Bush stresses taxes, trade in speech

NEW YORK (CNNMoney.com) -- In the first of two speeches on the economy this week, President Bush on Tuesday broadly outlined his economic growth agenda, which he said includes keeping taxes low, expanding U.S. free trade agreements, reducing the country's dependence on foreign oil and implementing a health care system that is "patient centered and not government centered."

"I'm going to submit a budget for Congress to look at that shows how we can balance the budget in five years and keep your taxes low," the President said in an address to employees and guests of construction and mining equipment maker Caterpillar in Peoria, Ill.

President Bush has urged lawmakers repeatedly to preserve his tax cuts, which are currently set to expire after 2010 and which he credits with helping to boost the economy out of recession.

Some of his tax cuts draw bipartisan support, such as the higher child tax credit, the creation of the 10 percent tax bracket and increased marriage penalty relief.

But critics say making the tax cuts permanent - in particular the lower rates on capital gains and dividends - will only add to budget woes. In coming years policy-makers will wrestle with an expected surge in costs from Medicare, Social Security, possible reform of the Alternative Minimum Tax, and the cost of the war in Iraq.

On Wednesday in New York Bush is expected to give a more detailed speech on economic conditions

Turning his attention to trade, President Bush highlighted how Caterpillar's exports to China, Chile and Australia have increased since the United States implemented free trade agreements with those countries.

"Opening markets benefits people who produce goods that people want," Bush said.

The president was expected to but did not mention his desire for Congress to renew his fast-track authority to negotiate trade deals, which expires July 1. Fast-track authority means that any deal negotiated by the administration would not be subject to debate in Congress, just an up-or-down vote on the negotiated agreement without changes.

The White House needs the Congress to approve at least a short extension of fast-track trade promotion authority to finish the Doha round of global trade talks and most likely other trade deals with South Korea and Malaysia, which have fallen behind schedule.

Major trading powers this weekend said they would resume the Doha talks, which were suspended six months ago over the issue of farm subsidies.

Trade has been one of the most divisive issues in Congress since Bush took office in January 2001, with Democrats generally pushing for stronger labor and environmental provisions than Republicans have been willing to include in trade agreements.

In a hearing on trade by the House Ways and Means Committee on Tuesday, Chairman Charles Rangel (D-NY) said he wanted to develop a bipartisan plan to renew the White House's ability to negotiate trade agreements that can not be changed by Congress.

Gene Sperling, a senior fellow at the Center for American Progress who previously worked for former President Bill Clinton, said Congress should consider extending the president's fast-track authority "just for the Doha round" if the Bush administration agrees to strengthen labor and environmental provisions.

President Bush also reiterated the energy and healthcare proposals he made during his State of the Union speech last week.

To help reduce the country's dependence on oil from abroad, the president stressed the need to develop new technologies and fuel sources. "I'm a big believer in ethanol," he told the Caterpillar audience.

Last week, he asked Congress to set a goal of reducing American gasoline consumption by 20 percent over 10 years, mostly through a nearly five-fold increase in use of home-grown fuels like ethanol by 2017.

Bush wants to achieve the target through improved vehicle fuel standards and increased production of alternative fuels.

About 60 percent of U.S. petroleum supplies currently come from imports.

Bush also proposed changing how spending on health insurance is taxed. Everybody who buys health insurance, whether through work or independently, would get a standard deduction of $7,500 for individual coverage and $15,000 for family coverage.

This standard deduction would be available to everyone, whether they itemize on their tax return or not. And you can take the full deduction even if your health plan costs less.

The proposal differs from current law in two key ways: 1) under current law, people who buy insurance on their own typically don't get a tax break at all; under the proposal they would; and 2) those who are insured through work can currently buy coverage with an unlimited amount of tax-free money. Under the proposal, a limit would be set.

(Here's a more detailed look at what President Bush's health care proposal would mean to you.)

-- Reuters contributed to this report

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