Press Briefing by OMB Director Leon Panetta

Room 450

The Old Executive Office Building

10:57 A.M. EDT

DIRECTOR PANETTA: What I would like to do is to present a brief summary of the elements of the package that we will be presenting and forwarding to the Congress later today. We have Elaine Kamarck and Al Burman speak to the procurement issues. Also present is Colleen Preston from DOD, and she's familiar with particular issues that relate to DOD with regards to procurement.

Let me again emphasize that the primary effort of this package is really making an effort to try to make government work better and to try to achieve savings in that process. But the main focus is really on government reforms. We're trying to do a number of efforts at streamlining that I'll describe, at eliminating programs, at consolidating programs. We're also doing a major reform with regards to the whole collection process within government, to try to expedite the ability to make these collections on outstanding debts; also to try to provide incentives for efficiency competitiveness, as well as the procurement reform that both the President and the Vice President spoke to.

Let me mention the key elements that are in the package. Hopefully, you all have a briefing packet on that. It's basically tied to the four areas that were described in the National Performance Review -- cutting back to basics, cutting red tape, putting customers first, and empowering employees to get results.

Let me just hit some of the highlights. I don't want to go through every one of these pieces, although I should say before I get into this package that I want to pay tribute to the staffs of particularly OMB -- Phil Lader, John Angel and the rest of the staff at OMB, as well as the Vice President's office, because what we had to do here, essentially, is put a reconciliation package or the equivalent of a reconciliation package together in a matter of a few short weeks, and that means working on all the legislation, getting it all done, getting it all packaged. So there's a lot of work that went into this in the package we're going to be sending up.

The key elements of it that I want to just draw your attention to is, first of all, on streamlining, we are going to include legislation that would provide the Secretary of Agriculture the authority to streamline and achieve his 1,200 office reduction with regards to field offices, as well as his bureaus here in Washington. That would achieve almost $1.6 billion in savings just by accomplishing that over five years.

In addition to that, we're going to include language that would allow the Secretary of HUD to proceed with the streamlining of the HUD operations as well. And in addition, we're including a directive to the Corps of Engineers to achieve savings of almost $105 million over five years, basically by implementing a reorganization plan, again, to reduce the costs in operations in that area as well.

In addition, we are eliminating a number of programs and facilities: the uniform services -- university for health services. That's the Department of Defense's operation to provide medical training. That is being eliminated. That's something that was contained in their bottom-up review and we're fulfilling it here. We're also eliminating the federal aviation higher education program, which is a program that has long been identified as one that we ought to get rid of. We're also phasing out the Bureau of Mines mineral institutes. The President mentioned wool and mohair, which is also part of the package, although Congress is already moving that legislation. As a matter of fact, we have a major piece of that legislation here at the White House. We're doing the same with honey; the honey program will be eliminated on the same basis as wool and mohair. And we're also going to be eliminating essential air service subsidies for those airports that are located within 70 miles of a major hub. Those are some of the key streamlining proposals that are part of the presentation.

In addition, what we're doing on collections -- the essential part of the collections reforms are basically to allow the agencies to have -- to be able to retain a portion of what they collect from delinquent debts in order to pay for credit management and the debt collection improvements. That's something that's never happened before. We're trying to lift the restrictions on the use of private collection agencies. We're also trying to bring technology into their collection efforts. Those are all part of this proposal. That affects, in particular, the Department of Justice, as well as HHS and others.

The Veterans Affairs departments, we're going to pick up almost $420 million by basically authorizing them to use the same data bank to determined whether veterans are receiving health care -- those who receive health care have private insurance that could cover those kinds of costs. That's included in this provision as well.

We have efforts at basically trying to target fraud in government. It's amazing when you look at the fact that we, for example, cannot right now cut off benefits to people who basically defraud the government in various areas. And so we are now authorizing that we are able to cut off their benefits, plus also bar from the program those who are convicted of defrauding it, which is something that currently is still allowed by the law. So we're doing some reforms on those enforcement areas.

On fair compensation, we are creating the opportunity for local commanders at DOD to be able to use some of the resources at the local level, so that if they are able to sell, for example, recyclable materials that are generated at the installation, they'll be allowed to use those funds at the local level and give them that authority that we ultimately predict will save about $500 million.

We're also adjusting monetary penalties to the inflation index. We have a broad amount of monetary penalties. They have never been increased for a number of years. We're basically going to tie those to an inflation index.

We're also doing power marketing reform, which is something, as Chairman of the Budget Committee, we have been trying to do for the last almost 16 years. We finally have been able to work with Bonneville Power. We've worked with others to try to work out something that would allow us to be able to reduce the kind of subsidies that are provided to those PMAs. So that's a major effort, and it has the support of the delegations that have been working on this issue.

In addition, we are providing the increased use of technology to streamline financial services. We are now going to require measures to promote electronic transfers by direct deposit of federal salary and retirement payments. And so we are finally, as the President and Vice President said, going to move to actually making allowance for electronic transfers. That will save about $23.5 million.

We're also doing a couple things that have been talked about for a long time in government. On year-end spending, in order to try to cure the "use it or lose it" syndrome with regards to the year end, when you get to the end of the year, if you have additional savings, the incentive now is to basically spend those savings rather than trying to save them or use them. And so the incentive is exactly the wrong approach with regards to the government. What we will do is encourage federal departments and agencies to be able to roll over those savings so that they can use those savings for either bonuses or within the programs that they have within in their jurisdiction.

In addition, we're going to reduce the number of congressionally-mandated reports. We've got a stack of mandated reports that is almost a foot and a half high, and we have now gone through each of those. We're going to send to the Congress recommendations to try to cut out some of those mandated reports that have lost their relevance.

And lastly, we're going to try to provide the incentives to encourage voluntary separation. This is really related to the effort to cut 252,000 federal employees. We think we do need to have the ability to buy out those employees who are ready for retiring.

The last thing I would mention is that we are eliminating the kind of federal printing monopoly that developed with GPO. We're going to basically permit and encourage that there be more competition when it comes to printing in the government. Those and others -- we've got about 40 different programs, as I said, that are presented in particular. Let me just give you a quick run-down of the process that we think we're looking at right here.

First, with regards to reinventing government, as the Vice President said and as I've testified, three key things -- executive orders, which we're implementing; the package, which we're presenting; and also the '95 budget, which will contain many of this.

On savings we're looking at $9.1 billion of savings that are in this package of recommended savings in the various areas -- $9.1 billion. We will then be sending later in the week a rescission package. And the reason we haven't included it here is because five of the appropriations bills still are with the Congress and have not been completed. But we hope to complete that action by Friday, and we expect that the amount of savings in that package could range anywhere from $1 to $2 billion. That will take this package to well over $10 billion. Plus the procurement reform -- obviously our view of the savings on procurement reform is we'll achieve $22 billion over five years. That's five percent of procurement costs in the government. The CBO will obviously estimate that at much lower -- somewhere between $3 billion to $5 billion. So we're looking at a minimum by CBO at a package of somewhere around $15 billion. By our count, it would be closer to $30 billion, based on what we think are real savings on procurement.

The process we're looking at right now is that the package will go to both the House and the Senate. We will send up this package late today. It will be distributed in the House to the various committees of jurisdiction, as it will be in the Senate. On the House side, however, because of their rules, they will require that there be a two-week consideration and then a report back to the rules committee where this package will be assembled as one and brought to the floor. We expect there will be amendments that will be offered on the floor, but we are very confident of action on the House side.

On the Senate side, it's much more difficult because of their rules, but we think that because of the merits of the package and the pressure of trying to get it done, hopefully, before the end of the session, that they'll be able to pull it together as well. But it's going to be much more difficult on the Senate side.

Q: If you were still Chairman of the Budget Committee, would you have the same view about these numbers? Do you believe strongly that these numbers really can be lived up to? And how much do you intend to try to squeeze out to spend on crime? Will that come from the rescission package, or would that depend on how much is in there?

DIRECTOR PANETTA: We're very confident of the numbers that are in the base package. When I tell you $9.1 billion in this package, it is a very solid number. I think CBO will support it. We may even actually pick up some additional savings, hopefully by virtue of their scoring. But it's a very solid number.

On the rescission package, which I said we'll introduce later in the week, that's also very solid. When you're rescinding spending and you put a number in there, believe me, that's real. So the rescission package will also provide us with over $10 billion. That $10 billion will basically go for savings and for deficit reduction. The amount that would be dedicated to fighting crime are the savings that we hope will flow from the procurement package. And that will be, as I said, savings that will flow over the next five years. But hopefully, that -- because we believe those savings are real -- we would commit those to the crime bill.

Q: On the commitment the President made to Senator Bob Kerrey of Nebraska to come up with additional deficit reductions, does this package that you're unveiling today -- the rescissions plus the procurement reforms -- does that meet the commitment, or is there anything else that you plan to further reduce the deficit that would go back to that commitment? And I have a related question after that.

DIRECTOR PANETTA: We think this more than fulfills our commitment. At the time both on the House side and on the Senate side we made clear that we would come back with an additional proposal with regard to spending cuts and savings reflecting in large measure the Vice President's effort on improving government, reinventing government, this package fulfills that commitment. We're going to be producing, as I said, in excess of -- under our terms, of course, we think with procurement reform we can get almost $30 billion in savings. But at the very least, with regards to CBO, it's $15 billion over five years in real savings.

This more than meets our commitment with regard to advancing additional efforts to try to find savings, and again focusing on improving government. There will be opportunities, obviously, on both the House floor and the Senate floor for members to offer additional amendments to this package. That commitment was made to a group of members on the House side by the Speaker. They will have the opportunity to offer that kind of amendment on the House side, and the same thing I'm sure will happen on the Senate side. So it's possible this package could be increased in terms of savings before it's over.

Q: And speaking about deficit reduction, what do you say to those critics of the health care reform package who suggest that what you're doing is simply releasing another uncapped entitlement program that will further increase the deficit at a time when the country simply can't afford it? And if there are caps, how do you maintain the universal coverage that the President said is a nonnegotiable item?

DIRECTOR PANETTA: There will be briefings, obviously, on the health care package, but I can assure you that our approach was to basically ensure that we had capped entitlements in order to maintain some discipline with regards to spending in that area. We think it's important. We think the President feels it's important that we not create open-ended entitlements, particularly when we're trying to discipline the rest of government spending. And the mechanism that has been built in to try to help us with regards to what happens if we reach the cap I think more than meets the requirement with regards to covering those that might be impacted.

Q: Are you talking about three separate pieces here and having them move very rapidly through Congress -- do you anticipate that everything will be joined in one? Within the two weeks you'll have just one bill that will pass Congress?

MR. PANETTA: Well, obviously, we're going to leave some of that judgment up to the leadership on both the House and Senate side. I should tell you, the rescission bill goes up on a separate process, just by the nature of a rescission bill, which is expedited when we send it up on a very limited time frame Congress has to act on rescissions.

On the House side, they may very well wish to join those issues, at least bringing those bills to the floor with one title being rescission, the other title being the spending savings.

On the Senate side, I believe their inclination is to handle the rescission bill as a separate bill. But the ultimate decision on that will be made by the leadership.

Q: Has the administration abandoned the ticket tax to pay for NAFTA, and if so, have they come up with other ways to pay?

MR. PANETTA: We are in the process of putting that package together. We have, we feel, have come together on what we think is a funding package that is more than supported by the facts. If there are to be any fees in that package they will only be used to cover the additional costs with regards to customs fees. The bulk of the coverage will be from other areas of savings.

Q: How much of this package is actually going to be used for deficit reduction and how much to meet the caps and targets?

DIRECTOR PANETTA: In the package we're presenting here, if we use CBO's numbers, again $10 billion we would commit for savings and the ability to reduce the deficit. The amount above that we would like to commit to helping to fund the crime bill.

On the overall package of $108 billion, as I've pointed out in my testimony, about $44 billion of that -- particularly the amounts with regards to the bottoms-up review at Defense -- are already very much in the process of having to be accomplished in order to meet the '94 targets that have been established under the budget. And $66 billion involves essentially new savings that we're hoping to achieve over these next five years to meet -- again, either provide for deficit reduction or help us to meet the caps that have been provided by the budget agreement.

As I've emphasized, these caps are tough. We're looking at a hard freeze over the next five years. Obviously, some of these savings will be used for that purpose and some of the savings will be used for deficit reduction.

Q: The President has mentioned today that this is somehow tied to getting money for crime fighting. Could you explain how that mechanism will work and how you would link this --

DIRECTOR PANETTA: Sure. Let me explain -- in the crime package, the spending in the crime package is basically on the discretionary side. We're not looking at entitlement spending on the crime side. Discretionary spending -- money for cops, money for additional programs to try to assist communities, money for prisons, money for law enforcement, generally. That's all discretionary spending.

What we would like to do is if we achieve procurement savings, which we think we can achieve, that money under the cap could be then used in order to help meet these new funding requirements if the crime bill is passed, and that's what we hope. So it's basically the ability to move savings under the cap into the crime area. That's what we're talking about.

Q: But there's no mandate in this bill?

DIRECTOR PANETTA: We would have to fight to make sure that the Appropriations Committee, in fact, meets the President's commitment, which is to use this money for crime. We think we've got a good argument to make with the American people, and that's the argument we would make with the Appropriations Committee.

Q: But is it your intention to expand the crime --

Q: The $9.1 billion -- you mentioned that wool and mohair have already been passed, and there are a couple of other things in here that have already been passed. How much of the $9.1 billion is, in fact, new, and how much of it is stuff that's already in the appropriations process?

DIRECTOR PANETTA: The vast majority -- the only exception would be wool and mohair, which is, as I said, a good piece of that is here at the White House for signature by the President. But everything else is essentially new legislation that will achieve new savings.

Q: Back on the crime bill. Is it your intention to expand the provisions of the crime bill if you get this money, or to use this money to pay for what you already proposed in the crime bill?

DIRECTOR PANETTA: Our view is that we don't want to make a commitment to spending on the crime bill that we in fact cannot meet. I mean, the problem we've had in the past is, there have been a lot of promises, either on the war on drugs or the war on crime. Everybody sticks a number in, and it's not met because of constraints in the budget.

What the President is basically saying is, we are going to meet the number that is in the crime bill. And if we can't meet it with procurement savings, which we think we can, then we will find other cuts in order to meet that commitment.

Q: So you don't really have any number at all about how much of this program would go to crime reduction, would go to funding the crime bill?

DIRECTOR PANETTA: We estimate that that number would be somewhere between $4 billion to $5 billion.

Q: Would any of it go to pay for health care?

DIRECTOR PANETTA: No. Health care is really on a separate track, and obviously that track will be presented based on each of the elements that we need in order to support and pay for health care. That is really on a very different track. There is nothing in here that would be used for health care.

Q: A bipartisan House group is going to finalize, I believe this evening, a package of perhaps $100 billion in cuts which they hope to offer as an amendment on the House floor to this package that you're talking about today. Given that you haven't seen it yet -- I don't know if you've been told by any of the people down there what's in it - do you think that the administration would look favorably or unfavorably on such a cost package that's 10 times greater than what you're proposing here today?

DIRECTOR PANETTA: Well, obviously we'd like to review the particulars of it, which my understanding is that Tim Penny and John Kasich are still putting the pieces together on that package. So we would like to review it.

The test is this, as always on these things. I mean, if an amendment winds up hurting our chances to get this package through the Congress, then that's cause for concern. Because our goal right here is not only to propose the savings that are part of this package, but to get it done and get it done before the end of the session. So often, when you get into these budget battles, everybody has a plan that can either multiply or quadruple the amount of savings in any proposal, but you never have the votes, and it's always blocked for some reason.

So one of the tests for us will be, does this help or hurt in terms of our ability to complete action on the package? The second thing I would mention is that my understanding is that they're talking about including some very key elements with regards to funding that affect health care, particularly on the entitlement side. And we would be very concerned about taking those resources, and instead of using them for health care reform, use them as part of the savings package -- because that could really hurt us in terms of health care reform.

Q: What very key elements?

DIRECTOR PANETTA: I think they're talking about elements that would relate to means testing on health care entitlements. And that concerns us because those are some of the same areas we're considering with regards to health care reform.

Q: You would oppose that?

DIRECTOR PANETTA: I'm going to introduce --

Q: Before you do, on the year-end savings for the agencies, on "spend it or lose it," you say that they're going to be able to keep a portion of that. Do you have that apportioned out in your legislation? For example, a dime on a dollar in terms of the additional savings that agencies will be able to keep as well as the debt collection they'd be able to keep?

DIRECTOR PANETTA: This package doesn't really relate to the '95 budget. I mean, this is on a separate track.

Q: That would be the '95 budget?

DIRECTOR PANETTA: The '95 budget is where we will use some of the remaining savings, hopefully, to meet those targets.

Thank you.

END 11:21 A.M. EDT