pass the requirement for a v-chip in tv sets so that parents can screen out programs they believe are

inappropriate for their children. [applause] when the parents control what their young children see that is not censorship, that is enabling parents to assume more personal responsibility for their children's upbringing. and i urge them to do it. the v-chip requirement is part of the important telecommunications bill now pending in congress. it has bipartisan support, and i urge you to pass it now. [applause] to make the v-chip work, i challenge the broadcast industry to do with the movies have done, to identify your program in ways that help parents to protect their children. and i invite the leaders of the major media corporations and the entertainment industry to come to the white house next month to work with us in a positive way

on concrete ways to improve what our children see on television. i am ready to work with you. [applause] i say to those who make and market cigarettes every year a million children take up smoking. even though it's against the law. 300,000 of them will have their lives shortened as a result. our administration has taken steps to stop the massive marketing campaigns that appeal to children. we are simply saying market your product to adults, if you wish, but draw the line on children. [applause]

i say to those who are on welfare, and especially to those who have been trapped on welfare for a long time for too long our welfare system has undermined the values of family and work, instead of supporting them. the contras and ai cormier agreement on a sweeping welfare reform. we agree on time limits, tough work requirements, and the toughest possible child support enforcement. but i believe we must also provide child care so that mothers who are required to go to work can do so without worrying about what is happening to their children. [applause] fight challenge this congress to send me a bipartisan welfare reform bill will really move people from welfare to work and do the right thing by our

children. i will sign it immediately. [applause] let us be candid about this difficult problem. passing a law, even the best possible law, is only a first step. the next step is to make it work. i challenge people on welfare to make the most of this opportunity for independence. i challenge american businesses to give people on welfare the chance to move into the workforce. i applaud the work of religious groups and others who care for the poor. more than anyone else in our society, they know the true difficulty of the task before us, and they are in a position

to help. every one of us should join them. that is the only way we can make real welfare reform a reality in the lives of the american people. to strengthen the family, we must do everything we can to keep the team pregnancy rate coming down. i am gratified command line sure all americans are, that has dropped for two years in a row. but we all know it is still far too high. tonight i am pleased to announce that a group of prominent americans is responding to that challenge by forming an organization will support grassroots community efforts all across our country and a national campaign against teen pregnancy. and i challenge all of us every american to join the efforts. i call on american men and women and families to give greater respect to one another. we must and the dippy discourage

of domestic violence in our country. [applause] and i challenge america's families to work harder to stay together. for families that stay together not only do better economically, their children do better as well. in particular, i challenge the fathers of this country to love and care for their children. if your family has separated, you must pay your child support. we are doing more than ever to make sure you do, and we are going to do more, but let's all admit something about that, too. a check will never substitute for a parent's love and

guidance. and only you, only you can make the decision to help raise your children to leave the matter who you are, how low or high your station in life, it is the most basic human duty of every american to do that job to the best of his or her ability. [applause] our second challenge is to provide americans with the educational opportunities we will all need for this new century. in our schools and every classroom in america must be connected to the information superhighway, with computers and good software, and well-trained teachers. we are working with the telecommunications industry, educators and parents to connect

20% of california's's classrooms by this spring and every classroom and every library in the entire united states by the year 2000. [applause] i ask congress to support this education technology initiative so that we can make sure that this national partnership succeeds. every diploma ought to mean something. i challenge every community, every school and every state to adopt national standards of excellence, to measure whether schools are meeting those standards, to cut bureaucratic red tape so that schools and teachers have more flexibility for grass-roots reform, and to hold them accountable for the results. that is what our goals 2000 initiative is all about. i challenge every state to give all parents the right to choose which public school their

children will attend form new schools with a charter they can keep only if they do good job. [applause] i challenge all of our schools to teach character education, to teach good values and good citizenship. and if it means that teenagers will stop killing each other over designer jackets, then our public schools should be able to require their students to wear school uniforms. [applause] i challenge our parents to become their children's first teachers. turn off the tv. see that the home work is done. and visit your children's classroom. no program, no teacher, no one else can do that for you. my fellow americans, higher education is more important today than ever before.

we've created a new student loan program that made it easier to borrow and repay those loans and we have dramatically cut the student loan default rate. that's something we shall all be proud of because it was unconscionably high just a few years ago. through americorps our national service program, this year, 25,000 young people will earn college money by serving their local communities to improve the lives of their friends and neighbors. [applause] these initiatives are right for america and we should keep them going. and we should also work hard to open the doors of college even wider. i challenge congress to expand the work study and help 1 million young americans work their way through college by the year 2000, to provide a 1,000-dollar merit scholarship

for the top 5% of graduates in every high school in the united states. [applause] to expand pell grant scholarships for deserving and needy students and to make out the $10,000 a year of college tuition tax deductible as. it's a good idea for america. [applause] our food challenge is to help every american who is willing to work for a achieve economic

security in this new age. people who work hard still need support to get ahead in the new economy for a lifetime and for raising children the aid required to the retirement security, the need access to health care. more and more americans are finding that the education of their childhood simply doesn't last a lifetime. i challenge congress to consolidate 70 overlapping integrated job-training programs into a symbol voucher worth $2,500 for unemployed or underemployed workers to use as they please community college tuitions or other training. this is a g.i. bill for american workers and we shall be able to agree on. [applause]

more and more americans are working hard without a raise. congress sets the minimum wage. within a year the minimum wage will fall to authority year low in purchasing power. $4.25 an hour is no longer in minimum wage but millions of americans and their children are trying to live on it. i challenge you to raise the minimum wage. [applause]

in 1993, congress cut the taxes of the 15 million hard pressed working families to make sure no parents to work full-time would have to raise their children in poverty. and to encourage people to move from welfare to work. this expanded earned income tax credits to is now worth about $1,800 a year to a family of four living on $20,000. the budget bill vetoed would have reversed this achievement and raised the taxes on nearly 8 million of these people. we should not do that. we should not do that. [applause]

but i also agree the people who are helped under this initiative are not all those in our country who are working hard to do a good job raising their children and their work. i agree we need a tax cut for working families with children to leave that one of the things most of us in this chamber i hope can agree on. i know it is strongly supported by the republican majority coming and it should be part of in the final budget agreement to the [applause] i want to challenge every business that can possibly afford it to provide pension for your employees. and i challenge congress to pass a proposal recommended by the white house conference on small business that would make it easier for small businesses and farmers to establish their own pension plans. that is something we should all agree on.

[applause] we should also protect existing pension plans. two years ago, with bipartisan support that was almost unanimous on both sides of the aisle. we move to protect the pension of 8 million working people and to stabilize the pensions of congress should not let companies endanger those workers' pension funds. [applause] i know the proposal to liberalize and players to take money out of the pension fund for other purposes would raise money for the treasury. but i believe it is false economy. i vetoed the proposal last year, and i would have to do so again.

[applause] finally, if our working families are going to succeed in the new economy, they must be able to buy health insurance policies that they do not lose when they change jobs or when someone in their family gets sick. over the past two years, over 1 million americans in working families have lost their health insurance. we have to do more to make health care available to every american. and congress should start by passing of the bipartisan bill sponsored by senator kennedy and senator kassebaum that would require insurance companies to stop dropping people when they switch jobs and stop denying coverage for pre-existing conditions. let's all do that to the [applause]

even as we enact savings in the programs we have a common commitment to preserve the basic protections of medicare and medicaid. not for the poor people in working families and putting children, people with disabilities, people with aids, senior citizens in nursing homes. in the past three years, we have saved $15 billion just by fighting health care fraud and abuse of. we have all agreed to save much more. we've all agreed to stabilize the medicare trust fund. but we must not abandon our fundamental obligation to the people who need medicare and medicaid.

america cannot become stronger if they become weaker. [applause] the g.i. bill for workers' tax relief for education and child rearing mentioned availability of protection. access to health care, preservation and medicare and medicaid, these things along with the family and medical leave act passed in 1993 these things will help responsible hard-working american families to make the most of their own lives.

but employers and employees must do their part as well as they are doing in so many of our companies working together, putting the long term prosperity ahead of the short term gain. as orders increase their hours and productivity, and lawyers should make sure they get the skills they need and share the benefits of the good years as well as the burdens of the bad ones. when companies and workers work as a team, they do better and sodas america. our fourth great challenge is to take our streets back for the crime and gangs and drugs. and at last we have begun to find a way to reduce crime. for many community partnerships with local police forces to catch criminals and prevent crime. this strategy called community policing is clearly working. violent crime is coming down all across america. in new york city comer girls are down 25% and st. louis, 18% and in seattle, 32%. but we still have a long way to go.

before our streets are safe and our people are free from fear. the crime bill of 1994 is critical to the success of the community policing. it provides funds for 100,000 new police in the communities of all sizes. we are already one-third of the way there. and i challenge the congress to finish the job. let us stick with the strategy that's working and keep the crime rate coming down. [applause] now we conclude a look at the state of the union speeches from the past with a 2005 address from president george w. bush to the he came to the house chamber for three months after being freed elected to give remarks that focus mainly on domestic issues. we will show you a part of that now. runs about 40 minutes.

>> mr. speaker, the president of the united states. [applause] [applause]

[applause] [applause] [applause]

[applause] [applause] [applause]

members of congress i have the privilege and distinct honor of presenting to you the president of the united states. [applause]

mr. speaker, vice president cheney, members of congress, fellow citizens, as the new congress gathers all of us in at the elected branches of government share a great votes privilege. with a new place in office by w the votes of the people we thais serve. and tonight, that is a privilegw we share with newly elected leaders of afghanistan, theritoi palestinian territory, ukraine and a free and sovereign iraq. [applause]

[applause] othis two weeks ago i stood on the c steps of this capital and renewed the commitment t of our nation to the guiding ideal of liberty for all. this evening i will set forth t policies toha ideal ld.wor advance tonight with a healthy growing economy, with more americans active force with more americans going back to work with our nation and active force for good inn the i world, the state of our union is confident and strong. [applause] been bles our generation has been blessed by the expansion of opportunity come by advances in medicine, by the securities purchased by our. parents sacrifice. in now as we see a little gray in h

the mirror, or a lot of gray and what your children moving into adulthood, we askio the question what will be the state of their union.choices we members of m congress, which re as we meet together will answerr that qaluestion. over the next several months on issue after issue let us do what americans have all done andorld build a better world for our children and our grandchildren. [applause] first, we must be good stewards of this economy and renew the great institutions on which millions of our fellow citizens rely. america's economy is the fastest-growing of any major industrialized nation. in the past four years, we provided tax relief to every person who pays income taxes, overcome a recession, opened up