house property capital gain exemption

the president: thank you all. thanks for lettingme come by. please be seated. thanks for the warm welcome. it's good to be in the heartlandof america. thanks for coming to let me visit with you a little bit about our economy. ireally want to thank the good folks at caterpillar for letting me come by. i like it when theysay, team caterpillar. that's a good sign. it means people are working together for thecommon good. (applause.) you know, people from texas like to say, thingsare better in texas. well, when you tour the cat plant here, it's -- having second thoughtsabout if things are better in texas. (laughter and applause.) i'm impressed by the machineryi have seen. more importantly, i'm impressed by the workers i have met who are puttingthe machines together. (applause.) and i'm

impressed by a culture of excellence and accomplishmentthat is the spirit of caterpillar. i also appreciate the chance to drive a d10. if you'venever driven a d10 -- (laughter) -- it's a cool experience. (laughter.) i'm going to go to new york city tomorrowto deliver a speech on the state of the economy, but i really want to spend a little time herein peoria to see how things are going. i was at the sterling brothers -- sterling familyrestaurant today -- sterling brothers? -- sterling family, yes, run by two brothers -- and metwith some small business owners, social entrepreneurs, as well as business entrepreneurs. i wasn'tsurprised by what i heard. it reminded me about the greatness of america. i heard aboutpeople willing to work hard to achieve dreams,

and people realizing that when they achievedreams they have an obligation to help others. it seems like to me the community spirit herein peoria, illinois is strong. and that's the way our economy is, as well.it's a strong economy. and the fundamental question is, what are we going to do to keepit strong? it's one thing to say today's economy is strong -- i say it because inflation isdown, interest rates are down, wages are on the increase, unemployment rate nationallyis low, people are working and putting more money in their pocket. and the question facingthe country is, what are we going to do to make sure it's strong tomorrow? as i saidto congress, we don't need more government, we need more enterprise. and so i want tospend a little time talking with you today,

talking about the economy. before i do, i want to thank congressman raylahood. he's been bugging me ever since i got elected president -- (applause) -- i didn'ttell you what he's bugging me about. he's bugging me to come to peoria. he said, whenare you going to show up? i kept saying, as soon as possible. the moment has finally arrived,and i'm glad i came. thank you for the invitation. i appreciate jim owens, the chairman and ceoof caterpillar. i thank bob williams for helping me with the tour. i thank gerry shaheen, whois the group president of caterpillar. i want to thank the workers i met with today. i spentsome time with people on the line, talking about the education programs here at thisfine company. i thank the leaders of the uaw

who welcomed me here. i thank the folks upand down the line who put up with me and all the cameras. i just don't travel alone thesedays, in case you've noticed. (laughter.) i want to thank mayor jim ardis, mayor ofpeoria, illinois. i met him at the airport. it was about -10. (laughter.) i said, do youwant to get in the limousine? he said, as fast as possible. (laughter.) so we droveover to the sterling family restaurant together. i was impressed by your young mayor. i wantto thank the local and state officials who joined us. i appreciate you serving. i appreciateyou doing what you think is right for the community that you represent. but most ofall, thanks for letting me come. people say, why would you want to go to peoria,and i just told you -- i want to get out of

washington and sit down with folks that arereally the backbone of this country. and i wanted to come to one of america's great companies,and that's caterpillar. (applause.) the good folks here show others that in themanufacturing world, we can compete. and that's really what america -- what americans wonder,can you compete in a global economy? and my answer is, darn right you can, with good policy.and in this company, you've shown how to compete. i want to spend some time explaining thatto the american people why competition is important, and why america can compete withanybody, anytime, anywhere, and why it's in our interest to do so. first of all, it's important for people toknow that caterpillar employs 48,000 workers

across america. secondly, more than half thoseworkers are here in illinois, 17,000 of them right here in peoria. caterpillar has greatworkers because it has got good training programs. caterpillar can employ new people becauseit makes good product that people want. i appreciate very much the notion that youall are in this deal together. that's what "team" means, that everybody works togetherfor the common good, and if it benefits one, it benefits all. and that's the spirit i havefound here. and our job in government is not to get in your way. our job in governmentis to put pro-growth economic policies in place that mean companies like caterpillar,which do the right things, can succeed. and let me talk some of what that means.

first it means keeping taxes low. oh, there'sa debate in washington that says we need more taxes. we don't need more taxes. it's importantfor you to keep your own money. you work hard for your money and i -- (applause.) i understandworkers are saying, am i going to have more money in my pocket? that's what we want. andone way to make sure you don't have more money in your pocket is for the government to raiseyour taxes. and so we cut taxes. listen, we've been througha tough economic period in this country. you remember it -- right after the -- we headedinto a recession in early 2001, then the terrorists attacked us. and the question was, could werecover? and i worked with congress to cut taxes before the terrorist attack and afterthe terrorist attack. and i believe one reason

why the recession we went through was oneof the shallowest in american history is because we cut the taxes. see, when you have moremoney in your pocket to spend or save and invest, the economy benefits, as far as i'mconcerned. and so one of the challenges we face is making sure that we keep the taxeslow. we cut the taxes on everybody who paid taxes.we increased the child tax credit. look, if you've got a child, we want to help you. wereduced the marriage penalty. i didn't like a tax code that penalizes marriage. i thoughtwe ought to be encouraging marriage, not penalizing marriage in our society. (applause.) we cuttaxes on capital gains and dividends, cut the taxes on small businesses.

now, all those tax cuts affected the performanceof caterpillar. you see, the tax cuts help your workers have more money in their pocket.i happen to believe that if the workers have got more money in their pocket, they're goingto be a more satisfied worker. i know it sounds not very sophisticated to say that, but isuspect it's true. if you got a safe workplace, a workplace where people are working together,you're a better satisfied worker if you're keeping more of what you earn. and that'swhat the tax cuts have helped provide. we helped small businesses with expensingprovisions. that's an accounting term that says if you buy new equipment you get a taxbenefit for buying new equipment. that helps people in caterpillar, because it encouragessmall businesses to use your products. it

also helps make sure the small business sectorremain vital. seventy percent of new jobs in america are created by small businesses,and if you're interested in coming out of a recession, and interested in people working,it makes sense to provide tax incentives to help the small business owner in america.and that's what we did. capital gains and dividend tax cuts benefitpeople who invest in your company. one of the things -- reasons this company is strongis you're able to attract capital. people say, i like what the workers are doing, ilike the product that's being put together, we want to invest, we want to work alongsideof the good people here in caterpillar. and the tax incentives that we provided by cuttingcapital gains and dividends encouraged that

kind of investment. we extended the research and development taxcredit. one reason why caterpillar is a modern, competitive company is because you're alwaysinvestigating new methodologies, you're investing in research. and therefore, in the tax code,we tried to encourage research and development. and so the tax cuts have worked. and i hopeyou don't fall prey to people in washington saying, we need more of your money in orderto balance the budget. i don't think so. i think what we need to do is to set prioritieslike you set priorities with your money, and make sure we focus on that which is necessaryto do. and the most important priority we have is to defend this homeland from attack.(applause.) and we better make sure that when

we have a man or woman in our uniform in harm'sway, they get all the equipment, all the support they need to defend the united states herein the 21st century. (applause.) i have an obligation to submit a budget. it'sone thing to stand up here and say we don't need to increase your taxes, we can set prioritiesand balance the budget; so next tuesday [sic]*, i'm going to do just that. i'm going to submita budget for congress to look at that shows how we can balance the budget in five yearsand keep your taxes low. i want to talk a little bit about trade. tradeis an important subject here at caterpillar, and the reason why is because a lot of theproduct you make here, you sell to somebody else, sell overseas to another country. that'strade. and yet it's -- it's a topic of hot

debate. the temptation is to say, well, trademay not be worth it, let's isolate ourselves. let's protect ourselves. i think it wouldbe -- i know it would be a mistake for caterpillar workers to do that. i think it would be -- iknow it's a bad mistake for the country to lose our confidence and not compete. let me give you some interesting statistics.first of all, we're the largest exporter in the world. last year we exported a record$1.4 trillion worth of goods and services. now, in order to export something, somebodyhas to make it. in other words, when i talk about numbers, behind the numbers is peoplewho are providing the service and/or making the product. so the more one exports, themore likely it is people are going to be working.

exports account for about 11 percent of oureconomy. one in six manufacturing jobs in the united states depends on manufacturingexports. we also benefit when people invest here. there are people who have good-payingjobs as a result of somebody saying, i want to invest in the united states. and so wheni'm talking about opening markets, i'm making sure that not only is our markets open, butsomebody else's market is opened. and we expect people to treat us just the way we treat them.all we ask for is be fair with the american people. we've got free trade agreements. that's howyou make sure that we're treated fairly. our market is open, and we want their market open.we got -- these free trade agreements really

represent only a small fraction of the gdp.in other words, they're not necessarily with significant economies, and yet they accountfor 42 percent of american exports. one way to look at trade is this: we're 5percent of the people in the world; that means 95 percent live outside of america, and shouldn'twe try to put ourselves in a position where we can sell goods and services to those 95percent? i think it makes sense to do so. we've pursued trade agreements. the way itworks is, you have bilateral trade agreements, in other words, with the united states and,say, chile. and we have regional trade agreements and world trade agreements. one world tradeagreement is called the doha round of the wto -- it's basically attempting to make surethat everybody gets treated the same way,

in the same fashion, so that the world marketsare open. again, i repeat to you, i strongly believethat if we can compete with people on a level playing field, nobody can compete with us.and so the key is to make sure the rules are fair. we had bilateral agreement with threecountries when i first became president; they're now up to 13, and we've got three more inthe mill. let me talk to you about caterpillar. halfthe products you make in america are exported. it's an interesting statistic, isn't it? youwalk by one of these things, it's sold right here in the united states, but the other oneright here is sold overseas. cat sells more than 300 products in foreign markets. it'snot just the d10 i drove that gets sold overseas,

there's 299 other products manufactured bythis company, by american workers, that are sold overseas. free trade agreements are helping. we dida free trade agreement with chile. chile has become caterpillar's fifth largest exportmarket since that free trade agreement. in other words, because we lowered trade barriers,and said, you treat us the way we treat you, it has enabled this company to sell more productthan ever before, which means people are working, when you have to make the product. the free trade agreement completed with australiatook effect in 2005. caterpillar exports to australia have grown by 26 percent. in otherwords, opening markets benefits people who

produce goods that people want. and peoplewant caterpillar product. why? because they work. they generally don't break down, themaster craftsmanship is great, and there's a demand for them. opening china's market -- i understand tradewith china is considered controversial. i know that. but i want to tell you something,if you're a caterpillar worker or a caterpillar shareholder, what that has meant; it meantthat caterpillar exports to china have increased by 40 percent since the market was opened.that's helped to create more than 5,000 new jobs right here in america. we're going to continue to negotiate freetrade agreements. and by that i mean we just

want people to treat us fairly. i'm confidentin our ability to sell american product and services overseas if the playing field islevel. a little bit on health care. you've got agood health care plan here, thanks to caterpillar employees. a lot of small businesses don't.the cost of health care is on the rise; you know it. some things we can do to make thehealth care system better is to make sure that customers, the patients, are more incharge of their lives and their plans. i'm worried about frivolous lawsuits that arerunning up the cost of health care. you know that there's about 1,500 counties in americawhere the ob/gyn has left because of frivolous lawsuits, and when somebody gets sued allthe time, they practice more medicine than

is necessary and it runs up your cost. health care needs to have new informationtechnologies. i met some people on the floor that are running some pretty sophisticatedcomputer ware, and we need information technology in health care. the old system of carryinghandwritten files is not efficient, runs up the cost of medicine for you, and leads toerrors. most doctors can't write very well to begin with. (laughter.) it's hard to readtheir writing. we need to change the tax code in a fair waythat treats everybody fairly. in other words, i've got a plan i'm going to spend a littlemore time with in new york tomorrow. i want to talk about energy tomorrow in new york.i'll give you the summary here. dependency

on oil puts us in a position that -- whereterrorists can harm our economy. when you're dependent on a product, and you import thatproduct, if somebody were to inflict damage on a energy infrastructure, it could causethe price of your energy to go up. or if you're dependent upon product from a hostile regime,it means you're in a position of vulnerability. and so i'm going to work with the congressto spend some of your money on technologies that would change the way we live. one ofthe interesting things that's happening is that there's some new battery research takingplace. and i believe within relatively short order americans will be able to drive thefirst 20 miles, and eventually 40 miles, on a new battery. and you can imagine, particularlyin the big cities, if people are using electricity

to drive their car -- and by the way, thecar is not going to look like a golf cart. (laughter.) not exactly looking like one ofthese things, but nevertheless, it will be normal size, something you actually want touse. but you can imagine how this battery technology can change our dependence on oil,because if we reduce the use of gasoline, you reduce your use of oil. and if most ofyour oil is coming from overseas, you're reducing your dependency upon oil from overseas. i'm a big believer in ethanol. you've gota lot of farmers around here who -- (applause.) fifteen years ago, or 20 years ago, if peoplestood up here and said a lot of people would be using a corn product to drive their cars,they'd have said, man, what -- the guy has

kind of lost it, hasn't he? but it's happening.we're up to about -- i think it's 6 billion or 7 billion gallons of ethanol per year now. we're going to run into a constraint prettysoon, though. it turns out corn is needed for more than just ethanol. you got to feedyour cows and feed your hogs. and that's why we're spending some of your money on what'scalled cellulosic ethanol research so we can use wood chips or other agricultural wastesto make ethanol, to power our automobiles. i believe we can reduce our consumption ofgasoline by 20 percent over the next 10 years, in order to be able to meet a goal of becomingless dependent on oil. and it's coming. these are new eras and it's exciting times. (applause.)

this is a global issue, obviously. it's anissue -- for example, when demand for oil goes up in a place like india or china, itaffects the price that you pay at the pump. and therefore, it makes sense for us to helpthese developing countries with new technologies that will not only make them less dependenton hydrocarbons, but better stewards of the environment. and so i appreciate what caterpillar has done.they're involved with what -- we set up what's called the asia pacific partnership on cleandevelopment and climate. i don't know if you know this, but you've sold more than $50 millionworth of equipment to a large coal mine in china to help capture methane gas and turnthat into energy. in other words, you're not

only making cats, you're making interestingproduct that will enable us to be better stewards of the environment. and i thank you for that. and my only point to you is, is that in orderfor us to be competitive, in order for us to remain the economic leader of the world,we're going to have to promote new technologies that make us less dependent on oil. and it'scoming. these are exciting times. i'm very optimistic about meeting the future, becauseof new technologies. i do want to say one thing about education.i really appreciate the worker program, the education program for the workers here. ithink cat spends about $900 a worker to help make sure our workers have the skills necessaryto be competitive in the 21st century. but

good education starts early. and we need tomake sure our public schools, particularly in the early grades, get it right. there's a piece of law i signed that i'm veryproud of called the no child left behind act. the spirit says we're going to raise standards.if you have low standards, you get lousy results. i used to call it the soft bigotry of lowexpectations. if you don't believe a kid can learn, guess what's going to happen -- he'snot going to learn. and so inherent in the no child left behind act says there is a rolefor the federal government. after all, we're spending a fair amount of money, and we oughtto expect good results for that money. so we said, in return for federal money weexpect you, the local districts, to set high

standards and to measure. i've heard everyexcuse for not measuring: you're teaching the test, you're testing too much. how canyou solve a problem unless you measure? and what we need to do is figure out who can reador write early, and have extra money to help those who can't read or write. (applause.) we have an achievement gap in america thatwe better do something about if we're going to be competitive. and by that, i mean whenyou put out the test scores, the minority students test below white students. and that'snot good enough. and we'd better make sure all our children can read early, not justa handful. and therefore, i like the idea of holding people accountable. and we say,we'll measure as a diagnostic tool to correct

problems early. and at some point in time,if schools refuse to change, there needs to be a consequence. there needs to be accountability.this isn't anti-teacher, this is pro-teacher. and it's pro-parent, and equally importantly,it's pro-child. (applause.) and congress needs to reauthorize this bill.it's working. the achievement gap is closing. how do i know? because we're measuring. wecan measure success in schools. it's in our interest as a country to make sure every childgets a good education, and it's important to start early. oh, i'm sure you've heard about all the readingdebates, what works and what doesn't. well, you're able to determine what works or whatdoesn't by measuring. and a measurement system

says to a school, we appreciate your hardwork, thanks for being in the classroom, but you might think about changing your curriculumsince you're not meeting standards. and then what this country needs to do isto recognize that we need to help poor students go to college. that's why we're expandingand increasing pell grants. and then what this country needs to do is understand theimportance of community colleges and support community colleges, to help older workersgain new skills necessary to fill the jobs of the 21st century. in order to compete, we got to have an educationsystem that makes sure all children from all walks of life have skills necessary to fillthe jobs of the 21st century; we got to be

confident and open up markets so that ourcompanies that produce products, goods and services that people want are able to sellthem overseas; we got to have a tax code that keeps taxes low on the people who are workingfor a living; we got to have a health care system that is patient-centered, not government-centered;and we got to make sure that we don't lose our confidence. and if you really knew americalike i'm able to see it, which is to see the compassion and the decency and the courageand the strength of the people, you'd share the same confidence i have about the futureof this country. i'm honored to be with you. (applause.) thanksfor letting me come to the heartland of the united states. god bless. (applause.)