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Background Briefing by Senior Administration Official on President's Speech

December 15, 1994

The West Wing

4:55 P.M. EST

SENIOR ADMINISTRATION OFFICIAL: The President is basically going to do some plain talking with the people of the United States this evening. He basically wants to talk about what this country is about and its strengths. He also wants to talk about the challenges that are confronting it, the problems that are facing particularly working families in the middle class in this country.

He also wants to indicate what steps he is going to recommend to try to deal with the problems that working families are facing and how he would like to work with the Congress to get these things done. And then, lastly, he's also going to talk about steps that citizens have to take in order to really have the American Dream come alive again for them. He lived the American Dream; he's going to say that to the American people, and he wants others to believe in it again as well.

With regard to the specifics, the main problems that are facing working families right now are really three in terms of financial -- tough financial decisions: One, how to pay for the education of your children; two, paying for raising a child; and three, saving for basically first-home purchases.

The steps that are being recommended are the following: One, he's going to recommend -- there are four ideas to the proposal that he's recommending to try to help working Americans. One is that college tuition would be tax deductible. And he's going to refer to the fact that since a mortgage interest deduction is deductible because we want people to own homes, we ought to make college tuition deductible because we want people to go to college.

Q: Unlimited?

SENIOR ADMINISTRATION OFFICIAL: There is a -- what he's proposing is that tuition for college, community college, graduate schools be fully deductible up to $10,000 a year for families making up to $120,000 a year.

The second recommendation is that he wants to help middle-class families raise their children --

Q: This doesn't include vocational education?

SENIOR ADMINISTRATION OFFICIAL: Yes, it does. Vocational education and worker retraining.

Q: So it's college and vocational education?

SENIOR ADMINISTRATION OFFICIAL: It's college, community college, graduate schools, professional schools, voc-ed, worker retraining.

Two, middle class families raising their children, so he wants to cut taxes for children under 13 -- in other words, 12 and under. And that tax credit would be available to any family whose income is less than $75,000 -- isn't it?

Q: That's a tax credit?

SENIOR ADMINISTRATION OFFICIAL: That's a child tax credit.

Q: Per child?

Q: Up to $500?


Q: $500 per child tax credit for families making $75,000?

Q: Or less.

SENIOR ADMINISTRATION OFFICIAL: Three, he again wants to help middle-income families, so with regard to saving money he wants to create savings incentives. He wants every American to be able to put $2,000 a year tax-free in an IRA and be able to -- then withdraw that money tax free for education, medical expenses, purchase of a first home.

Q: Any medical, or just catastrophic?

SENIOR ADMINISTRATION OFFICIAL: Catastrophic. Purchase of a first home and the care of an elderly parent. And then, fourthly --

Q: And there's a cap on how much can be withdrawn without penalty?

SENIOR ADMINISTRATION OFFICIAL: Is there a cap on how much can be withdrawn?

Q: Is this available to everybody, or just to certain income groups?

SENIOR ADMINISTRATION OFFICIAL: Families up to $100,000; individuals up to $70,000.

SENIOR ADMINISTRATION OFFICIAL: And fourth, he basically wants to consolidate all of the different training programs that the government now has and provide a voucher to improve job training if somebody loses their job or wants a better one, so that we begin to consolidate those programs as part of it.

He basically is going to take the training programs -- Secretary Reich is recommending consolidation of the training programs -- and trying to provide vouchers directly to individuals that want job training.

The proposals themselves on the tax cut side -- we estimate the cost, and you've got to be -- it's approximate; it's about $60 billion for five years. Five year cost, $60 billion. They are fully paid for in the package. And I'll go over that, but every -- there's nothing added to the deficit. As a matter of fact, we actually get some additional deficit reduction in the package that we're presenting.

The savings themselves for the pay-goes come from two areas. One is major restructuring of government agencies -- the following agencies: Energy, HUD, Department of Transportation, GSA, and OPM. This is the beginning of a process -- these are actually the first five in agencies to go through this restructuring process. They'll be -- we're going to ask others to do the same.

Q: Is this something that would have happened anyway?

SENIOR ADMINISTRATION OFFICIAL: Most of these were --we were asking them to look at their operations to begin with. But obviously, it is something that is part of the REGO effort, the restructuring of government effort. It's basically targeted at management restructuring, consolidation of programs, privatizing of some of the programs in these agencies, as well as eliminating some of the programs that these agencies have.

For example, in Energy, we are eliminating some programs. They are basically reducing the layers of management; they've got a lot of management and supervision layers there. And they're also going to be privatizing some of the programs at Energy.

At HUD, you're looking at mainly consolidation of programs. Secretary Cisneros is recommending some pretty dramatic consolidation of programs so that they're targeted at housing and economic development. And the same thing is true for these other agencies.

So that's one piece of it. The second piece of it --

Q: How expensive?

SENIOR ADMINISTRATION OFFICIAL: That piece saves about $24 billion.

The second piece is to continue a hard freeze in discretionary spending through 2000. We currently have a hard freeze in place through Fiscal Year '98 as part of the $500-billion deficit reduction program. We would extend that hard freeze for an additional two years, which picks up $52 billion. And you've got some additional deficit reduction on top of that.

Now, let me make clear that this represents the portion that relates to the tax cuts and how we're paying for the tax cuts. We have still not made all of our decisions with regard to the budget, and those will be presented, obviously, in the fuller budget.

Q: This is $76 billion in savings?

SENIOR ADMINISTRATION OFFICIAL: This is $76 billion in savings.

Q: And so the $60 billion will pay for the tax cut --


Q: and $16 billion will pay for additional deficit reduction.

SENIOR ADMINISTRATION OFFICIAL: It helps us in the deficit picture. We're going to have to do more on the deficit picture, and we're going to be working through those decisions next week.

Q: Now, is it fair to say if you didn't have any tax cuts, you would have been able to save $76 billion in deficit reduction? (Laughter.)

SENIOR ADMINISTRATION OFFICIAL: I want to go "duh." (Laughter.) The answer is yes.

Q: If you were to have done this -- would you have done this anyway?


Q: Would you have done this anyway? I mean, the tax cuts.

SENIOR ADMINISTRATION OFFICIAL: No. Clearly, we were pushing for major restructuring in government programs. And the additional freeze is something we were considering.

Q: Are you going to have any actual text for us that we can get into the broadcast of what the President is saying.

SENIOR ADMINISTRATION OFFICIAL: Excerpts. We're working on that.

Q: Okay, because it's getting -- we're getting --


SENIOR ADMINISTRATION OFFICIAL: We've got a summary of what it means for a family, a four-person family with $50,000 of wage and salary income. And, my colleague will walk through these quickly.

SENIOR ADMINISTRATION OFFICIAL: These are examples of four-person family, $50,000 of wage and salary income, $7,500 of itemized deduction and four personal exemptions which add up to $10,000.

Q: That's current? That's current circumstance and now you're going to go to the scenario is what would happen to them as a result of these proposals?

SENIOR ADMINISTRATION OFFICIAL: Correct. So case one, both children, 12 or under, that means they're going to get $1,000 tax credit, two-$500 credits -- that's a 21 percent reduction.

Both children over 12, so they don't get any child credit, but they get educational expenses in excess of $10,000, so they get the full $10,000 deduction.

Q: But that means like they'd have to -- this is sort of if you can put your kid in private school or put your kid --


Q: But this is children over 12 aren't in college.



Q: But basically for people with young teenagers between 12 and 18 unless they're in college, they don't get anything.

SENIOR ADMINISTRATION OFFICIAL: No. Look at case three. They can put money in an IRA, can save for college or for a first home or whatever--

Q: $50,000 -- they can all do that on a $50,000 income. (Laughter.) Okay.

SENIOR ADMINISTRATION OFFICIAL: I think that the reason why people, why it's hard for them to save for the retirement is because they're usually already saving for, you know, trying to save for college or something. So this makes it exceedingly easier for a family who was trying to put away -- I mean, a lot of people making $50,000 are trying to put away some money for their kids education. That would help any of those families.

Q: And then the reason we did children 12 and under as opposed to 18 and under is because most of that money, you figure, needs to go for child care?


SENIOR ADMINISTRATION OFFICIAL: -- targeted, you know, the caring of kids at home.

Q: Let me ask a question. On the third thing --$2,000 they can put into an IRA. Right?


Q: Per child?


Q: Is that for anybody?


Q: Anybody with a family income of $100,000 and individuals at $70,000?


Q: So this third thing over here, where you're saying about --

SENIOR ADMINISTRATION OFFICIAL: It could be either -- you can either have children or it could be a family with no children -- that third example.

SENIOR ADMINISTRATION OFFICIAL: Right now, an IRA, you can put $2,000 in if your income is up to $40,000, phasing up to $42,000, but you can only use it for retirement. If you take it out before 59-1/2, you face a penalty. This does two good things for middle-class families. One, instead of being $40,000 as the limit, it raises it significantly to almost $100,000, so it includes a lot more middle-class families. Secondly, it has a whole other category besides retirement that you can take it out penalty-free for.

Q: But the maximum contribution is still $2,000?


Q? For the family or for the individual?


Q: What government services, one or two, of the top ones that Americans enjoy are going to privatized? What services the people would recognize are on the privatization list?

SENIOR ADMINISTRATION OFFICIAL: Well, let me give you just one example which would be that, for example, the petroleum reserve that currently is under the Energy Department's control. That's being suggested for privatizing.

Q: I mean, what would that mean? It would just be privately managed?


Q: But the government would still own the oil, right?

SENIOR ADMINISTRATION OFFICIAL: The government could still have access to the oil, but the -- it would basically be operated in a private sector basis. In other words, the private sector would basically manage the field. We would still have the ability to get access and draw from it. But right now we're running that whole operation out there.

Q: Nothing far-reaching like air traffic control or the National Weather Service or --

SENIOR ADMINISTRATION OFFICIAL: There are -- I mean, we're looking at a series of those proposals, and I think we -- what we want to do is basically provide a more in-depth briefing on all of that when we get into the particular departments.

Q: Is this tomorrow we're talking about or --

SENIOR ADMINISTRATION OFFICIAL: I think some of it will be tomorrow. A lot of it will be over the weekend.

Q: Over the weekend?

SENIOR ADMINISTRATION OFFICIAL: Probably Monday is when we want to do a major briefing on all of the departments, as well as -- I mean, the Vice President's back then from Russia, and wants to be able to provide a fuller briefing on the restructure.

Q: But would that go beyond monies needed to cover this $76 billion.

SENIOR ADMINISTRATION OFFICIAL: I think it's mainly going to be the restructuring there plus some of the additional stuff they want to do with regards to other departments.

Q: When was the final package finalized, crossing the last t's and dotting the final i's, numbers for all of this?

SENIOR ADMINISTRATION OFFICIAL: The decisions by the President were basically concluded yesterday.

Q: Yesterday morning?

SENIOR ADMINISTRATION OFFICIAL: Yes, on the tax pieces and the numbers, obviously, were worked through today.

Q: All the details on the 100,000 --

THE PRESS: Thank you.

END 5:10 P.M. EST

William J. Clinton, Background Briefing by Senior Administration Official on President's Speech Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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