Bush Speaks on Soaring Food and Energy Costs

MARYLAND HEIGHTS, Missouri (May 2, 2008) - The President of the United States on Friday visited World Wide Systems, Inc. in Maryland Heights, Missouri and addressed the economic forces that are impacting consumers and business. Here are a few of the issues he addressed that impact small business owners.

On Soaring Food Costs: The More Prosperous the World, the Higher the Demand for Food

President Bush: Let me talk about price. As you know, I'm a ethanol person. I believe, as I told you, the interim step to getting away from oil and gas is to go to ethanol and battery technologies for your automobiles. I think it makes sense for America to be growing energy. I'd much rather be paying our farmers when we go to the gas pump than paying some nation that may not like us.

And so -- but most of ethanol now -- or nearly all of ethanol now -- is produced as a result of corn. And the price of corn is real high now. And so people say, well, it's your renewable fuels policy that is causing the price of food to go up. I've looked at this issue a lot. Actually, the reason why food prices are high now is because, one, energy costs are high. And if you're a farmer, you're going to pass on your cost of energy in the product you sell; otherwise you go broke. And when you're paying more for your diesel, paying more for your fertilizer because it's got a lot of natural gas in it -- in other words, when your basic costs are going up, so does the cost of food.

Worldwide there is increasing demand. There turns out to be prosperity in developing world, which is good. It's going to be good for you because you'll be selling products into countries -- big countries perhaps -- and it's hard to sell products into countries that aren't prosperous. In other words, the more prosperous the world is, the more opportunity there is.

It also, however, increases demand. So, for example, just as an interesting thought for you, there are 350 million people in India who are classified as middle class. That's bigger than America. Their middle class is larger than our entire population. And when you start getting wealth, you start demanding better nutrition and better food. And so demand is high, and that causes the price to go up.

And finally, there's been weather-related problems. Some of the major producers of food have had drought. That's what happens. Weather patterns change. And so there's a lot of reasons why the price of food is high. And no question that ethanol has had a part of it, but I simply do not subscribe to the notion that it is the main cost-driver for your food going up.

How to Bring Down Energy Costs: Congress Needs to Allow Domestic Exploration

Pres. Bush: Let me talk about energy very quickly. I'm fully aware that people are paying dearly at the pump. The other day at a press conference I said it's like a tax; it's a tax on you. The more that gasoline goes up, the more you're paying -- the more you're paying for the pump, the less money you have in your pocket to spend for your family. I will tell you it's taken us a while to get in this fix, and therefore it's going to take us a while to get out of the fix. But I want to remind you that an energy policy that basically prohibits America from finding oil in our own land is an energy policy that has led to high gasoline prices.

When I first got to the Congress, I suggested that we have a comprehensive energy policy: one that recognizes the short-term effects of being reliant upon foreign oil; one that says we can use new technologies that will enable us to power our automobiles in different kinds of ways, using ethanol, for example, or battery technology; and one, ultimately, that will allow hydrogen to power the car.

So we worked well with Congress on the interim step. As you know, ethanol is beginning to take off, and I'm convinced we're going to be able to make ethanol out of something other than corn here relatively quickly, like wood chips, or grasses grown in the desert, which will be very exciting for the American people. Hydrogen -- we're doing a lot of research on your behalf to have hydrogen-powered automobiles, which means you're running on hydrogen, the waste product of which is water.

But in the meantime, in the short run, we didn't allow exploration for oil and gas in places like Alaska, our outer-continental shelf. And guess what happened? World demand exceeded supply, and now you're paying for it. If Congress truly is interested in helping relieve the price of gasoline, they would do two things: They would recognize that we can drill for oil and gas in environmentally friendly ways here in the United States, where there is good reserves; and they would build refineries. They would encourage the construction of refineries. Do you know that there hadn't been a new refinery built in America since 1976? No wonder there's constricted supplies. If you want more of something, in this case you got to build the additional manufacturing capability. And so our gasoline supplies are restricted, as well.

My attitude is, I understand the pain, but I also understand if we don't allow us to explore in environmentally friendly ways for oil and gas reserves in the United States of America, we'll remain dependent in the short-term on foreign oil. And that's not good for us.

Stimulate Spending: Tax Rebates This Week Should Stimulate Consumers to Spend More

President Bush: Last fall we started to get indications that the economy was going to slow down. And so, believe it or not, you can actually work with Congress sometimes -- with people on both sides of the aisle, which is what we did; these two members were incredibly constructive -- to pass a stimulus package, pro-growth package.

There's two aspects to that package I want to spend some time talking about; one of them is, is that you're going to get some money. It turns out it's your money, but you're going to get it back. (Laughter and applause.) Six hundred dollars per person, $1,200 per couple, $300 per child; a family of four will be getting a $1,800 check. And the reason why -- and by the way, it's going to affect 130 million families. And the reason why that is good policy, first of all, it's a temporary tax relief, recognizing that we're going to recover, and this is to help stimulate that recovery. Secondly, we wanted to make sure that people were encouraged to be consumers. We wanted there to be consumption in our society, and no better way to stimulate consumption than to let you have some of your own money back.

Thirdly, it turns out that this money is going to be very helpful in helping people deal with high energy prices and food price. I'm going to spend a little time on energy here in a minute. And fourthly, it's big enough -- in other words, we didn't want to make a political statement, we wanted to make a statement that will affect this economy. When you're affecting 130 million households, with over $150 billion, a pro-growth package, it's going to affect us positively. The experts say that beginning -- toward the end of this quarter and the beginning of next quarter, we should see some positive signs as a result of the pro-growth economic package.

Stimulating Company Investments

President Bush: The other aspect of the program was to stimulate investment for companies like World Wide. In other words, there's a -- you can effect the tax code that provides incentives for the CEOs to say, I think we need -- we ought to buy some equipment. And that's important for a couple of reasons. One, it makes you more productive, it makes you more competitive, it gives the employees a better chance to keep this company on a cutting edge.

Secondly, somebody has to make that which you purchase. So if the tax code says it's in your interest to buy a piece of equipment, or to buy software, or to buy something to make this company a better company, then somewhere in the economy somebody is going to make it for you. And that also creates jobs. There's a ripple effect for using the tax code to stimulate investment.