By Ron Insana Anchor
updated 4/19/2005 7:23:00 PM ET 2005-04-19T23:23:00

CNBC's Ron Insana sat down with President Bush for an exclusive interview on topics including Social Security, personal savings accounts, the stock market, budget deficit, Medicare, oil prices, the dollar, international trade, and terror.  Here is a transcript of that interview.

Ron Insana: Mr. President, thanks for talking to us today upon your return from Columbia, S.C., still on the Social Security program, reform program down there. What's the reception among the people when you go out in the towns and talks to them about it?

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President Bush: You know, good where I go, but the most important group of people look at it, kinda the people at large. Do they understand we have a problem? In other words, my strategy has been to say there is a problem and now I'm gonna go explain the problem to the American people, and the problem is pretty easy. Baby boomers like me are getting ready to retire and we're gonna live longer, we've been promised greater benefits than the previous generation.

There's a lot of us. Fifty percent more people will be retired when the baby boomers fully retire than the current generation, and there are fewer people paying into the system, which leads to, you know, a deficit in Social Security relatively quickly.

And so I've been explaining the problem to the American people, and it's important -- and by the way, I'm just starting -- and it's important for people to see there's a problem, Ron, because once they see there's a problem, then the next logical step is to say to people elected to public office, 'Why don't you do something about it?'

And so the response has been good. I'm very pleased.

Insana: Now the Washington Post reported, though, that some of the working poor are afraid of making these investment choices in the personal savings accounts that you're offering, and that they would rather have the government just do what it's been doing for the last 70 years, and kind of take that burden away from them.

What do you tell them? How do you explain the program to them?

President Bush: Well, I would explain that if -- you know, personal accounts would be a voluntary plan. In other words, if a worker's nervous about managing his or her own money, and that's what we're talking about, his or her own money, in a conservative mix of bonds and stocks, if that makes somebody nervous, then just stay in the system, however it looks, after there's a permanent fix.

You know, one of the things I think that's very important for people to understand is that there are plans such as this, the idea of private savings in the government. In other words, people from all walks of life have managed their own money through a federal thrift savings plan.

And so when I say that the program ought to give younger workers a better deal by allowing them to save in a personal savings, I'm not inventing something new. This is an idea that has been tried and has worked.

The other thing I say to the person who expresses concern is that I think the government has an obligation to explain to the working person that he or she can earn a better rate of return on her money on a conservative mix of instruments as opposed to what the government has earned.

Insana: But let me ask you about that. Last week, the stock market suffered its worst week in two years.

President Bush: Yeah.

Insana: It's been five years since we hit the all-time highs for the Dow-Jones Industrial Average or the NASDAQ. Someone joked earlier that, you know, the bad news is the stock market's going down. The good news is that my Social Security money isn't in there. Is this the wrong time to be talking about putting Social Security money into the stock market?

President Bush: No. Listen, now's the right time to talk about permanently fixing Social Security because every year we wait it costs $600 billion more for the next generation. In other words, it's going to cost that much more money a year by -- if there's political delay.

Secondly, I mean, I think most people will tell you that if you hold money over a long term, the rate of return on a conservative mix of bonds and stocks clearly is greater than that which the government earns on your behalf.

And finally, there are ways to design plans that take risk out of a plan. In other words, you switch your mix of bonds and stocks to an instrument that allow, that will take care of any market swings toward the end of your retirement, and so there's a -- look, I mean, I cannot believe that people aren't willing, andaren't willing to say to a younger worker, if you so choose, if it's your desire, you should be allowed to manage some of your own money in a personal savings account, just like congressmen and senators get to do.

And I think most people are wise to what it means to manage money. One of the things I said in my speech [Monday] is that we're dealing with a different culture now, Ron, than when you and I grew up.

I mean, a lotta young workers are used to 401(k)s or IRAs. They're used to managing their own money and it makes sense to make sure that the Social Security system allows the younger worker that option, so that the system is a better deal for younger workers.

Insana: Now let me ask you a little bit about the stock market, though, because it's had such a bad week. Is it causing you any worry, at all, with respect to what it means to the economy or, you know, what it means to your Social Security reform plan, for instance?

President Bush: Well, I think the -- you know, the stock market is an indicator of people looking at value. I believe [in] this economy and I believe like most economists believe, that this economy is steady and strong. But people are constantly adjusting and I suspect some of the stock market has to do with the price of gasoline. You know, the price of crude oil tends to go up and the stock market tends to go down.

But, nevertheless, I think long term, the stock market is, will reflect the long-term strength of America.

I mean, we are, we're growing steadily. Relative to other economies, ours is a, ours is a strong economy as well. So, I mean, not only are strong at home, but internationally we are competitively strong.

There's more to do. I mean, we need an energy bill. We need tort reform. I think we may get an asbestos reform piece of litig -- asbestos litigation reform.

Insana: That could come this week, correct?

President Bush: Well, that's what they're saying. I don't know. I mean, I -- you know, I, I, I -- we talk to the Senate and House members all the time and you get conflicting reports. But there is a desire to continue legal reform. I'm going to sign the bankruptcy bill this week, which will be good legal reform.

Insana: I want to circle back to some of those other issues, but if I can, I want to play a little game, kind of 20 questions on how you envision a Social Security compromise. Because you have recently indicated that you're willing to think of a lot of different ideas --

President Bush: Yeah.

Insana: -- and ways to fix this problem. Would you, for instance, trade the personal savings accounts if you were promised a permanent fix for Social Security solvency problems?

President Bush: Well, I think any plan has got to have -- give younger workers an option of investing some of their own money in, in personal savings accounts. First of all, it's not going to pass [inaudible] personal savings accounts; secondly, a plan with personal savings accounts would bring the Social Security system into the modern era.

Let me say something. Social Security worked for a long time. The problem is there's fewer people paying in the system now. And a lot of us are getting ready to retire, so we have to think about modernizing the system. I want Social Security to exist and continue to exist; I just want it to reflect the 21st century. And one important ingredient is to allow younger workers to take some of their own money, set it aside in a conservative mix of bonds and stocks.

Insana: Would you accept those personal savings accounts as add-ons, as some Democrats are suggesting, and then work through some of the solvency issues that we're also talking about?

President Bush: Well, first of all, there needs to be a permanent fix. You keep talking about solvency issues. I agree. I mean, look, personal accounts will make the system better for younger workers. The solvency issue needs to be addressed. And, and you've heard ideas as to how to address solvency. And the Democrats have put out ideas, Republicans have put out ideas. And my job is to keep the process moving forward.

One thing I'm not going to do on your show, in all due respect, is negotiate with myself.

Insana: [Laughs.] Mr. President, we've had this conversation once before.

President Bush: You're wisely trying to get me to negotiate with myself, but I'm not going to do it.

Insana: Are there any items, though, that you favor over others when it comes to fixing the solvency problem, for instance?

President Bush: Well, the only thing I don't favor is raising the payroll tax rate. I think that would be terrible for the economy. And by the way, if we do nothing until the crisis is -- until the system goes bankrupt, in other words, if we wait, it could mean a payroll of upward of 18 percent on young workers, which doesn't make any sense for the economy or for them.

Insana: Do you think the retirement age should be raised to about 70 for those youngsters?

President Bush: Certainly one of the options. As I recall, President Clinton, my predecessor, suggested that might be a good part of the fix. There is, there's a variety of things on the table that I want Congress to discuss. One of the things members of both parties must hear from me is that if you put a good idea forward, I won't use it against you politically. And that's an im -- an important part of making sure there's a good and honest debate. I do worry about members feeling, feeling like they ought to offer a, offer a, you know, a solution and then somebody turns around and bashes them over head politically. And we've got to get rid of that and we've got to wash that out of the system in order for there to be a permanent solution.

Insana: You've recently been to one part of the country, in Ohio, where they have an opt-out provision, where an actual city in Ohio --

President Bush: Yeah.

President Bush: -- as is true in Galveston, Texas, where they're opting out of Social Security and starting their own savings programs. Could there be a national push to do something like that and, and fix the problem through regionalizing or localizing retirement savings?

President Bush: You know, I would hope that, I would hope that we would be able to take the ingredients in these local plans that are so attractive to workers from all walks of life and incorporate it into the current Social Security system. In other words, to modernize the system, to, to recognize that there is an investment, people seek investment opportunities all the time and, and that many youngsters are used to investing their own money. And there ought to be a part of the system that --

Listen, Social Security's important. And I say to seniors around the country, it's very important, Ron, for them to know, that they're going to get their check. I mean, one of the dangers about talking about this issue is that it can be demagogue, in other words, people can go around the country frightening seniors.

Insana: And there's be no benefit cuts to anybody who was born in 1955 or later, correct?

President Bush: 1950.

Insana: 1950.

President Bush: Or before. Absolutely. And that's important for people to -- I know the propagandists are saying otherwise, and I know there's flyers being put out trying to frighten seniors. But the seniors just need to know the system is solvent for them. And once I convince people there is a serious problem, and once I convince seniors that the system is solvent for them, the issue becomes generational; in other words, a grandmom I met today talked about making sure that the system was available for her grandchildren. More and more Americans are beginning to understand that we're really talking about a younger generation of Americans.

Insana: By the same token, only -- according to an NBC News poll, only 32 percent of Republicans support personal savings account and the type of reform that you're proposing. How do you get popular support and congressional support to get this passed?

President Bush: Well, I -- Look, I mean, all due respect to surveys, I've seen, you know, all kinds of answers in surveys, and you can pretty much figure out, you know, what you want to read in surveys. I think most people, when they understand that the government will allow you your choice, your option to set aside some of your money so you can earn a better rate of return than the current system does, will make that choice. And that's all I'm asking Congress, is to make the choice available.

See, I don't think most people -- or, I'm sure they do by now; I hope they do -- a lot of people think there's a Social Security trust, that we take your money, you've worked hard, you pay your payroll taxes, the government collects your money and holds it for you so that when you retire, we just simply give you back your money. That's not how it works. You pay into the system your payroll taxes, the money goes out to pay beneficiaries, and with money left over, the federal government spends it on general programs. So that all that is left behind are a series of file cabinets with IOUs in it. I've seen the IOUs first-hand, by the way, in West Virginia. So there's no real assets in the system. There's paper promises. And what I think we ought to do is to, you know, permanent fix the system and give younger workers the opportunity to build real assets.

Insana: With the size of the budget deficit where it is right now, though, can the U.S. afford the transitional costs, which are estimated to be $750 billion to $2 trillion over a 10-year period. Can you do it?

President Bush: Well, just remember, now, we've got a $11 trillion unfunded liability. So we do already have a liability. And the question is can we, you know, pay for that liability in a smarter way. In other words, the people listening to this program have got to understand the government is committed to $11 trillion, and it's unfunded. And so the fundamental question is can we fund the program in a smarter way. And the longer we wait to come up with a solution, the more drastic the ultimate solution will be. And so now is the time to get something done.

Insana: Now, Medicare is six times the unfunded liability --

President Bush: Yeah.

Insana: -- of Social Security. Why do Social Security first?

President Bush: Well, one of the things is we've just reformed the Medicare system and I think it's important to let those reforms take in -- take hold. We have a Medicare system now which provides preventative screenings for the first time ever, and hopefully that will help save lives and save costs. We've introduced competition to the system. Poor seniors will be able to get drug coverage. In other words, there are some things that are in the new Medicare bill that will hopefully mitigate some of the unfunded liabilities. But no question, we're going to have to deal with the same math that affects Social Security, affects Medicare. Baby boomers retiring, being promised their benefits, with fewer people paying for them.

Insana: Let me ask you about energy because you brought it up earlier.

President Bush: Yeah.

Insana: And you've expressed your concern about rising oil prices. There are some people who worry that even as we wait for your energy bill to be passed we could see a $3 or $4 price-per-gallon for gasoline this summer. Before the bill passes, is there anything you can do to bring down the price so that it's not going to be a burden to the average American come this summer?

President Bush: A couple of points on that. First, you know, it took us awhile to get to where we are today and it's going to take us awhile to become less dependent on foreign sources of energy. Even signing an energy bill, you don't have an instant fix. Secondly, I fully understand high gas prices is beginning to really pinch a lot of our fellow citizens, and that's troubling. There are some things that we need to do in the energy bill, which is encourage more exploration, we need to look refining capacity -- how do we help put regulations in place that will encourage construction of refineries so, at the very minimum, there's a steady source of supply of gasoline. Thirdly, obviously, internationally I'll be talking to our friends about making sure that they understand that if they pinch the world economy too much, it'll affect their ability to sell crude oil in the long run.

Insana: Let me ask you about that specifically --

President Bush: Sure.

Insana: -- because Crown Prince Abdullah from Saudi Arabia is coming to Crawford at the end of the month.

President Bush: Right.

Insana: What are you going to tell him about that?

President Bush: Well, I'm going to explain to him that, you know, a, a, a, high-price crude oil will hurt the international economy.

Insana: Can he do anything about it? The Saudis are pumping flat out.

President Bush: Well, they're not yet. I don't think they're pumping flat out. I do think you're right, I think they're near capacity, and so we've just got, got to get a straight answer from the government as to what they think their excess capacity is. I, I don't think "flat out" is the right description. On the other hand, it is certainly not the way it was in the past, where they had, you know, millions of barrels of excess capacity. Nevertheless, there may be some things we can do. We can make sure that people aren't getting cheated, you know. In other words, that there's fair pricing, market pricing.

But this is a -- this, this, this, this price of gasoline should be a wake-up call to the United States Congress to get an energy bill passed that encourages conservation, encourages exploration for hydrocarbons in environmentally friendly ways, causes us to open up more, you know, portals for liquefied natural gas to come from around the world. I mean, there's a lot of things we need to do. I am for safe nuclear energy expansion. I'm for clean coal technologies. I know ultimately the automobile manufacturers, if the marketplace so demands, are going to have to come up with a different mixture of fuels and automobiles.

Insana: Well, GM and Ford are getting hit pretty hard right now based on how gasoline prices are. Are you worried about what the impact of a weakened General Motors might be on the economy because oil prices and gasoline prices are so high?

President Bush: Well, I think they're going to have to learn to compete. In other words, if the consumer starts saying we want a different kind of automobile, they're going to compete once again with, say, the Japanese automobile manufacturers to, to, to, to get a, to keep their lion's share of market demand.

Insana: Can you try to relax the restrictions on reformulated gasoline? Could you release oil from the strategic petroleum reserve, or take some short-term measures should we see some sort of gasoline shock this summer?

President Bush: Well, you know, I, I -- first of all, the SPRO was put in place for a national emergency. And that's what it's going to be used for. In terms of -- we're going to look at all regulations in terms of the manufacture of gasoline, refining of gasoline. Whether or not, you know, regulations that could prevent a refiner from expanding. The more supply there is of a, of, of a commodity, the, the, you know, it's going to take pressure off of price. And we've got to look at ways to not only mitigate the regulatory causes of price, but also the regulations that will prevent, or discourage people from investing capital to create expansion of refineries.

Insana: Some of your loyal opponents on Capitol Hill today made some cynical comments suggesting that you don't mind way high oil prices because they help some of your friends in the oil business. How would you respond to statements like that?

President Bush: I, I'm the president of everybody. And I -- look, I go to Fort Hood, Texas, and I sit down at a table with a young solider and we're talking about his tour of duty. And one of the first questions he asked me is what are you going to do about gasoline prices, Mr. President?

I mean, here's a kid who has, you know, put his life on the line for our nation's freedom and for peace and he's worried about gasoline prices. 'Course I'm worried about gasoline prices. And a high price of crude drives the price of gasoline.

And listen, I've been talking to Congress for three or four years now about getting a plan in place, getting a bill to my desk that reflects a comprehensive energy plan. And in all due respect to the members of Congress who are -- might be somewhat critical of the administration, it's time for them to stop debating and time for them to get a bill to my desk.

Insana: I want to ask more, a little bit more about energy with respect to its impact on the economy and inflation.

President Bush: Yeah.

Insana: The government, whether it's, you know, your administration or even the Federal Reserve, that inflation's not a problem right now. And that's true unless you are filling up your car, buying a house, now picking up a cup of coffee at Starbucks, sending your kid to school, or paying your doctor bills. Is inflation a problem for the average American that's going unrecognized by the federal government?

President Bush: No, I don't think so. Yes, I think inflation can be a problem for the average American, and no, I don't think it's going unrecognized. As a matter of fact, why I was so strongly for tax relief, you know, I, I, I want there to be more money in the pockets of the average American family. And, you know, some are talking about running taxes back up. I think it would be a huge mistake. I think it would hurt the economy, but more importantly it would hurt the average American family.

Insana: One item that seems to be pushing up the price of oil is a falling U.S. dollar, because oil is priced in dollars.

President Bush: Right.

Insana: And some people are wondering if you are prepared to make a forceful statement or take forceful action to boost the value of the dollar and help drive down the price of oil.

President Bush: Right. Well, I, let me, I, I'll try to make a forceful statement right now. This government is for a strong dollar. We do believe the market ought to set the price of the dollar relative to other currencies, but we are for a strong dollar.

Insana: Now, what about the Chinese currency? We'll talk a little bit about trade here because you came out and said recently that you'd like to see the market set the price of the Chinese currency sometime soon.

President Bush: Right.

Insana: Are you getting any indications from the Chinese government, with which we now have a $160 billion annual trade deficit --

President Bush: No, Ron, I -- listen, I, you know, I, I meant what I said, that China's a trading partner, we would like to see them float their currency. They don't move quite as quickly as we do in America. There have been some indications that they're thinking about a, you know, a interim step toward floating the currency. We're constantly urging them, if they're going to take that step, to take it as soon as possible and eventually get to a float cur -- a, a currency which floats. And, you know, I think you would find that officials all up and down our administration and different cabinet officers, cabinet secretariats are constantly talking to China about this issue.

Insana: How long do you think it'll take them to do it?

President Bush: It's hard for me to predict. It's a non-transparent society. It's not like a democracy, where the China can follow every single movement of our country and all the decision-making because you do a very find job of putting it on the airways and people, people can make calculations as to how fast the United States may or may not do something. We, we don't have that same look into the Chinese government that...

Insana: They've been doing some interesting things on the energy front, cutting deals with Russia, Venezuela --

President Bush: Yeah.

Insana: -- African nations. Do you think the Chinese are trying to crowd the U.S. out of the energy markets? Because five, 10 years from now, their needs are going to be even bigger than our own.

President Bush: You know, I don't think so. I don't think there's a -- you know, and a -- a, kind of a, a, a economic war plan that would crowd the U.S. out of the energy market. I do think they're trying to, you know, satisfy a huge appetite for a massive economy growth, a fast-growing economy. And I was pleased to see that, that they're willing to, you know, build nuclear power plants. And I would hope India would do the same thing, these fast-growing under-developed economies. Because as they demand energy, it would be very helpful that a part of that demand is not in the hydrocarbon sector.

Listen, we're all going to have to diversify away from hydrocarbons over time, Ron.

Insana: Right.

President Bush: I mean, we're just going to have to change our habits. And that's one of the reasons why I funded the hydrogen-powered automobile initiative, fully recognizing that, you know, with the decade we're going to have to think about how to drive different -- you know, power, power our automobiles. It's a -- the hydrocarbon society will still be with us, but it can't be with us to the extent it is today.

Insana: We sat down about 18 months ago last time to talk about the economy and things were starting to take on a much brighter tone than they had in years prior. And I asked you at the time why Americans should rehire you as the CEO of the United States. Right now, only 41 percent of Americans in an NBC News poll --

President Bush: [Starts laughing.]

Insana: I know how much you love polls. Are having a favorable reaction toward your handling of the economy.

President Bush: Yeah.

Insana: How do you reassure them that their decision to rehire you was the right one?

President Bush: Well, to keep pro-growth policies in place. Keep taxes low. It'd be a disaster to raise taxes, in my judgment. It would take money out of the economy, it would give it to the government to spend, it would hurt small businesses and entrepreneurs. Secondly, to continue to push for tort reform. Third, work on an energy bill, an energy plan with Congress, and get a bill to my desk. Make sure we deregulate to the extent possible to encourage investment of capital. Work on a strong dollar policy. Open up markets for U.S. products overseas.

But you know something, Ron? In my position, you know, as I say, there's all kinds of surveys saying all kinds of things. And the only thing I know to do is to stay true to my philosophy and continue to enhance the entrepreneurial spirit in America. That's one of the things that makes the country unique and strong, the fact we got people from all walks of life willing to start a business, for example, and the small business sector of America is very strong and very vibrant today, which to me says that the long-term economic health of the country is in good shape.

Insana: What about the trade deficit? The G-7 over the weekend said that is one of the biggest economic problems in the world. What can you do?

President Bush: Well, it depends if you're selling or buying.

Insana: True.

President Bush: But one of the things, obviously, we've got to do in terms of the trade deficit is make sure America's still a great place to do business in, to invest, that our markets stay liquid, that people feel secure in investing here, and that it's, and that it's just the best place to get a decent rate of return. And that's, that's the way our markets are and we need to keep them that way. We don't need an intrusive government, you know, burdening the capacity of money to move in and out in a fair way.

Secondly, we've got to make sure that people's currencies are properly valued. You got to -- the biggest part of our trade deficit is energy, as well as China. And obviously on the energy front we've got to become more diversified. That's why I support renewables and alternative sources of energy and, and safe nuclear power. But, and on, and on, with China, you know, obviously we're at a competitive disadvantage to the extent that their currency won't float. And so it's not a, certainly not going to be a panacea to get them to float the currency. On the other hand, we got -- we'll continue to press to get them to do so.

Insana: Mr. President, today is the 10th anniversary of the Oklahoma City bombing and a lot of people are reflecting on that act of terrorism --

President Bush: Yes.

Insana: -- that occurred a decade ago, one that we almost forget in light of what's happened since. Can I get your reflections on that event and what it means still even to the war on terror, even if that's a domestic rather than international issue?

President Bush: Well, I appreciate that, Ron. First of all, I know there are people who still suffer in Oklahoma and elsewhere who lost a loved one during that horrific bombing. I have some friends who were in the building, Secret Service agents that had come down when my dad was president, come down to Dallas and, and I hope their loved ones are doing well.

Look, it goes to show that violence can erupt anywhere, any time, and, and as a society we've got to be diligent to those who would try to harm us. It also goes to show that terrorist acts not only come from abroad but can come here at home. The positive news in this instance is the City of Oklahoma came together in strong compassion and decency and care and hope for those who suffered, and our justice system worked. The two perpetuators to that crime are -- have been held to account.

Insana: Mr. President, thank you for your time. Appreciate it.

President Bush: Yes, sir.

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