Bill Clinton photo

Background Briefing by Senior Administration Officials

December 15, 1994

The Roosevelt Room

5:25 P.M. EST

SENIOR ADMINISTRATION OFFICIAL: Let me try, if I can, to summarize some of the main points of the speech this evening. Basically, the President, as you know, is speaking for 10 minutes. The President's basically going to be doing some plain talking with the people of the United States tonight. He's got to be very direct. I think he's going to be trying to speak from the heart in terms of what he thinks needs to be done in this country over the next two years.

Basically he's going to talk about what this country is about -- its strengths, the challenges and the problems that are confronting it, particularly for working families, the middle class in this country -- the steps that he recommends to try to deal with some of the problems facing working families, and how he will work with Congress to try to get those accomplished.

And then he also wants to talk about some steps that the citizens themselves need to take in order to keep the American Dream alive. He basically has lived the American Dream, and he's asking others to believe in it again as well.

The main thrust and the target for the speech is aimed at trying to provide some help to working families with regards to the economic recovery. He's going to speak to the economic recovery, the fact that he was able to get it in place, the fact that -- we've seen a lot of good come from the fact that our economy is doing much better, but that obviously a lot of families have not felt that recovery, and therefore, having made a down payment on a middle income tax cut in the initial economic plan with the earned income tax credit that provided relief to almost 15 million working Americans; that the time has come now to build on that for working -- all working families.

The main concern that he sees are the choices -- the difficult choices, financial choices that face working families right now when it comes to either paying for the education for their children or raising a child within the home, or trying to save up for a purchase of a first home, or for dealing with catastrophic illness or for the care of an elderly parent. Those are the kinds of problems, real problems, that are facing working families.

And so to address that, he is proposing basically four elements that are part of the proposal. The first is that college tuition would be tax deductible. Just as we made mortgage interest tax deductible -- I'm going to read this quote from the speech: "Just as we made mortgage interest tax deductible because we want people to own homes, we should make college tuition deductible because we want people to go to college."

So he's proposing that tuition for college -- community college, graduate school, professional schools, vocational schools, worker training after high school would be fully deductible up to $10,000 a year for families making up to $120,000 a year.

This is a principal centerpiece. He is very -- he believes deeply that this country, in terms of its future, is better off if we can invest in our children and invest in their education.

Q: Sliding scale or flat?


Q: Up to $10,000 per $120,000 --


Q: Are the incomes adjusted gross?

SENIOR ADMINISTRATION OFFICIAL: Adjusted gross. And it phases out completely at $120,000. Starts to phase out at $100,000, and phases out completely at $120,000.

SENIOR ADMINISTRATION OFFICIAL: Secondly, with regards to families raising children, we provide a $500 tax credit for children under 13. Tax cuts would be made available to any family whose income is less than $75,000. Again, to address --

Q: Adjusted gross?


SENIOR ADMINISTRATION OFFICIAL: It phases out from 60,000 to 75,000.

Q: So the $500 applies to under $60,000 a year.

SENIOR ADMINISTRATION OFFICIAL: Well, under $75,000 -- you get some of it up to $75,000.

Q: Full $500 up to $65,000?


Q: And what would you get at $75,000? Zero? Okay.

SENIOR ADMINISTRATION OFFICIAL: Thirdly, again to try to address those particular problems that I talked about, you would allow every American to put $2,000 tax free into an individual retirement account, and then be able to use that money not just to retire on, but to try to be able to withdraw money from those accounts tax free for education costs, catastrophic costs, purchase of a first home and the care of an elderly parent.

The fourth piece that is part of the package is --

Q: Is that $2,000 a year you just stash away or $2,000 for life?



Q: The income limits that -- the ones now are for the --

SENIOR ADMINISTRATION OFFICIAL: Plenty of time. Let me have my colleague explain it. Go ahead.

SENIOR ADMINISTRATION OFFICIAL: Existing IRAs will be changed in two ways. The income limit will be raised. It's currently for couples, $40,000 -- phases out -- it starts at $40,000 and phases out at $50,000. That's current law. Under the proposal the phase-out will start at $80,000 and be completely phased out at $100,000. So we are expanding the universe of people who can contribute to IRAs. In addition, we are going to have the penaltyfree withdrawals for the types of things my colleague just mentioned.

Q: It's tax-deferred --

SENIOR ADMINISTRATION OFFICIAL: Tax deferred. And in addition, there will be a option to put in a so-called back-loaded IRA. You can put in -- it's nondeductible, but you can get the money out tax free.

Q: That's couples, the $80,000 to $100,000 -- that's couples?


Q: Will the $2,000 a year be tax deductible or just tax deferred?

SENIOR ADMINISTRATION OFFICIAL: The current IRA that we have now, you get tax deductions, and the income that is in the IRA is not taxed until you take it out, as well as the contribution.

Q: And the $2,000 is per person -- for instance, a couple would get $4,000.

SENIOR ADMINISTRATION OFFICIAL: And they're both working --

Q: Would there be any means test for the elderly parent, any income levels?


Q: Who would decide --

SENIOR ADMINISTRATION OFFICIAL: We're working out those details. We're working out --

Q: So there may be strings attached to that.

SENIOR ADMINISTRATION OFFICIAL: There will be conditions on all --

SENIOR ADMINISTRATION OFFICIAL: That really -- that concludes the main tax benefits that would be provided to working families. There is a fourth element that the President will talk about relating to job training in which he basically will state that there are billions of dollars now that the government spends on dozens of different training programs. And he wants to provide direct payment, in the form of certificate or grant, to be able to give that to people directly if they lose their job or want a better one, so that we're consolidating job training programs and basically providing those payments directly.

Q: So someone loses their job, instead of going to a training program you give then $10,000 grand, and all the programs are eliminated and they go to some private place?

SENIOR ADMINISTRATION OFFICIAL: Secretary Reich is working on a consolidation of those programs and trying to basically provide -- empower the individuals themselves as to how to use those funds for job training.

Q: Well, it sounds like elimination, not consolidation. Aren't you just disappearing --

SENIOR ADMINISTRATION OFFICIAL: Well, I think the funding is pretty much the same, but it's basically to try to cut through the various programs that are out there on job training and try to go directly to the people so they can use this directly without having to go through the bureaucracy --

Q: Cut through or cut out?

SENIOR ADMINISTRATION OFFICIAL: Well, they're cutting out a lot of the different operations. Let me tell you, Secretary Reich will give you a fuller briefing on the specifics of this, but this is one of the improvements that he's been looking for and trying to get money directly to people.

Q: This is the same amount of money?

Q: How big a voucher would --


Q: But is there a restriction on the money -- all must be used for job training?


Q: Can they start a business if they want to

SENIOR ADMINISTRATION OFFICIAL: I believe it's for job training.

Q: So it's a voucher.


Q: It doesn't affect unemployment --

Q: Did you say that's correct, it's a voucher?

Q: And what's the amount? SENIOR ADMINISTRATION OFFICIAL: On the -- I don't know. SENIOR ADMINISTRATION OFFICIAL: It's $2,000 to $3,000

-- it will be between $2,000 and $3,000.

Q: And would that be based on income?

SENIOR ADMINISTRATION OFFICIAL: This is a further reform, reinventing of a new reemployment option. Our initial one had consolidated several programs. This increases the consolidation -- dozens -- up to 60 programs. And it would still ask states -- it would still ask that there be consolidation, go to one place and know everything. But rather than even having to go to -- (inaudible) --to find out, the grant certificate comes to you and then you can go to one place to find out consumer information on what the best training opportunities are. There will still be standards, but as my colleague says, taking 60 different funding streams and consolidating, and empowering the individual directly, and then having choice and information provided to them on the different variety of reemployment options.

Q: And how much are those 60 programs worth now?

SENIOR ADMINISTRATION OFFICIAL: I believe it is somewhere between $10 billion and $13 billion. But as I said, I think the Secretary will brief more detailed --

Q: These are 60 programs that will disappear?

SENIOR ADMINISTRATION OFFICIAL: Their funding streams will be consolidated.

Q: So where's the savings?

Q: Their funding streams will be consolidated?

Q: Where is the savings -- in administrative costs?

Q: Is there a price tag for all of this stuff?

SENIOR ADMINISTRATION OFFICIAL: I think what we need to do is -- obviously, Secretary Reich has the more specifics on the proposals, but I think you're right, that you're basically taking 60 programs and creating one funding stream.

Q: One program to replace them?


Q: Politically, you don't have trouble with saying you're eliminating programs, do you?


Q: That's what you're doing.

SENIOR ADMINISTRATION OFFICIAL: That's correct. We're consolidating, and you're consolidating --

Q: But you don't want to advertise it that way?

SENIOR ADMINISTRATION OFFICIAL: However you'd like to -- (laughter) --

Q: This is worth $2,000 to $3,000 per person, this voucher?


The main focus of this has been something that Secretary Reich has been working on for a long time, which is basically to -- instead of having a number of different job training programs out there, to try to consolidate those and try to get it directly to people without having to go through the bureaucracy or the administration of a number of these different programs that operate on a number of different levels. I mean, everybody knows that we are dealing with a lot of very different programs that have a very mixed record of performance. He's trying to consolidate it and get it directly to individuals.

Q: Well, consolidating suggests there will be a consolidated federal program -- these people can go to a federal program to get the training; they still will have the opportunity, is that right?

SENIOR ADMINISTRATION OFFICIAL: I believe that's the case --

Q: What's the five-year cost?

Q: What's the overall cost of the tax cut --

SENIOR ADMINISTRATION OFFICIAL: Okay, on the tax cut itself, which is fully paid for, we are looking at approximately -- I mean, because obviously these numbers get scrubbed a little here or there -- but $60 billion approximately with --

Q: Over five years --

SENIOR ADMINISTRATION OFFICIAL: It's over a five-year number from '96 to 2000.

We pay for the tax cuts in the following manner. Let me just make clear the context here because we are working on the fuller budget. We are still making decisions with regards to the fuller budget, which will be presented in February. There are more decisions to be made next week with regards to that budget. This is a piece of that budget that we're working with.

I don't want to give the impression that this is all of the budget. This is a piece of the budget that pays for the tax cuts. The piece that pays for the tax cuts is the following. Its restructuring -- it's made up of two pieces. One is major restructuring in the following agencies: Energy, HUD, Department of Transportation, GSA and the Office of Personnel Management. The main areas for restructuring involve management, tightening up on levels of management, consolidation of programs, privatizing many of the programs within these different departments, and eliminating some of the programs as well.

In Energy, for example, there's the elimination of a number of programs. But there's also the reducing of a lot of their layers of management and supervision. They do privatize as well. I'll give you an example -- the privatization is the petroleum reserve that they would move to try to privatize that.

In HUD, Housing and Urban Development, there is a consolidation of the programs. Secretary Cisneros has developed a very large consolidation of programs, at HUD to basically focus on housing as well as economic development. Those are the two areas that he wants to focus the programs.

Department of Transportation, the same thing. There is some privatizing of some of the programs there, plus tightening up on management as well as the supervision levels there.

Q: Which programs would be privatized in Transportation?

SENIOR ADMINISTRATION OFFICIAL: There's only -- the one that would be spun off is the air traffic control operation. But there are others, and I don't want to get into all of the particulars.

Q: Do you have an example from HUD?

SENIOR ADMINISTRATION OFFICIAL: HUD is basically, what I said -- it's consolidation of their programs into funds that are targeted at housing, at economic development. I think there's a couple others. But it really is major consolidation of programs. What he's done and what he's recommended are to take whole areas that now involve many different loan programs and trying to consolidate those. It's a really dramatic proposal.

Q: Just as an example, how much is the SPR and the ATC worth if they're sold off? What are your estimates here?

SENIOR ADMINISTRATION OFFICIAL: I don't know, and I'll try to get you that.

GSA is the same. We're transferring a lot of the responsibilities to GSA back to agencies and there's some privatization that goes in at GSA as well. And the same thing is true for OPM where there's some training programs that are directed back to the agencies. But, nevertheless, there are some retirement programs that continue to operate under OPM's control.

Q: How much is that worth?

SENIOR ADMINISTRATION OFFICIAL: All of that is worth approximately $24 billion.

Q: Everything you've discussed?

SENIOR ADMINISTRATION OFFICIAL: Everything I've just discussed with regards to the agencies --

Q: How many people would lose their jobs on that?

SENIOR ADMINISTRATION OFFICIAL: I can't give you that estimate right now.

Q: Are these numbers over and above reinventing?

SENIOR ADMINISTRATION OFFICIAL: These are above and beyond what -- I mean, you currently saw in reinventing government, this is a major effort at restructuring. In these agencies, I should tell you that you are looking at the same kind restructuring with regards to other agencies as well. The Vice President will speak to that on Monday when he returns from Russia.

The second piece is to continue the freeze -- it's a hard freeze on spending, for an additional two years. Right now there's a hard freeze on discretionary spending that goes through '98. We would continue the hard freeze on discretionary spending for '99 and the year 2000. That produces $52 billion in savings. The total of that is $76 billion, so we have at least $16 billion that we can use out of the amount right now to help us with regards to the deficit that we're working on with a larger budget.

Those are the pieces that we're looking at, and, again, I guess -- one thing I would remind everybody of is that there is a history here, obviously, for the President with regards to the middle-income tax cut. It's something that he advocated three years. The Vice President introduced, at one point, a major tax credit proposal with regards to children. The President endorsed the middle-class tax cut. The House passed it, and, as you may recall, when the House passed it, every Republican House member but one voted against that bill.

So it is a proposal that we've supported in the past; it's something the President supports. He feels he's building on what he already did with EITC and that it is -- it's consistent with the policies we've been trying to put in place as President.

Q: Why the cut-off at age 13? Why not just have it all minor children?

SENIOR ADMINISTRATION OFFICIAL: I think what he wanted was to target kids in the 12-and-below area because those are really where the costs, principal costs are with regards to caring for kids.

Q: When do the tax cuts take effect? Do they take effect before the spending cuts?

SENIOR ADMINISTRATION OFFICIAL: When do the tax cuts take effect?

Q: Will they be retroactive January 1st? Is that part of the plan?

SENIOR ADMINISTRATION OFFICIAL: No, they'll start to take effect in January 1 of '96.

Q: How come it's less expensive to --

Q: Wait, wait. January 1, '96?

SENIOR ADMINISTRATION OFFICIAL: Right. That's what all the proposals have been.


Q: Sir, if you don't have kids, you don't need any job training, and already bought your first home, what's in it for you.

Q: You're screwed. (Laughter.)

SENIOR ADMINISTRATION OFFICIAL: I think it's fair to say if you want to save for your retirement, or if you want to save for education.

Q: You have no one to save for. If you're a single person and you own a home --

SENIOR ADMINISTRATION OFFICIAL: And you want to save for your retirement, you --

Q: So you only get a retirement benefit out of this?

Q: Why are you so much more specific about the tax cuts than you are about the details in spending cuts? Is it because the details of the spending cuts haven't been decided yet or because --

SENIOR ADMINISTRATION OFFICIAL: No, they've fully been decided, and what we want to do is basically provide a more specific briefing with all of the Secretaries involved in these departments that would provide all of the particulars with regards to that.

Q: And when is that briefing?

SENIOR ADMINISTRATION OFFICIAL: I mean, these decisions have all been made. The Secretaries have all made them, and they're preparing a briefing on that.

Q: And when is that briefing going to be? Today? Tomorrow?

SENIOR ADMINISTRATION OFFICIAL: We'll provide some of the details tomorrow, but the Vice President would like to present them on Monday when he returns from Russia.

Q: But this is all the details for tonight, though?


Q: Now, is the $16 billion extra going to deficit reduction?


Q: Why did you decide against eliminating the Cabinet agencies or combine them?

SENIOR ADMINISTRATION OFFICIAL: Look, I think -- because, frankly, we weren't doing this for show, we were doing this on the basis of trying to make good policy decisions about how we could save money in each of these agencies. Each one of these agencies still have major functions that their responsible for. For example, the Department of Energy has all of the nuclear cleanup responsibilities. That needs to be done, has to be done. Just to simply move that to another agency doesn't save money; it's basically shifting blocks from one place to another.

If the Department of Transportation had the responsibility for that and we decided it was important to keep it there. In the Department of Transportation they have major responsibilities with regards to safety, and we ought not to just simply walk away from those or try to transfer them someplace else; they have that responsibility.

Same thing is true with regards to the Department of HUD. And OPM has responsibility for handling retirement programs for federal employees. We would have to transfer that responsibility someplace else. So our feeling was, let's do the major restructuring that improves each of these departments, but allow them to operate the responsibilities that they really have jurisdiction over and have expertise in. That was the approach we took.

Q: Technically, where do you break middle class?

SENIOR ADMINISTRATION OFFICIAL: Just one second. On the point of if you didn't have children -- by lifting it from $70,000 to $100,000, it allows a lot more people to get an IRA for their retirement, but it also would allow somebody current -- even besides that, the IRA would be allowed to be used for catastrophic medical expense, for long-term unemployment. And then also the education -- the education deduction could also be used for anybody who loses their job and needs to go back for a certified education program.

So there are several ways that somebody in that situation, who already had their first home and didn't have young children would still benefit. There's also being able to include helping their children save for these. So I think it covers quite a lot for working families.

Q: Where does the middle class break? And then, how much of the $60 billion goes to those below that middle class break?

SENIOR ADMINISTRATION OFFICIAL: That's your question. (Laughter.)

Q: You're saying the top is $75,000, right? You're saying the top is $75,000, what's the bottom of the middle class and how much goes to those below the bottom?

SENIOR ADMINISTRATION OFFICIAL: Well, the EITC is a program we've put in and that basically phases out at about $28,000. All of these will be available to people who are above that level.

Q: So that's your definition of who is eligible?

Q: So basically you're saying people below $28,000 won't benefit because they're already in that negative --


Q: So everybody above the EITC, the $500 tax credit for kids under 12?

SENIOR ADMINISTRATION OFFICIAL: That will not be available to people who get the EITC. It will be available --

Q: The reason for the age limit on kids -- is there any difference in that -- is there any reason for that and the reason behind the income limits? I mean, aren't they both basically designed to deal with the amount of money you feel you have available?

SENIOR ADMINISTRATION OFFICIAL: Well, they basically are aimed at -- again, the President felt that it was important to target the tax credits on the families that really have the most costs with regards to kids at that level. He really wanted to target them. And, obviously, it part of the consideration of the resources that are available when you target anything. Otherwise you'd give a lot to everybody. But that was the main reason.

THE PRESS: Thank you.

END 5:50 P.M. EST

William J. Clinton, Background Briefing by Senior Administration Officials Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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