Good morning. This weekend, I am in Russia meeting with other world leaders at the G8 summit. This annual summit gives us a chance to talk about key issues facing all our nations, such as energy security and the threat of infectious diseases like avian flu.
At this year's summit, we will also discuss how to promote the spread of freedom and democracy, and how our countries can work together to expand trade and prosperity for all our citizens.
As the world's economic powers gather for the G8, the American economy remains the envy of the world. And this week we received even more positive news about our economy. On Tuesday, my administration's Office of Management and Budget released its annual update on the budget outlook. This year's report is very encouraging: Because our economy continues to enjoy strong growth, federal tax revenues are growing, and we are cutting the federal deficit faster than expected.
This good news is no accident. It is the result of the hard work of the American people, and pro-growth economic policies in Washington, D.C. Since 2001, we have cut taxes for everyone who pays income taxes, reduced the marriage penalty, doubled the child tax credit, and put the death tax on the road to extinction. We cut tax rates paid by most small businesses and further encouraged expansion by cutting taxes on dividends and capital gains.
Together these tax cuts have left nearly $1.1 trillion in the hands of American small business owners, workers, and families. And you have used this money to help spur an economic resurgence that has produced 18 straight quarters of growth.
Some in Washington think the choice is between cutting taxes and cutting the deficit. This week's numbers show that this is a false choice. The economic growth fueled by tax relief has helped send tax revenues soaring. When the economy grows, businesses grow with it, people earn more money, and they pay taxes on this new income.
In 2005, tax revenues posted the largest increase in 24 years, and they're projected to rise again this year. The increase in tax revenues is much better than we had projected, and it is helping us cut the budget deficit.
Our original projection for this year's budget deficit was $423 billion. This week's report from OMB projects that this year's deficit will actually come in at $296 billion, a reduction of $127 billion. That is a tremendous difference, and 90 percent of it is because our growing economy has produced a lot more tax revenues.
Because of these new revenues, we now project that we'll meet our goal of cutting the federal deficit in half by 2008, a full year ahead of schedule. This is real progress, yet we cannot depend on a growing economy alone to cut the deficit. We must also cut waste and restrain unnecessary government spending. And my administration is doing its part.
Every year since I took office we have reduced the growth of discretionary spending that is not related to national security. My last two budgets have actually cut this kind of spending. I am also working with Congress to pass a line item veto, which will help me and future Presidents target wasteful spending that lawmakers tack on to large bills. The House has already passed this measure with significantbipartisansupport. Now the Senate needs to act and get a line item veto to my desk to sign into law.
Finally, I will continue to work with Congress to address the unsustainable growth of entitlement spending so that we can save programs like Social Security, Medicare, and Medicaid for our children and grandchildren.
This week's good news confirms the wisdom of trusting the American people with their own money and being wise with the money they send to Washington. By pursuing pro-growth policies and restraining government spending, we will keep our economy the envy of the world. We will create more jobs and opportunities for all our citizens, and we will deliver results for the American taxpayer.
Thank you for listening.