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MR. SNOW: Good afternoon. A couple of preliminary notes, and then I'll take your questions. First, the President had a call today with Canadian Prime Minister Harper. They talked for 20 minutes. The two leaders, along with Mexican President Felipe Calder n, will meet on August 20 and 21st, in Montebello, Canada. It will be the third time that the three North American leaders have met during this administration.

The meeting agenda will include security and prosperity partnership. The leaders also will have time to discuss bilateral hemisphere and global issues. It will mark the President's fourth trip to Canada.

During today's conversation, they shared initial thoughts about the summit. They also reviewed a range of bilateral issues including the situation with softwood lumber and implementation of the Western Hemisphere Travel Initiative. They briefly touched upon other issues related to the Western Hemisphere, including the importance of supporting President Uribe of Colombia with approval of the free trade agreement with Colombia. Furthermore, the President thanked the Prime Minister for Canada's steadfast support for the people of Afghanistan.

As for some issues that arose this morning, let me do some clarifications on security arrangements and security negotiations. There was talk about arms agreements with the Saudis and others. No such agreements have yet been reached. Let's march you through what we have so far. The announcement yesterday that there will be a recommendation of new aid packages for Israel and Egypt over 10 years -- $30 million for Israel, removing economic supports because those are no longer necessary -- and $13 billion for Egypt, also over 10 years.

There have been conversations with other regional partners. They have been informal, for the most part. As Nick Burns noted yesterday, they've been taking place over the last nine to 12 months. However, there will be an attempt to formalize not only conversations, but agreements by the middle of the month. Mr. Burns will be traveling to the region. These will not be grants, but in fact, the offer of arms sales to allies within the region. So I hope that clears that up.

Also, with regard to the health records and the situation with the Chief Justice, Chief Justice Roberts had made known his history of a seizure to those who were doing the vetting. As a matter of fact, there were press reports at the time. And Senator Specter had mentioned it, I know, in at least one press report, as we go back and look at it. He also had physical exams which were forwarded to members of Congress, and full medical records. So for those wondering what people knew, he was very open about it, and he had mentioned it to the people doing the vetting here at the White House and it was taken into consideration. I don't have any further details beyond that, but that is the situation.

Finally, just a few notes again about what's been going on in Iraq. There has been increasing reporting about changing conditions on the ground. Mark Fox gave a pretty good briefing the other day and I want to share just some of the major findings, again, that our force has been coming up with in recent days, especially in terms of interdicting arms and getting at some of the sources of weaponry that could have created an enormous amount of violence in Iraq.

First, the number of weapons caches captured -- last year, in all of 2006, the number is 2,726. Already to this point in the year it's nearly 3,700 -- 3,698. As you can see, General Petraeus referred to this as staggering, the improvement in the seizures. Just a couple of examples from recent weeks. First, a coalition raid on July 23rd found 21 rifles and pistols in multiple locations, 28 grenades, 252 rockets, 391 mortar rounds, 475 gallons of nitric acid, and 5,000 pounds of fertilizer. Those who have studied Oklahoma City know how devastating the last two can be. And in an Iraqi raid in An Nasiriyah on the 24th, they found 11 heavy machine guns; 42 IEDs; 70 mortar rounds; and approximately 400 rockets of various calibers.

One of the reasons that we are having more success -- the coalition and U.S. forces -- has to do with tips. The number of tips received by Iraqis each month has nearly quadrupled from the spring of 2006 to the spring of 2007, from 6,000 to 23,000. It gives you a sense I think of what happens when there is increased confidence not only in the commitment, but also the competence of the forces involved.

So there is just a little more granularity and it's one of the reasons why there is increasing talk of success certainly on the defense front, but also there remains work on the political front.

Questions. Read more Comment (0), Email this.

MR. SNOW: I'm not aware of that, but on the other hand, you may want to check also with those who did the vetting in the Senate. This was -- keep in mind that the reports were that this was something of indeterminate origin. They did not see that there were larger problems. I don't want to try to pose as a medical expert. But it obviously was not something that was seen as an issue of overwhelming concern, but it was something that people did take a look at, and it is something that he made a point of mentioning up front to those who were doing the vetting. Read more Comment (0), Email this.

MR. SNOW: I don't know if the President got into the details of his medical history, but certainly the people doing the vetting -- and there are a number of those, in Counsel's Office and elsewhere were aware of it and they did take it into consideration. Read more Comment (0), Email this.

MR. SNOW: I don't know. Obviously people had taken a look at it, but I don't want to try to get into trying to disclose confidential medical accounts. But obviously -- again, look, Terry, it's something that you will take seriously, but obviously, upon examining it, they also believed that he would be competent to continue and still do believe so. Read more Comment (0), Email this.

MR. SNOW: He was basically inquiring about his health and how is he doing, and the Chief Justice said, I'm doing fine, thank you for calling. It was a brief conversation, but one where the Chief Justice reassured the President that, in fact, he was doing fine. Read more Comment (0), Email this.

Q Tony, following up on some of the statistics that you're presenting, and there's been a number

MR. SNOW: Well, I think what you're trying -- something interesting is going on, Jim, and this is something that I don't know that we had fully anticipated, but it is maybe the most welcome development, which is, if you take a look at what's been going on on the ground, in many ways what has been going on among the Iraqi people has been outpacing progress within the political realm in the sense that the Iraqis, themselves, are turning aggressively against al Qaeda in a number of areas throughout Iraq now. It's not merely Anbar anymore, but it seems to be spreading. And what you see are the people, themselves, creating conditions for getting to where we want to be in terms of peace and stability throughout the country.

Now, what does have to happen is that members of the political class also have to sit down and they have to reach accommodation on a number of these goals. What is happening is that the approximate security concerns certainly in some of the provinces and in areas of Baghdad -- although Baghdad, itself, is not fully secure -- ought to be creating conditions now where people are going to be able to sort of step back -- you've seen a reduction of sectarian violence and violence against civilians, and those are conditions that we trust are going to lead to political progress. I can't give you a time line on it. Read more Comment (0), Email this.

MR. SNOW: Well, again, I don't want to try to get into -- there have been some conversations, but, frankly, at this point, I'm not in a position to disclose. Let's simply say that there's certainly a recognition on the part of Iraqi leaders, and also Iraqi parliamentarians, that they need to get these things done, and on the part of the Iraqi people. Read more Comment (0), Email this.

MR. SNOW: Members of Congress are going to have to make their own decisions. If you heard Representative Clyburn, the House Majority Whip, yesterday, he said that, in fact, reports based on security might change the minds of a number of people within Congress. I think the most important thing is for members of Congress to assess the facts on the ground. We also have noted that the first product of the surge ought to be increased security. And that seems to be the case.

Having said that, as General Petraeus cautioned, there's always the possibility that somebody is going to succeed with a suicide or an act of mass violence that will be designed to try to trigger larger tensions. I would note that the most recent bombing in Samarra at the Golden Mosque did not achieve that goal.

So I think you take in measure of several different things here: Number one, what's going on in terms of security? Number two, what's going on in terms not only of the attitude of the Iraqi people, but also the actions of the Iraqi people in support of U.S. forces when it comes to achieving a mission? And finally, again, the political question -- I don't have a clear answer for you, other than it is important that the members -- and they do understand this -- that it's important to see progress on the political accommodation front. Read more Comment (0), Email this.

MR. SNOW: No, there will be something going up to the Hill and it will be a little bit later. It's not quite meeting the noon deadline, but he, in fact, will get a response today. And we do -- first, we thank Senator Specter. He agreed to get himself read into the program yesterday and received a briefing and he had some questions. And those questions are going to be answered; they'll be answered in the course of the day, but they have not yet been provided. We expect within the next few hours that he'll have a full response. Read more Comment (0), Email this.

Q Tony, following on that, Senator Specter put out a statement saying that the letter would be available

MR. SNOW: I will let the documents speak for themselves, and he'll have an opportunity. Read more Comment (0), Email this.

MR. SNOW: Again, at this point -- it's not coming out of the White House. Read more Comment (0), Email this.

Q Tony, you used to anchor Fox News Sunday. Were you surprised this past Sunday when the person who

MR. SNOW: No. I must confess I didn't watch it, either. Read more Comment (0), Email this.

MR. SNOW: No. Read more Comment (0), Email this.

MR. SNOW: Well, again, a lot of times a number of considerations go into whether you're going to put somebody on a Sunday show. Do not read into the fact that somebody did not appear on my old program, Fox News Sunday, as a sign that we're backing away from the Attorney General. We are not. Read more Comment (0), Email this.

MR. SNOW: Well, permit me to be strong again. This is another -- what you have in American politics today -- and it's something that I think people are increasingly getting fed up with -- is kind of a race to be most toxic. How can you try to elevate the stakes in what ought to be common, reasoned debate, and do it also in an atmosphere in which Congress, itself, has had a very difficult time getting its own work done? In this particular case, the Attorney General has testified truthfully, and this is the kind of thing that is designed to turn up the temperature rather than to turn on the light. Read more Comment (0), Email this.

MR. SNOW: Well, the Attorney General -- again, as we pointed out, there have been attempts to try in open session to get the Attorney General to comment on things that are classified, and to do that would be irresponsible from the standpoint of national security. Therefore, it is pretty easy, if you want to game it, to ask a question you know somebody cannot answer in open session, and then point out that they didn't answer it the way you would like them to do so.

Again, the Attorney -- so we support the Attorney General. Let there be no question about it -- we support the Attorney General, and, furthermore, as members have an opportunity to examine fully what's going on, they'll be able to -- we hope that they will sit around and make reasoned judgments rather than leaping to theatrics. Read more Comment (0), Email this.

Q But if there was a disagreement about the classified portion of the NSA program, shouldn't the

MR. SNOW: He was asked about the TSP, and there was no disagreement about it. Read more Comment (0), Email this.

MR. SNOW: That is correct. Read more Comment (0), Email this.

MR. SNOW: They will hear from the -- he will hear from the Justice Department. Read more Comment (0), Email this.

Q Second question, following up on the slide presentation that you had earlier, where are most of

MR. SNOW: Well, a couple of things, a couple of things. First, we mentioned at least one of the seizures -- and you get seizures throughout the country. The July 24th raid was in An Nasiriyah. There were multiple locations on the 23rd of July. What you know is that throughout Iraq, there have been insurgent forces and also al Qaeda that have tried to hide caches of weapons so that they can use them for attacks on coalition forces and on the Iraqi people. What is significant is that with increasing regularity, people who are in the know about these things have, in fact, been turning them in, talking about locations and also, frankly, talking about the whereabouts of al Qaeda members and others, so that coalition forces and Iraqi forces operating independently are in a position either to go ahead and seize these weapons caches or try to do interdictions and confrontations with forces that, in fact, have been trying to make life miserable for the Iraqi people.

The most significant factor here is that the Iraqi people are sick of folks who are coming in to kill them. Their view is that those people are not their friends, no matter what they preach. And in point of fact, those who are busy trying to save Iraqi lives -- and that would include the U.S., the Brits, other coalition forces and the Iraqis who are now increasingly standing up -- those are the people that they want to deal with because they are now seen as providing credible protection.

There was a period, Peter, where there were real questions about whether that protection was credible, and so people would turn to other individuals. They would turn to militias, they would turn to al Qaeda. And now you're seeing, with some increasing regularity, greater faith in the coalition and the Americans. And, furthermore, getting to the gist of Jim's question, as you build a greater sense of credibility within the government forces, it also makes it a lot -- it increases the likelihood of making the kind of political accommodations that are going to be vital. Read more Comment (0), Email this.

MR. SNOW: No, it doesn't necessarily mean so. It means that we're being more effective at finding things that have been there. Certainly we are concerned with weapons coming into the country, and we've mentioned that specifically with regard to weapons, especially EFPs that have been making their way in from Iran. And there was also a seizure disclosure, discovery a couple of weeks ago of 34 separate missile batteries that had been arrayed in the desert, also apparently of Iranian provenance.

So there is certainly a problem of weapons coming in through Iran. We continue to make that a point of emphasis. But on the other hand, I'm not sure that you can conclude just because you're finding more weapons that more are coming in. I think what you can conclude is that you're getting more support from the local populous.

Martha. Read more Comment (0), Email this.

MR. SNOW: Don't know. Read more Comment (0), Email this.

MR. SNOW: No, but my guess is that the people are not flooding the hotline with prank calls, but in fact -- Read more Comment (0), Email this.

MR. SNOW: Well, perhaps. But on the other hand, what you do see is a marked change, as you know, in terms of security situations in a number of places on the ground and in terms not only of confronting and exposing the enemy, but also the arms caches. I will -- well, I won't try to characterize because I don't know how many were good tips. Read more Comment (0), Email this.

MR. SNOW: No. I'm not sure that I -- number one, there has been a considerable amount of activity on the part of the legislature. What we have not seen, though, are some of these bellwether items that we've talked about for a long time, principally the oil law -- Read more Comment (0), Email this.

MR. SNOW: But those also remain areas in which, certainly in the conversations the President has had with the Council of Presidents and the Prime Minister, everybody understands not only the importance of it, they do, too, and they continue to try to work the problem. I think that rather than -- Read more Comment (0), Email this.

MR. SNOW: I think because it's a political system and as you see here in the United States -- I hate to continue to make this analogy, but here you have a new democracy in a country that does not have democratic traditions, that has traditions in many cases of people having longstanding enmity at the tribal or the religious or sectarian level that go back centuries, and they are trying to do something extraordinary, which is to knit together a democracy that operates not merely on the principle of majority, but consensus. Read more Comment (0), Email this.

MR. SNOW: The President would love for all this stuff to happen now. But the fact is you also have to acknowledge in a democracy -- to continue the point I was making before -- is that it is a difficult process where people have to work through a lot of their different conflicts and positions as they're trying to iron out something. And what they've done is basically set an even higher benchmark than we do, because we go by majority rule. They're looking for consensus in a new democracy because they think that's the best way to build long-term confidence.

It's tough. I mean, I don't want to -- but I also don't think that this is a reflection of intransigence or a lack of desire on the part of the Iraqis. It's a reflection of the difficulties for this young democracy in working through these issues. Read more Comment (0), Email this.

MR. SNOW: We'll find out. It doesn't mean that you're not going to have people in communication with one another and still continuing to work the problems. Read more Comment (0), Email this.

MR. SNOW: I think rather than having me try to fake inside knowledge of negotiations that have yet to begin, it's better to wait for Nick Burns to go to the region and to conclude what he does and then we'll be able to find out. Read more Comment (0), Email this.

MR. SNOW: The President made clear in his recent speech about the Middle East and also -- and continues to make clear through the Secretary of State and Secretary of Defense, that everybody is expected to play a role in contributing to regional peace and stability. So that's not new. That is part of the deal in the sense that everybody in the region understands that it is very important not only to have a stable and democratic Iraq, but also to play a constructive role in trying to move to a position so that the Israelis and the Palestinians can negotiate according to Quartet conditions; that the Lebanese are going to be able to enjoy democracy without the fear of outside forces; that you're not going to have suiciders and others moving over the Syrian border into Iraq, and so on.

So the President did make clear -- as you recall, he said the Israelis have responsibilities, the Palestinians have responsibilities, and players in the region have responsibilities. So he has made that clear in public forums. Read more Comment (0), Email this.

MR. SNOW: Okay. Sure, Connie. Read more Comment (0), Email this.

MR. SNOW: Well, I'm assuming that that would be a given, Connie. But, again, I'm not going to -- it is not my role to get up here and play junior negotiator for you. We have people who -- no, I would be very junior, I would be a lousy negotiator and I think it's good to leave it in the hands of professionals. Read more Comment (0), Email this.

MR. SNOW: Well, we offered it to Senator Leahy and we hope he'll take up on it, but he -- but it was important and we thought it was important to read in the key members of the Judiciary Committee if they chose to be read in because this is an area of concern to them. So it was offered to both of them; we don't know if Senator Leahy at some later date will take up the opportunity. Read more Comment (0), Email this.

MR. SNOW: He has not taken advantage of it, so he's -- Read more Comment (0), Email this.

MR. SNOW: At this juncture. Read more Comment (0), Email this.

Q The political status in Iraq obviously isn't happening in a vacuum. It's not that the politicians

MR. SNOW: Well, for one thing what you've done is taken a fairly provocative view that may be true in some cases, but certainly not all. What you are seeing in fact is a commitment to the so-called center of government in terms of working with Iraqi and coalition forces and going after al Qaeda, which is a key aim.

Furthermore, as I mentioned before, there are long-held sectarian divisions that create political difficulties, and those are things that you've got to continue to iron through. You have also seen within Shia areas within Iraq the same sort of reaction to those who have been operating against the government.

So I think what you're -- as you begin to build security, and also begin to build confidence in the Iraqi security forces -- which include in some cases Shia units within Sunni areas -- what you end up creating is a greater confidence in the government as a whole in the ability to realize that security is something that does have to be provided by the government, not by militias, not by outsiders, it's not done on a sectarian basis, but is going to be most effectively done on a national basis so that everybody realizes that you've got a government that will protect your security and your rights, regardless of who you are. Understand that it's a tough challenge, but it's also a vital one. Read more Comment (0), Email this.

Q But that's not the dynamic you're seeing. You're not seeing that in Anbar or Diyala that they want

MR. SNOW: Well, as we have discussed, the conditions there are -- General Petraeus has mentioned this, and this also showed up in his earlier report to Congress -- is that while there are requests of this sort, the condition has to be that you will be working in conjunction with and in support of the government. Read more Comment (0), Email this.

MR. SNOW: Correct. Read more Comment (0), Email this.

MR. SNOW: Correct. Read more Comment (0), Email this.

MR. SNOW: Once again you've mischaracterized what's going on here, which is in a case of -- you've got an aid package to Israel and Egypt. Those, of course, have been in place for many years. Read more Comment (0), Email this.

MR. SNOW: No, the others are going to be arm sales. These are not going to be aid packages, these are not going to be grants. These are going to be arm sales. So these individual countries will have an opportunity to buy with their own taxpayers' money. Read more Comment (0), Email this.

MR. SNOW: No, what we're trying to do is to protect people in the region from killers. Read more Comment (0), Email this.

MR. SNOW: Well, yes, we consider it a matter of real importance. And we're making it clear you've got -- the Director of National Intelligence is speaking, he is going to be available for the whole Senate today. I believe he will also be available for the House tomorrow. So I think there are going to be important opportunities for him to express a feeling of urgency.

It is our belief that this is not something you can hold over. This is a top priority, it is urgent. You've got to streamline the system so that people can operate quickly on the basis of information, so they can protect American lives. So we've got a proposal forth and we are hopeful that this thing is going to get acted on before Congress leaves. Read more Comment (0), Email this.

MR. SNOW: The DNI has made it clear that there are certain things that are absolutely -- absolutely -- essential. And he's made that clear. Read more Comment (0), Email this.

Q Tony, two questions. One, last week Under Secretary Nick Burns was on the Hill before senators

MR. SNOW: Well, wait a minute here. You're saying that the U.S. does not have direct access to A.Q. Khan -- Read more Comment (0), Email this.

MR. SNOW: Well, again, look, first, I don't want to try to give -- I don't want to try to fake an answer on what's going on with the A.Q. Khan network. Let me just -- it is important, number one, that he has been apprehended. Number two, again, we continue to support the government of Pakistan. And what we have seen, Goyal, is that there has been a real commitment, especially going into the tribal areas and trying to take care of the trouble spots -- al Qaeda and Taliban -- and to go after them. And that is something that is absolutely critical and we'll continue to support them in doing it. Read more Comment (0), Email this.

Q And second, if I may, quickly -- this was the first time also last week that so many Chinese --

MR. SNOW: Well, the President has talked with the Chinese openly and publicly about the importance of democracy. Read more Comment (0), Email this.

MR. SNOW: It's going to be one of the items, but it's not the -- it is not the focal point. Read more Comment (0), Email this.

MR. SNOW: That's correct. Read more Comment (0), Email this.

MR. SNOW: Well, what the President is going to make clear is that there's a top line of $933 billion. And when members say, well, it's only one percent difference, we're only asking for $22 billion more, well, guess what happens? Here in Washington, what happens is, you start with a little bit more and it rapidly escalates. In fact, over five years, that $22 billion grows to $205 billion. And that's one of the reasons why you have to maintain fiscal discipline. The President has made it clear that he's got a top line for the budget, and furthermore, there are a number of other, depending on the bill, there are other provisions that he finds objectionable.

The real question is, will Congress show flexibility, and also will it show responsibility in the way it handles taxpayer dollars. The simple fact is that $22 billion ain't pocket change, I don't care who you are. And you've got to ask yourself, is this money that is absolutely vital, each and every penny? Or do we have pork, do we have stuff that's political grandstanding? How does this fit into the overall picture?

What the President believes is that for $933 billion, you can probably handle your non-defense discretionary spending, and you can put together the programs that you need -- and actually it includes defense spending, so let me correct that before we have to add an asterisk -- but $933 billion for your top line on these, on non-mandatory spending. And it gives you an opportunity, for members of Congress to debate priorities, to take a careful look, and to do something that maybe isn't done often enough, which is to say, do we need to spend every penny on these programs, or can we be a little more responsible with the taxpayers' money? Read more Comment (0), Email this.

MR. SNOW: I don't know. Again, we have made it clear that we think that it's incumbent upon Congress to present the President with the appropriations bills. Gotten one out of the -- I guess the Senate has only passed one; the House has done almost all of it. It should finish up its business by the end of the week. Read more Comment (0), Email this.

MR. SNOW: None are in conference, and that is a real challenge for Democrats who promised that they, in fact, would move all these bills. So the first priority is to get all these bills done. Get them done separately and get them done clean, and get them to us. Read more Comment (0), Email this.

MR. SNOW: Well, we think -- look, Jim Nussle is somebody who is qualified to be budget director. And at a time when people are saying, well, we want to talk about appropriations -- then you're going to need a budget director to deal with. Rob Portman is leaving. That's it. And so the fact is that Jim Nussle is qualified and we think the Senate ought to remove the anonymous hold, give him a vote. Read more Comment (0), Email this.

MR. SNOW: I don't know, I don't want to try -- for one thing, you're talking about an anonymous hold, so I think it would irresponsible to try to ascribe motives to an individual whose identity we don't know. Read more Comment (0), Email this.

MR. SNOW: No. No, Friday is his last day. Read more Comment (0), Email this.

MR. SNOW: Well, I -- look, far be it from us to get ourselves involved in internal Japanese politics. We obviously think that Prime Minister Abe is an important and valued ally. But we make it a practice not to get ourselves involved in partisan disputes. Read more Comment (0), Email this.

Q Thank you, Tony. The Republican National Committee is meeting in Minneapolis later in the week

MR. SNOW: No, this is a resolution that, as I gather, has 47 sponsors, which is less than a third of the membership of the RNC. There is some question about whether it is directly at odds with administration policy. The President defends his belief that comprehensive reform is the way to go, and furthermore, that the immigration problem is not going to go away. He certainly would -- we've talked about the importance of dealing with border security -- I don't think the people who write the resolution disagree with that -- of trying to identify those who are here illegally, of trying to find ways of making employers accountable, and also coming up with a reasonable list of who's here and who's not; to find more aggressive ways to kick out those who have broken the laws. All of those are things on which people agree. So I think what our message is, is let's work constructively and get stuff done. Read more Comment (0), Email this.

MR. SNOW: I'm not going to comment on the measure. I think at this point what you're talking about is a measure that has minority sponsorship, but on the other hand, look, it's a sign of health in a political party when people do disagree. They're going to be able to hash it out. Read more Comment (0), Email this.

MR. SNOW: Here we go. Questions. Read more Comment (0), Email this.

Q Okay, so I'm going to try from the gaggle this morning -- I'm just a little confused, both from

MR. SNOW: I can understand -- let me try a little better. I understand it's difficult to parse because what you have involved here are matters of classification. Attempts to discuss those in an open congressional setting sometimes is going to lead people to talk very carefully, and there's going to be plenty of room for interpretation or conclusion.

This comes down to conversations in 2004. In 2004 the Department of Justice and the White House all agreed that there was a legal basis for intercepting conversations or communications involving al Qaeda or al Qaeda affiliates in the United States and overseas. There is no dispute about that. That program did not have a name at the time. It was later labeled the terrorist surveillance program, after some press disclosures, and I think the label stuck in 2006. But again, there has never been, at any juncture along the line, any disagreement about the propriety or legality of that program.

Now, when you talk about the terrorist surveillance program, there are many intelligence activities in the American government. We're talking about a very thin slice, limited to exactly what I was telling you about, which is monitoring communications between al Qaeda or suspected al Qaeda affiliates, one in the United States, one overseas. So when the Attorney General talks about TSP, that's precisely what he's discussing. Read more Comment (0), Email this.

Q So, okay, what you're saying then is, when the Attorney General and Mueller were talking about --

MR. SNOW: No, let me just say -- this is where -- look, there are a broad range of intelligence activities that the government is involved in, and from time to time there are going to disputes about some of those intelligence activities. But again, what the Terrorist Surveillance Program, which I've defined very narrowly and carefully, there have been no disputes about that. Read more Comment (0), Email this.

MR. SNOW: Again, I don't want to go too much into the briefing. The answer to your question is, yes. Read more Comment (0), Email this.

MR. SNOW: No, you asked a different question that I said yes to. Read more Comment (0), Email this.

Q Well, let me try this and then ask a broader question. My understanding is, this is a disagreement

MR. SNOW: Again, David, when you talk about "this program," I'm being very specific here, this program, monitoring those al Qaeda conversations, trying to find out what al Qaeda is communicating here in this room -- Read more Comment (0), Email this.

MR. SNOW: Well, what he referred to was a National Security Agency program. I'm giving you a very narrow slice, which is -- because there are lots of programs and lots of activities that are used to try to protect American citizens. This narrow slice, this bit of surveillance on al Qaeda was not, itself, at any point, a subject of controversy, legal or otherwise. Read more Comment (0), Email this.

MR. SNOW: Well, again, you're asking me to get into operational matters and I can't. Read more Comment (0), Email this.

MR. SNOW: No, I think the Attorney General had in mind exactly what I was talking about, which was this particular program, which was not -- I mean, I've described it as a narrow program, but it was a significant program. But there are many other efforts on the part of the federal government to protect the American people.

I cannot get into operational discussion such as the one that you've raised. But again, the question of the propriety of this program, were there concerns about the legality of a program that allowed U.S. authorities, the President to go ahead and approve attempts to intercept communications between these folks -- that simply was not a matter of concern. I'm not going -- Read more Comment (0), Email this.

MR. SNOW: No, again, this is where you get into the fact that there's a possibility that there were broader discussions, and I'm not going to get into the context of those. What is worth noting is that whatever concerns may have been raised, as has been testified by the former acting head of the Justice Department, were, in fact, resolved, and whatever concerns they had were addressed and addressed appropriately to their satisfaction. Read more Comment (0), Email this.

MR. SNOW: No, we don't think he did. Read more Comment (0), Email this.

MR. SNOW: Here's the -- rather call them activities -- and the problem again is you are applying retroactively a label to a program that didn't even have that label at the time this conversation was taking place. And so I cannot -- I don't want to stand here as the judge to try to interpret for you what everybody means when they use that term, when they use "terrorist surveillance program," because it may have different significations to different people. I've told you the narrow construction that the Attorney General has used.

And this gets us back into the situation that I understand is unsatisfactory because there are lots of questions raised and the vast majority of those we're not going to be in a position to answer, simply because they do involve matters of classification that we cannot and will not discuss publicly. Read more Comment (0), Email this.

MR. SNOW: Well, again, when you -- because he has testified truthfully and tried to be very accurate. And what also happens is, you've got an interesting situation, when members of Congress, knowing that somebody is constrained by matters of classification, they can ask very broad questions, and those are questions they know the person sitting on the other side cannot answer thoroughly in an open session -- you can create any kind of perception you want, by saying, well, can't you finish the answer, or why don't you tell us this, or why don't you tell us that -- knowing perfectly well that there are very real constraints there. There's no way that that is not going to create uncomfortable moments for the person sitting in the chair. But you simply cannot give a full and complete answer, because to do so would compromise American security. Read more Comment (0), Email this.

MR. SNOW: Yes. Read more Comment (0), Email this.

MR. SNOW: This is one where I don't want to climb into their heads. All I'm going to say -- because notice yesterday, the Director of the FBI never once used "terrorist surveillance program." It was used in questions to him, and he always said "National Security Agency" -- Read more Comment (0), Email this.

MR. SNOW: No, no, he said "National Security Agency program." Read more Comment (0), Email this.

MR. SNOW: Okay. Read more Comment (0), Email this.

MR. SNOW: As I said, he was very careful about his words, and I am not going to try to read his minds on this. But again, we have been using a very clear and specific definition of TSP. And I just think -- I can't go any further than that. Read more Comment (0), Email this.

MR. SNOW: Well, let me put it this way: There is no question that the legal basis and the activity of providing surveillance of al Qaeda members -- overseas or al Qaeda affiliates tied to people in the United States or communicating with them -- having the federal government go after them, that was not a matter of controversy for the Director of the FBI. Read more Comment (0), Email this.

MR. SNOW: Not if it involves compromising national security. Read more Comment (0), Email this.

MR. SNOW: I'm not going to get into conversations that we may or may not be having. We understand how frustrating it is, but again, what we're talking about -- this is what happens when one turns into a political football highly classified programs, knowing that you have free rein to say whatever you want, knowing that the other side can't respond. Cannot respond without violating the law. Read more Comment (0), Email this.

MR. SNOW: I'm saying that that acknowledged program -- the program that the President disclosed to the American people was not something that was legally controversial. Read more Comment (0), Email this.

MR. SNOW: Because -- what I'm saying is that there was the discussion of a controversy; the controversy did not hinge upon this program that I've discussed -- Read more Comment (0), Email this.

MR. SNOW: Okay -- Read more Comment (0), Email this.

MR. SNOW: I thought I was pretty clear, but maybe I'm just being too -- Read more Comment (0), Email this.

MR. SNOW: Okay, let me try again. The terrorist surveillance program, as it has been labeled -- it was not so labeled at the time -- was a program of doing surveillance on communications of al Qaeda or suspected al Qaeda members internationally -- internationally into the United States. The legal basis of that was accepted by the Department of Justice, and it was not a matter of controversy. To the extent that there were controversies on -- there are many different things that involve the gathering or use of intelligence; some of those may, in fact, themselves have been subjects of controversy, there were controversies about those. It is also the case that whatever controversy had been raised by the then acting Attorney General had been resolved. And that is something that he has said publicly.

I can't -- I know, I know you're going to say, well, what are you talking about? I can't tell you. Read more Comment (0), Email this.

MR. SNOW: Right. Read more Comment (0), Email this.

MR. SNOW: That's right. Read more Comment (0), Email this.

MR. SNOW: I'm not contradicting myself. I'm saying that -- because you're assuming that -- again, the terrorist surveillance program -- no controversy about that -- many intelligence activities, could be some controversies about other intelligence activities. Read more Comment (0), Email this.

MR. SNOW: Again, now we're getting into one of these things where linguistically it becomes a total muddle. I'm simply telling you, I have defined very narrowly what the terrorist surveillance program is, and that has never -- the legal basis and the authority of that were never a matter of controversy. Read more Comment (0), Email this.

MR. SNOW: He's referring to the TSP. He's referring to the program that the President made public. Read more Comment (0), Email this.

Q When you referred to a political football would you include Senator Specter in that? How do you

MR. SNOW: Well, I'll let you refer this to Senator Specter. But Senator Specter is a guy who's got his own opinions. Among other things, one of the things he also said yesterday were calls for a special prosecutor he thought were wholly political and unwarranted. I mean, he's Senator Specter. Read more Comment (0), Email this.

MR. SNOW: I'm just -- I'm not going to get into that. Read more Comment (0), Email this.

MR. SNOW: Well, take a look at what's been going on. There have been a whole series of attempts to go after Alberto Gonzales, on U.S. attorneys and a number of other things, from the beginning of the year. And each one begins with an insinuation rather than a fact. And that's what we have here are a series of insinuations. It is worth going through -- look, Congress has an absolute right and obligation to do oversight and they're free to do so. As a matter of fact, the Department of Justice has been very accommodating in terms of making all its personnel available, thousands of pages of documents available.

And it does seem that what happens is some story comes up, you've got -- it's very easy to understand, with the ambiguities in the language here, how people could get worked up. But the fact is to start out trying to create a benefit of ill behavior on the Attorney General strikes me as not the attitude you strike when you're trying to do due diligence. It's something where you've got your mind made up at the beginning. Read more Comment (0), Email this.

Q You mentioned Senator Specter. He also said in his news conference yesterday that one of the most

MR. SNOW: There are lots of programs in intelligence. I will not talk about any others, but of course -- look, you don't simply have one intelligence program when you're trying to fight a war on terror. There are lots of them. Read more Comment (0), Email this.

MR. SNOW: Well, I understand his concerns. Read more Comment (0), Email this.

MR. SNOW: I don't want to -- it might be worth taking it up with members and asking them what they think of the idea. Read more Comment (0), Email this.

Q I just want to try and jump into this muddle a little bit again. So Mueller is saying that, yes

MR. SNOW: No, it's not preposterous. But it's a great analogy, and I can't even come back with a countervailing analogy. (Laughter.) Read more Comment (0), Email this.

MR. SNOW: No, I know what you're getting at, and the fact is, again, I'm in a position here where I can acknowledge the peas, I can't acknowledge whether there are other things on the dish. So what I can say is -- Read more Comment (0), Email this.

MR. SNOW: Good, then I did succeed. Read more Comment (0), Email this.

MR. SNOW: Yes, just mashed them all together. Let me try to deal with David's question as best I can. And I'll guarantee you right up front it's not going to be satisfactory, because to give a satisfactory answer means telling far more than we're simply in the position to be able to tell. I'm sorry about that, but that's the way it is. When it comes to matters of classification, these are simply not things that you can discuss in great detail out in public. And therefore, it does lead to conversations like this one where we look like we're chasing each other around the -- Read more Comment (0), Email this.

MR. SNOW: No, I think -- to the extent that -- what he's trying to do is to be precise. You also understand that if one is construed as being too loose with language in a situation like this, all of a sudden people can import all sorts of other meanings in things and you're in deep trouble, too. It's a really, really difficult situation . You've got people trying to talk in open session about things the vast majority of which you can't talk about in open session. So you have to be very, very careful in the way you do it. You certainly are going to stand accused of parsing; probably better that than spilling the beans. Read more Comment (0), Email this.

MR. SNOW: Yes. I mean, he's -- but what's happened is -- look, it is clear that there are a lot of members of Congress who don't like his performance. But the President supports him ad the President supports his performance. Read more Comment (0), Email this.

Q Among those members were some Democratic senators who are privy to intelligence briefings, who

MR. SNOW: I don't want to get into that because I think you've seen a number of people who have had access to this, having themselves differing memories -- I don't want to get into being the referee of that. Read more Comment (0), Email this.

MR. SNOW: Well, again, there have been others, but I will allow them to speak for themselves. Read more Comment (0), Email this.

MR. SNOW: Let's finish this, and then I'll get to the economy, Wendell. Go ahead, Ken. Read more Comment (0), Email this.

MR. SNOW: Again, I can't -- I just can't go any further than I've gone. Read more Comment (0), Email this.

MR. SNOW: I know, like I said, it's a natural consequence of frustration at this line of questioning. Read more Comment (0), Email this.

MR. SNOW: As I've defined TSP, that is correct. Read more Comment (0), Email this.

MR. SNOW: Please. Read more Comment (0), Email this.

MR. SNOW: Yes. (Laughter.) Read more Comment (0), Email this.

MR. SNOW: Yes, I think so. Yes, I mean -- Read more Comment (0), Email this.

MR. SNOW: Look, I cannot -- I cannot serve as the fact witness of everything that was in their head and try to unpack exactly what they meant. But I'm sure that both men were up there telling the truth and the whole truth as they understood it. Read more Comment (0), Email this.

MR. SNOW: I'm not going to go any further than I've gone. Read more Comment (0), Email this.

MR. SNOW: Yes, of course, in due course. Read more Comment (0), Email this.

MR. SNOW: Before the deadline. Typically -- you will know what our response is. Read more Comment (0), Email this.

MR. SNOW: The Grim Reaper -- oh, my goodness. Read more Comment (0), Email this.

MR. SNOW: Have you heard this story? Read more Comment (0), Email this.

MR. SNOW: They've got this hospice where this cat climbs in bed with people in the final hours. Go ahead. Read more Comment (0), Email this.

MR. SNOW: Come on, Connie, that's -- Read more Comment (0), Email this.

MR. SNOW: You mean, do we all have resignation letters in the file? No, unless someone has written one for me and stuffed it in the desk and I'm unaware of it. Read more Comment (0), Email this.

MR. SNOW: It includes the way -- yes, the way the President put it together. Read more Comment (0), Email this.

MR. SNOW: Well, yes, that's right. The program as it was then constituted and operating. Read more Comment (0), Email this.

MR. SNOW: At this point, probably the best way is, let's just -- I don't think we're ready to cross that river yet. Read more Comment (0), Email this.

MR. SNOW: That's not an answer, yes. I'm just -- I'm not prepared to answer that question right now. Read more Comment (0), Email this.

MR. SNOW: Okay, that's right, you know what -- that's absolutely right. Wendell. Go ahead, Wendell. Read more Comment (0), Email this.

Q Secretary Paulson says that the shake-out in the market, if you want to call it that, is a wake

MR. SNOW: Well, number one, I am unaware of any time in which the President said, come on, come all, buy a house you can't afford. Read more Comment (0), Email this.

MR. SNOW: Well, that's right. So I think you've created a strawman there. What the President has said is that it's important to have an economy that continues to provide for jobs, opportunity and income. He has celebrated, quite rightly, the growth of home ownership in this country. And one of the things you want to do to deal with the situation now is to create enough continued growth in the economy so that at some point we'll have the possibility of interest rates once again moderating. But it's also important for people to make wise choices in how they finance their homes. I mean, all of those are legitimate issues, but I think the idea that somehow the President -- you lay it at the President that a lot of people went out and bought homes, that seems an awful stretch. Read more Comment (0), Email this.

MR. SNOW: Let Wendell continue -- Read more Comment (0), Email this.

MR. SNOW: Oh, good. Read more Comment (0), Email this.

Q I'm not saying that at all. I'm asking you whether or not the President may have contributed to

MR. SNOW: So, in other words, it would have driven our numbers from the high 90s to the mid 90s. Read more Comment (0), Email this.

MR. SNOW: Everybody is paying it. I was unaware of a big burst. I'm not sure that the home ownership created a bonanza at the polls. Perhaps it did. The fact is -- what's really interesting, Wendell, is you take a look at all the economic numbers, and we still have the strongest economy we've had in a very long time.

One of the other things that Hank Paulson said, the world's economy is the strongest he's ever seen it -- somehow that doesn't seem to have been reflected. So if you're trying to import some sort of political insinuation, somehow we didn't get the benefit, so let's take the political piece out of it. When it comes to trying to figure out how to come up with a system that is going to be able to enable folks to finance their homes and to achieve the American Dream, that's something the President does support. And if problems come up along the way that deserve addressing, I'm sure that we'd be happy to look at them, and I'm sure Congress would, as well. Read more Comment (0), Email this.

Q Tony, there are chain-reaction effects to what's happening on the sub-prime market. We've got

MR. SNOW: Let me offer several general propositions. Number one, as I said early on in my tenure here, I do not make market-moving pronunciamentos from the podium, whether they be about the value of the dollar, or the proper levels of prime interest rates, or so on. Furthermore, you have laid out a scenario that had dominos toppling hither and yon at some point in the future. Whether they do or not, I am not competent to tell and, therefore, not competent to answer about consequences.

It is important to realize that the President does believe in fiscal responsibility. He also believes in trying to keep the economy growing, so that people will have options and will have income streams and will have strong futures, and furthermore, that you've got a Treasury team that continues to look at these and many more issues to try to maintain the strength of the American economy. And despite the sort of cataclysmic scenario you've just laid out, we've just gotten a report that indicates that there's, in fact, extraordinary strength in the American economy, something that would be the envy of the rest of the industrialized world. It is our challenge to build on that and where there are problems, to address them.

April. Read more Comment (0), Email this.

Q Tony, on Iraq, General Barry McCaffrey said about an hour ago -- he said he'd given the administration

MR. SNOW: Since you're presenting me with Barry McCaffrey quotes that I've not been able to read or see in context -- Read more Comment (0), Email this.

MR. SNOW: -- or just email me. But either way, I'm not going to respond right now. Read more Comment (0), Email this.

MR. SNOW: That is correct. Read more Comment (0), Email this.

MR. SNOW: Goyal, what do you think? I mean, the President has already made it clear that closer relations with India are pivotal for us. Of course, he takes interest in it. Read more Comment (0), Email this.

MR. SNOW: One of the things that was of concern during the conversation about comprehensive immigration reform is that if you did not get comprehensive federal legislation, localities would try piecemeal to apply different solutions, and it would make it rather difficult to figure out what to do from jurisdiction to jurisdiction. Senator Lindsey Graham made that point on a number of occasions.

But you know what, localities do, in fact, have their own federalist responsibilities and freedoms when it comes to doing certain types of legislation, so I'm certainly not going to get into arguing about it. We still think the best way to deal with the immigration problem is on a comprehensive basis. Read more Comment (0), Email this.

MR. SNOW: Okay, well, let me talk to John, and then you and I will hook up again. Read more Comment (0), Email this.

MR. SNOW: Well, once again, typically a special counsel is something appointed by the Department of Justice. But I'm not going to get into that right now. Read more Comment (0), Email this.

Q Tony, going back to McCaffrey, McCaffrey has stated -- and this is a man that the President has

MR. SNOW: Well, that's a prediction on his part. I don't know where he gets it. Read more Comment (0), Email this.

MR. SNOW: Well, the Pentagon, which has thousands of employees. Let me just -- a couple of things. Read more Comment (0), Email this.

MR. SNOW: We like and respect Barry McCaffrey. Again, I am not going to get in a position of trying to fly-speck something that you have back in your -- Read more Comment (0), Email this.

MR. SNOW: I would be happy to do it. But several things to keep in mind: What are we doing about it? In the State of the Union address, the President talked about significantly increasing the size of the military forces, precisely so you could get back into a regular rotation structure. He also talked about rebuilding equipment in a way so that we also didn't have equipment problems. Go back and -- again, you can read it, it's right there, it's in the State of the Union address, it's a five-year plan, it deals with tens of thousands of new forces. Read more Comment (0), Email this.

MR. SNOW: Well, no, because the President knew that we were talking about a way forward. The other thing that has changed is that there's been significant success on the military front -- this is less and less disputed -- in the early stages of the surge. And we've seen it in Baghdad and we've seen it in areas around Iraq. We've seen it also in the change of behaviors of Iraqis, where, with much increasing regularity, they're turning in bad guys -- the number of tips up by something like 400 percent. And you have a significant change on the ground, in terms of the security situation.

We understand the importance of providing for the forces, and also training up not only our own forces by Iraqi forces.

But you're getting me here into a very long philosophical dispute, not having heard what -- Read more Comment (0), Email this.

MR. SNOW: I believe that the generals who have spoken recently have talked about the success of things that are going on, the importance of staying the course -- Read more Comment (0), Email this.

MR. SNOW: Thin? It's a tough war.

Okay, thank you. Read more Comment (0), Email this.

MR. SNOW: Gordon Brown? I believe you'll -- Read more Comment (0), Email this.

MR. SNOW: We did the week ahead this morning. Let me just take -- let me see if I've got any -- let me just -- there will be pool coverage for the arrival on Saturday with the Prime Minister. And there will be a joint press availability -- Read more Comment (0), Email this.

MR. SNOW: I mean on Sunday -- I'm sorry, Sunday. And on Monday at 11:25 a.m., there will be a joint press availability with the Prime Minister. And after that he'll return. Read more Comment (0), Email this.

MR. SNOW: Well, again, it's the topics that you would expect. And it -- I know I say this often, but what will happen is, the two will follow the issues that are closest to them. They'll talk about the Middle East, they'll talk about security in Europe, they'll talk about Darfur. They certainly will talk about Iraq. They will talk about the broader war on terror. Chances are they may talk about political developments in Europe, talk about the Doha Round. So the kinds of smorgasbord of big topics you could expect them to be discussing, but I don't know at what length or what order; that's really up to them. Read more Comment (0), Email this.

MR. SNOW: I don't expect any deliverables. Read more Comment (0), Email this.

MR. SNOW: We'll find out. When Tony Blair -- when George W. Bush came to office, people said, how can there possibly be a close relationship, concerning how close Tony Blair was to Bill Clinton? You got to keep in mind, the things that draw the Americans and Brits together are the personalities of their leaders, but also deep affection and shared interests between the two nations.

With that, we're done. Read more Comment (0), Email this.

CHAIRMAN LAZEAR: Well, thanks for being here. I'm going to lead off. I'm Ed Lazear, Chairman of the Council of Economic Advisers. Carlos Gutierrez, Secretary of Commerce; Hank Paulson, Secretary of Treasury; Rob Portman, Director of Office of Management and Budget are next to me. I will lead, just talk for about two or three minutes. If you have any questions, please ask me right then, because then I will be leaving, and then my colleagues are going to take over from there.

Let me just start by saying that we believe that the economy is back on track. The 3.4 percent GDP growth that we saw during the second quarter is an encouraging sign. I would say it can be summarized as follows: We got one point for consumption, we got one point from non-residential construction and equipment and software, we got a point from exports, a point from government spending, and we lost a half a point on housing. So a very balanced picture this time. And I would say that that, to me, is probably the most important story that we see in this number. Not only is the number a good, strong number, suggesting that the economy is healthy, but it also tells us that we have a somewhat different pattern than the one that we had in the past.

If we look back over the past few quarters, the economy has been driven primarily by consumption. That's not necessarily a bad thing, but when we recognize that our saving rate is negative right now, that's probably not a good long-term pattern. And we need to get back to a situation where we're consuming at levels that are more consistent with kind of a long-run trend.

The negative aspect of that, of course, is that when consumption declines, we take a hit in that quarter in terms of GDP growth and job growth. That did not happen, and the reason it did not happen is because we've had strong growth everywhere else. So even though consumption growth was not as strong as it had been, we had a balanced picture elsewhere. That, to my mind, creates a very robust economy and a very good picture as we move forward.

We see that in a variety of other measures, as well. Employment is still very strong. Every week, when we look at the initial claims for unemployment, that's consistent with a strong and growing labor market; 4.5 percent unemployment, 40 out of 50 states right now have unemployment rates that are below the average for the '80s and '90s. So we are looking at a very strong and healthy labor market. Wages continue to grow -- real wages continue to grow.

And finally I would say that the fact that profits are high and earnings are high is also encouraging, because it means that this is not in any way something that we have to fear as being indicative of false expectations. The economy is based on real fundamentals, and it does seem to suggest that as we move forward, we have a healthy picture.

So I'll just stop there, and again, if you have one or two questions, give them to me now, and then I'm going to turn it over to my colleagues. Read more Comment (0), Email this.

CHAIRMAN LAZEAR: That's one that I'll turn over to Hank. Why don't you hold off on the -- SECRETARY PAULSON: All the tough questions he's going to -- CHAIRMAN LAZEAR: Yes, all questions on -- usually I have to say I can't answer it. This time I can say Hank is here, and he will answer it for you. If there are no questions, I'll just -- SECRETARY GUTIERREZ: I've got a few sides that I'll show you on GDP growth, and really breaking it down to the components of what contributed to growth and what detracted from growth. Something the President said this morning, when he talked about this quarter's GDP, which I think comes across loud and clear as you see the economy, and maybe over a longer period of time, is that this is a very resilient economy; it's a very diversified economy; it's a very flexible economy; and in spite of the fact that it's the largest economy in the world, because of our free enterprise system it has a way of naturally self-correcting, and it shows a tremendous amount of flexibility.

We've seen that, and that's the way we've been able to get through situations like 9/11, a stock market crash, a recession, corporate scandals, Katrina, you name it -- this economy has been able to withstand it, and has been able to adjust.

The other thing that I want to point out, that you'll notice in the second quarter numbers, which for us is a very important number, is the fact that net exports are a positive contributor to GDP growth, which means that the increase -- the absolute change of exports is greater than the absolute change of imports. And that's something that we have not had for a long time. And we know that we've had to get economies around the world growing faster to be able to export more. The fact that we have more free trade agreements, and they're now rolling up and we see more and more companies exporting, and just the fact that we are the largest exporter in the world, but we're growing our exports at a very fast pace, and I think that says a lot about our economy, our businesses, our system. And that's a very important contributor to this quarter's growth.

Compared the first quarter of 2007, you could see the impact from, on one hand, housing -- we had a change in inventories, and we are also -- we had a negative impact from that exports. This quarter the only thing that actually dragged down the growth of GDP was residential housing. Everything else contributed, including a very important contribution from that exports.

And then, just looking over a longer period of time, the point of flexibility and resiliency, and the fact that we are a diversified economy -- you can see that over time. In 2002, for example, government spending and consumer spending grew enough for offset, a very significant negative contribution from business investment, as well as net exports. So we were able to offset those two factors with consumer spending and government spending.

If you look at 2005, what you see is very strong business investment and consumer spending offsetting the decline in housing. And we've seen that just about every quarter, the ability of this economy to continue to grow because it is so diverse and because it is so strong.

Let me show you one more chart -- talked about exports, the fact that in spite of our size we are becoming a major, major exporter. Look at those first three years, real exports actually declined by almost 4 percent per annum. After 2003, you see a growth. These are real growth numbers, 8.3 percent on average. So we're exporting more, economies around the world are growing faster so they're able to buy more of our goods, and a very important factor here is the President's policy on free trade -- opening up markets, focused on exports, helping exporters access markets. That's all paying off.

I'll stop there and I'll turn it over to Secretary Paulson. SECRETARY PAULSON: Okay. Carlos, let me say I, too, see a healthy U.S. economy, strong labor markets, great growth outside of the U.S. I've been looking at the global economy for a long time and I can't think of any time in my business career where I've seen such a strong global economy. And as Carlos said, we're really benefitting from that in terms of exports.

That's why it is so important to get our trade agreements with Peru, with Colombia, Panama, Korea done; why it's important to keep working -- and I know how hard Sue Schwab is working to get something done on Doha, and how much the President cares about that.

You know, we talk a lot about trade. We don't talk as much about being open for investment. And on May 10th, the President put out a statement on the open economy, open for trade and investment. Yesterday he signed the CFIUS bill. I just want to emphasize how important it is to us, to our country, direct foreign investment. This is key. We have 5 million jobs in this country that are directly related to investment. We've got another 5 million that are indirectly related to that.

It's also keeping markets open outside of the U.S. for investment -- very, very important. When a global company that's headquartered in the U.S. makes an investment outside of our country, that outgoing investment also is very beneficial to our country, because what the analysis shows is that those global companies that make investments outside of the U.S. are creating export platforms, and they make a disproportionate contribution to our economic growth through exports, and that if they're not making those investments, some other country is making those investments. And growth outside of the U.S. leads to more growth in the U.S. And again, that's something that we think is going to be -- has been important for a long time, and we can't forget it.

Now, the last thing I would say about the economy is

-- and I've received a fair amount of questions about volatility, market moves, those kinds of things, and I always start with looking at the underlying economic strength in the global economy and a very, very healthy U.S. economy. And when we have benign markets, strong markets, economic growth for a period of time, there can be a tendency to have excesses, to get a bit lax. Borrowers need to be disciplined; lenders need to be disciplined.

And what we've seen with this recent adjustment has been -- and it's been a repricing of risk, a reassessment of risk, and as we look at some of the signs of excesses, there have been excesses, LBL loans, that have been done without the traditional covenants. We've seen some of those same excesses when it's come to sub-prime lending and so on. But again, that's a wake-up call, and there's an adjustment and a repricing of risk.

On that, why don't I go to Rob. DIRECTOR PORTMAN: Thanks, Hank. And Eddie, Carlos and Hanks have done a good job talking about the economy and the importance of some of the variables that you saw on the chart earlier, including, as Hank just did very well, I thought, the both in-bound and export side of our economy, which is critically important. As the global economy is increasingly integrated, we need to engage, and we are, and we're succeeding in the sense that our economy is stronger, jobs are improving, wages are up. So we have a lot of good news to report today.

This strong, resilient, diversified economy that was talked about earlier has also resulted in increased revenues to the federal treasury. And if you look at what's happened, really over the last three years we have a record level of revenue -- 37 percent increase in revenue since 2004. That has resulted in, along with some better restraint on the spending side, a decline in budget deficit.

This chart over here shows as a percent of the GDP, our debts are going down. It's also going down in nominal terms, meaning that for the past three years the deficit has actually gone down over $200 billion. Our projections that this year the deficit will go down at least $43 billion. We are now at about 1.5 percent of GDP -- our economy in terms of our deficit -- which is, as you can see by this chart, is far below the average of the last 40 years of 2.4 percent.

We continue to make progress on deficit reduction so long as two things happen: One, we keep restraint on the spending side; and second, we be sure that while our expenses are being restrained, our revenues continue to grow. And that's why these numbers today are encouraging, and why it's so important that as we look ahead we are going to be promoting and ensuring that the tax relief stays in place, that we not have tax increases, which would jeopardize this economic growth; therefore, revenues; therefore, the good progress we've made on the budget deficit.

Second, we need to be sure that our expenses, again, stay restrained. And what the President has offered this year in his budget resolution is an increase in the spending, almost 7 percent -- 6.9 percent. Congress has indicated that's not enough, we need to spend more than -- almost triple our inflation. And what the President has said is, no, there's a top line here and there is a number beyond which he cannot go. And that's the reason for the red line or the top line veto threat on some of these spending bills that are working their way through Congress now.

So this is important news today because it shows that a continuing strong economy is good for American workers; 4.5 percent unemployment, over 8.3 million new jobs in the last three years. It's also important for revenues, keeping the budget deficit going down. We need to be able to look forward and see how we can continue that, and that is keeping the tax relief in place, not jeopardizing this growth; and then on the expense side, being sure that our government spending continues to be restrained and we continue to prioritize our spending.

You will see this week and next week in the House and in the Senate continued debate on this. The President will continue to hold firm to the veto threat on individual appropriations bills that exceed the top line. He will also continue to talk about the importance, as Secretary Paulson does continually, of the mandatory or entitlement spending. And this relates to the S-CHIP debate that is currently being debated in the halls of Congress, that we want to be sure that while we're restraining the day-to-day and annually-appropriated spending, we also don't allow the entitlement spending to continue to grow at unsustainable levels.

So good news today and further evidence that a pro-growth economic policy works, and we need to be sure we continue it. SECRETARY PAULSON: Rob, you said one thing that I wanted to build on, which is -- you had mentioned taxes. It's very important that Congress move to fix the AMT. They've done it every year for the last six years. This is the longest we've gone, and we need to fix that situation so there are not 21 million Americans paying an alternative minimum tax. That would surprise people. That's an unintended tax. And so that's something that needs to be patched or fixed.

Okay, let's have your questions. Read more Comment (0), Email this.

SECRETARY GUTIERREZ: Let me just say, because those numbers come out of Census and are revised by BEA. We do a revision once every three years, and we also have three revisions to every quarterly number. It happened to be that these revisions were downward, but I think if you look at the shape of the growth, it doesn't change the story; it doesn't dramatically, or it doesn't really materially change the shape of our growth or the story of our growth. As time goes on, we get more reliable information. And that's just one of the realities of trying to add up a very complex set of data. Read more Comment (0), Email this.

SECRETARY GUTIERREZ: You're talking about projections? Read more Comment (0), Email this.

SECRETARY GUTIERREZ: Well, we'll have to wait and see. But we're not expecting something that would change the fundamental story of the quarter. You may have -- we may have revisions up, we may have revisions down, as we've had them in the past, but I'm not concerned that it would be a different picture. Read more Comment (0), Email this.

Q Secretary Paulson, can I start -- I think Secretary Gutierrez pointed out that there was only a

SECRETARY PAULSON: Let me step back and say, to build off what Carlos said about data -- I never place too much reliance on any month or any quarter. The key thing is the trend and the overall picture. And we have a very diverse, very flexible economy. And there are signs that business is increasing its investment, and again, very strong growth outside of the U.S. And in terms of the consumer spending number, it was lower this quarter, but again I think we need to look at it over a period of time here. SECRETARY GUTIERREZ: Just to add to that, we've talked a lot about how our growth rate is reliant on consumer spending, and how it would be a good thing to diversify and have other sources of growth. The dilemma has always been, if consumer spending contributes a smaller portion of the growth, how do you offset the rest? The great thing about this quarter is that we saw it -- we saw it through net exports, we saw it through government spending. And I think it's a good reflection on the economy that we can take that kind of a breather and still grow at 3.4 percent. DIRECTOR PORTMAN: Also, because Ed is not here, I will mention what he would mention, which is that it is good for the United States to have a higher savings rate. And what you see in these consumption numbers is slightly lower consumption projected for the second quarter, but will result in, therefore, somewhat higher savings, which deals with what Hank and Carlos have been talking about on the international side, as well, in terms of rebalancing our current account. So there are some positives in terms of -- from my perspective -- in terms of the improvement in terms of the U.S. savings rate that comes from that. SECRETARY PAULSON: But again, we need to look at it over a period of time. You're going to get distortions and aberrations from one quarter to the next. Read more Comment (0), Email this.

Q Thank you all for doing this. This is very interesting. Ambassador Portman, what's your sense

DIRECTOR PORTMAN: I'd like Secretary Paulson to address that, as well. But let me just say, briefly, I totally agree with his comment earlier about the need to do the patch in the alternative minimum tax. As you recall, we offered a balanced budget where we did provide for a patch, which has about a $48 billion in our revenues in 2008, and yet we are able to show a balanced budget, the biggest impact for the 2007 patch being in the 2008 tax year. Congress did not choose to do that in their budget resolution, despite criticizing us for not fully covering all the AMT costs over time, and that concerned me at the time, and we commented on that.

Now, I agree with Secretary Paulson, we're beginning to get concerned that there be a plan in place to ensure taxpayers that there will, indeed, be a patch, as there has been in previous years. The patch that we included in our budget is the no net new filer patch, which is the most generous one that Congress has used in the past several years. And we believe that's the appropriate way to go.

So my concern is it hasn't been accomplished yet, also there doesn't seem to be a clear plan in place to accomplish that. We provide for it in our budget; Congress doesn't. We wish that they would move forward with that.

With regard to the prospects for it, I think they're generally good. I don't think that Congress at the end of the day is going to find it viable not to provide the patch, in the context of having trouble coming up with a broader reform. Second thing I'll say about reform -- and again I want Secretary Paulson to address this -- I am very encouraged by what Secretary Paulson is doing, in terms of looking at our corporate tax structure. This is an area ripe for reform, where, frankly, the code has not kept up with the realities of the rapidly-changing, integrated global economy we talked about earlier. The United States is falling behind, because our corporate tax rate is now relatively high, which Secretary Paulson can talk about with much more detail.

So there are lots of areas where reform is needed. One is certainly in terms of international competitiveness, and being sure that America continues to have a tax code that attracts new business investment. SECRETARY PAULSON: Well, I don't have much to add to that. I had a conference yesterday, and what struck me was that when we brought in a wide range of experts, how clear everyone saw it that we had gone from having a corporate income tax that in the '70s wasn't competitive, to one that in the late '80s, with the '86 reform was relatively low, to now one which is relatively high. But the way in which we're thinking about this is in terms of competitiveness. And we're focused on it in terms of the benefits to the average worker, prosperity to Americans and jobs, higher wages, and what it takes to do that.

So for any given level of revenue, because any tax is a drag on the economy -- the reason you have a tax is we need taxes, we need revenue. So the question is, what's the best system to use to tax businesses so that we can be competitive?

And the world is changing, and it's changing all the time. And one of the real sources of growth for us right now for exports is Europe. The growth rate in Europe has doubled. And it's extraordinary to see what a number of these countries in Europe have done in terms of reducing their corporate income taxes, and what they're doing right now. Right now the Germans have another tax cut underway, through one house of the legislature; the French and the British are talking about it. So again, I think that's going to be something that's going to be very important that we all focus on. Read more Comment (0), Email this.

SECRETARY PAULSON: Well, I think we need to do more work, there's no doubt about it. This is going to be something I'm going to have to work on very hard for the 18 months I'm here. And we're going to have to -- first of all, there's going to have to be greater understanding and recognition as to how the world has changed. There's going to have to be greater recognition that businesses are -- they come with different corporate structures, that's a legal structure, but the taxes are paid by people. And so we -- and then we're going to need to take a number of tangible steps. So what we're going to do is we're going to sort of reassess where we are, and you're going to see a number of actions and steps taken over the next 18 months on this.

Yes, in the back. Read more Comment (0), Email this.

SECRETARY PAULSON: Again, step back, because that when there are big adjustments in markets based upon economic fundamentals, that's one thing; but when you have economic fundamentals that are strong, that's a better place to be.

Listen, I've been watching markets for a long time; it's my job to be vigilant, so I'm watching these markets carefully. There is -- there has been this adjustment, this reassessment of risk. I view it exactly as I said to you. There were excesses in the system. This is a wake-up call. We need to see more discipline in certain areas. And so -- but I take comfort from the underlying economic strength. There are a number of hung bridge loans in the high-yield market. Those aren't -- the underlying companies, the underlying economy hasn't changed. Those were loans that were put in place without traditional covenants. And again, lenders need to be very aware of the risk, borrowers need to be aware of risk, and I would submit that people are more aware of those risks and the need for discipline today than maybe they were a month or two ago.

So again, let's keep our eye on the very strong underlying economy, which puts us in a position of strength. Read more Comment (0), Email this.

MR. SNOW: Everybody ready for a speed gaggle? All right, here we go. The President had his normal briefings at 7:00 a.m. We're now headed to the American Legislative Exchange Council. The President will be speaking on the budget and the budget challenges, challenging Congress to get moving on key pieces of legislation, including defense authorization and other key legislative priorities. On the plane with us today, Senator Arlen Specter, Congressman Kenny Marchant, and Congressman Jim Gerlach.

After returning to the White House, at 11:45 a.m. the President and Mrs. Bush will participate in a Special Olympics Global Law Enforcement Torch Run Ceremony. That will be in the Rose Garden, open press.

And at 2:40 p.m., the President will participate in a photo opportunity with officers of the National FAA organization; that's in the East Room, stills at the top.

In addition, the President will be welcoming to Camp David this weekend, Sunday and Monday, the Prime Minister of Great Britain, Gordon Brown. That will be their first meeting, at least here in the States, since Mr. Brown has become Prime Minister. And they will cover a whole retinue of topics, sort of the predictable topics.

Questions. Read more Comment (0), Email this.

MR. SNOW: Okay, well, I can't give you a full readout on the meetings. I know that the Prime Minister will be arriving in the evening, and they'll have a dinner. And then there will be a pretty full meeting schedule the following day. Read more Comment (0), Email this.

Q On Gonzales, this Negroponte memo shows an apparent contradiction in what he told the committee

MR. SNOW: Unfortunately we get into areas that you cannot discuss openly. It's a very complex issue. But the Attorney General was speaking consistently. The President supports him. I think at some point this is going to be something where members are going to have to go behind closed doors and have a fuller discussion of the issues. But I can't go any further than that. Read more Comment (0), Email this.

MR. SNOW: It's simply more complex than that, and I can't go into any more detail. Read more Comment (0), Email this.

MR. SNOW: I will repeat myself -- it's more complex, and I cannot go any further than that. Read more Comment (0), Email this.

MR. SNOW: Look, the most important thing to do is, I'll refer you back to DOJ to going through all this. But there were a series of briefings for a small, restricted number of members of Congress who seem to have differing recollections about what went on. As I've told you the last couple of days, I'm not going to try to be the fact witness on this. Read more Comment (0), Email this.

MR. SNOW: The most important thing you get out of the Brown meetings is two leaders of nations that have a very special and important relationship continuing to move forward on issues of shared interest and concern. Read more Comment (0), Email this.

MR. SNOW: You can imagine Iraq, Iran. You can imagine discussions of Darfur. You can imagine discussions of what's going on in Europe, defense in Europe, Kosovo. I mean, there are any number of ranges -- Afghanistan, the role of Iran, the U.N. Security Council and its efforts to try to offer a way for the Iranian government to step away from enrichment and reprocessing and activities that may lead to developing nuclear capabilities. It's a pretty broad agenda. Read more Comment (0), Email this.

MR. SNOW: Don't have any -- we'll be announcing things when we have -- Read more Comment (0), Email this.

MR. SNOW: Well, typically, he chats with them on the plane. So -- he's a pretty amicable host. Read more Comment (0), Email this.

MR. SNOW: Well, the President can assert executive privilege, but you've misstated the way this works. In fact, the Department of Justice has the responsibility -- the Department of Justice has already published an opinion; furthermore, there is a longstanding series of opinions out of the Department of Justice from Democratic and Republican administrations that talk about the inapplicability of criminal contempt of Congress citations when it comes to people asserting executive privilege.

So, number one, the President is not issuing orders; this is something that falls under the purview of the Department of Justice. And number two, legal precedent all points in one way and it would not be the way contemplated by the House Judiciary Committee. Read more Comment (0), Email this.

MR. SNOW: How on earth are you trying to apply the Nixon's tapes case here? That seems an awful stretch. Read more Comment (0), Email this.

MR. SNOW: Well, it's -- nice try. Read more Comment (0), Email this.

MR. SNOW: Hello, everybody. As you probably know, the House Judiciary Committee has just voted along partisan lines to have a criminal contempt of Congress referral against White House legal counsel and the White House Chief of Staff. For our view, this is pathetic. What you have right now is partisanship on Capitol Hill that quite often boils down to insults, insinuations, inquisitions and investigations rather than pursuing the normal business of trying to pass major pieces of legislation, such as appropriations bills, and to try to work in such a way as to demonstrate to the American people that Congress and the White House can work together.

I want to remind people that this White House, on a number of occasions, has reached out to the House Judiciary Committee and offered accommodations: First, we offered anybody at the Department of Justice who was of interest to testify under oath and on Capitol Hill, which many did. We supplied 8,500 pages of documents, including some between the Justice Department and the White House. The Attorney General, himself, and senior members of his team also went up to testify on Capitol Hill.

In addition, we offered further that we would make available any persons of interest at the White House for full interviews by members of the committees -- they'd be able to ask whatever questions they wanted to do. In each and every one of these cases, the efforts of the White House were rebuffed.

And so now we have a situation where there is an attempt to do something that's never been done in American history, which is to assail the concept of executive privilege, which hails back to the administration of George Washington, and in particular, to use criminal contempt charges against a White House chief of staff and the White House legal counsel. Ironically, this comes as the very same committee is marking up the attorney-client privilege protection act, apparently not believing that attorney-client privilege applies to the President and his own lawyer.

In any event, it's worth putting this in perspective in terms of the accomplishments of the present Congress. If you take a look at the 110th Congress right now, which had promised to have all of its appropriations bills done this month, here's what we have seen since the beginning of the Congress: More than 300 executive branch investigations or inquiries; 400 requests for documents, interviews, or testimony; we've had more than 550 officials testify; we've had more than 600 oversight hearings; 87,000-plus hours spent responding to oversight requests; and 430,000 pages made available to Congress for oversight. That's pretty significant.

In fact, the 87,000 hours that we mentioned that have been used in document production -- that's equal to more than nine-and-a-half years -- and here's your graphic of the day, ladies and gentlemen -- if you took those 430,000 pages and stack them on top of each other, they would reach a height twice that of the executive mansion, itself.

Now, this White House remains committed to the principle that we are willing to accommodate members of Congress. They have legitimate oversight interest, and we have made available any individuals and any facts that would be necessary for them to conduct their deliberations. Interestingly enough, nobody has cited or recited anything that they think they've been denied. Instead, there has been constantly, and it seems, a desire to provoke a confrontation.

We think a confrontation of this sort is neither constructive, nor necessary. As I said, we maintain our position of accommodation toward the House of Representatives. But make no mistake, based on legal precedent this is something that the drafters of this particular referral know has very little chance of going anywhere. And so the question is, why are they doing this rather than the people's business?

Questions. Read more Comment (0), Email this.

Q Tony, how can you cite as a sign of cooperation sending the Attorney General to Capitol Hill, when

MR. SNOW: I will let you do the characterizations. In point of fact -- Read more Comment (0), Email this.

MR. SNOW: I understand what Arlen Specter said -- Read more Comment (0), Email this.

MR. SNOW: Well, your characterization was, he contradicts himself every time, I think is what you said. Read more Comment (0), Email this.

MR. SNOW: Well, no -- I don't want to parse too much here, and I'm not going to serve as the fact witness, so we're not going to get too deep into what he said, when and where. But I will remind you that when one is being called in an open session to talk about classified matters, it becomes very difficult to walk the line about what is permissible and what is not permissible to say in public. We continue to believe that the Attorney General has testified truthfully. He has also testified behind closed doors in considerably greater detail. Neither you nor I have heard that. Read more Comment (0), Email this.

Q -- he testify under oath last year, under oath, and say that there was no disagreement within the

MR. SNOW: James Comey did not mention the terrorist surveillance program. Read more Comment (0), Email this.

MR. SNOW: We'll go here, then -- go ahead, Jennifer. Read more Comment (0), Email this.

MR. SNOW: No, we don't choose a response. The Department of Justice will handle the referral. If you take a look at opinions that have been handed out by prior Departments of Justice, and including the quote that I used last week from Senator Leahy, who seemed to believe that it would be a fruitless endeavor, given separation of powers doctrines and opinions that had been written by Democratic and Republican administrations in the past, that this is not likely to go anywhere -- but nevertheless, that is a decision to be made by the Department of Justice and will do so. Read more Comment (0), Email this.

MR. SNOW: No, it does not. No, in this particular case -- Read more Comment (0), Email this.

MR. SNOW: -- the decision-making authority in this falls to the Department of Justice. They'll make the decision. Read more Comment (0), Email this.

MR. SNOW: Well, at this point it's being done out of the Department of Justice. Read more Comment (0), Email this.

MR. SNOW: No, what it did was recite -- what was provided was an opinion written by Ted Olson that explained why it would be inappropriate to do such referrals -- this was a 1984 opinion -- and also some opinions written by Walter Dellinger during the Clinton administration. Read more Comment (0), Email this.

MR. SNOW: Well, what's interesting is that there have been all these hearings on the Attorney General and yet nobody has really laid a glove on him. What you do is you have complaints, but there is yet to be any specific allegation. Instead what you have is a demand for more and more intrusive looks into the internal workings of the White House. Again, look at all the pages here, look at all the hearings. It is as if they keep throwing mud against the wall, hoping something is going to stick.

Frankly, if you have something solid and you think you do, invite the people up, ask the questions. Everybody has been made available. You have not been denied a shred of information. I've yet to hear anybody say any piece of information that they have been denied. Instead, this looks like an attempt to provoke something that falls more into the area of political theater than respectful, good governance and trying to do oversight. Read more Comment (0), Email this.

MR. SNOW: That I don't know. Read more Comment (0), Email this.

MR. SNOW: No, I -- no, no, no. I mean, again, you look at past precedent; they will be putting together -- but I would refer you to Justice. But, no, this is not something where somebody is going to say, hmmm, can I stretch this out for 18 months? Nobody would stand for that and that would be an improper way to proceed. Read more Comment (0), Email this.

MR. SNOW: The President's objection in this particular case is going in and trying to open up the issue of executive privilege. You may recall that in this administration, the first time we went to bat for executive privilege it was on behalf of executive privilege for the Clinton administration. It is very important to be able to protect the confidentiality of conversations.

I guarantee you if somebody went before any member of the Senate and said, we want to know everything anybody said in this deliberative process, they wouldn't stand for it for a minute, nor should they. If you did the same thing to the judicial branch, nobody would stand for it. This is, in fact, a central principle of our government and it has been held since the administration of George Washington. And we have done -- I listed a whole series of accommodations, which have not been met at any juncture by reaching out by members of the House or the Senate, in terms of saying, we're giving you everything you could possibly need to render a decision; what more do you want? And the answer seems to be -- Read more Comment (0), Email this.

MR. SNOW: I'm sorry, the second word? Read more Comment (0), Email this.

MR. SNOW: Oh, a transcript. Okay. Read more Comment (0), Email this.

MR. SNOW: Well, but when you -- no, what the President was doing was declassifying the names of some of the people who have been involved in killing Americans. That's a far different thing than talking operationally about ongoing efforts to try to save Americans.

April, first of all -- Read more Comment (0), Email this.

MR. SNOW: We will classify as is appropriate. We will not declassify in such a -- Read more Comment (0), Email this.

MR. SNOW: Well, no, there is, I think, Helen, a pretty sensible way of going about this. We are certainly not going to declassify things that say, hey, al Qaeda, here's what we're doing; hey, al Qaeda, here's what we're working with; here are the people going out, please go and kill them. Read more Comment (0), Email this.

MR. SNOW: Are you arguing that we were somehow responsible for being attacked on September 11th? Read more Comment (0), Email this.

MR. SNOW: Okay, then the answer, why did they attack us on September 11th, it goes back to a fatwah -- Read more Comment (0), Email this.

MR. SNOW: Well, we will not talk about -- number one, there's no -- you are characterizing an interrogation; those are interrogations that are conducted by -- Read more Comment (0), Email this.

MR. SNOW: No, torture is not on the record. It's against the law. I'm just not going to get into spin cycle.

Go ahead, April. Read more Comment (0), Email this.