Press Briefing by John Hilley

The Briefing Room

9:35 P.M. EST

MR. HILLEY: (in progress) -- most importantly, this does balance the budget under the latest CBO economic and technical assumptions and results in a surplus of $1 billion in 2002. And in terms of the totals there's over $600 billion in deficit reduction. In this -- I think the easiest table to look at is the third table in.

Probably the best table -- maybe I'll walk you through -- is this one called The Balanced Budget Proposal, which is the third one in on our handout, I think is the easiest way to walk through this. I am looking at the table entitled The Balanced Budget Proposal. It's the third page in. I'll just walk you through line by line. Maybe I'll walk you through it and try to answer questions off this table if it's not clear.

It begins with the new December baseline that was just updated, and the first thing we do is we take the full BLS adjustment, which is to take the formula mix to the .3 range, is what BLS says is at the upper end of what they expect as the revision, and then we start with our spending cuts.

In the discretionary counts -- this includes both domestic and defense -- cuts totaling $295 billion -- and I will as I go through give you some comparisons to the Republican perhaps on these -- cuts totaling $295 billion over seven years, as compared to the Republican cuts of $383 billion. And then into the mandatory counts --

Q: Before you do, how much is defense, how much is domestic?

MR. HILLEY: In the in-years there's an assumption that -- well, this year, of course, we have the defense bill signed already, and it's being negotiated what the final domestic numbers will be. But that reflects an assumption of what would happen. And then there's no assumptions about the out-years because there will be no firewalls. So we don't have -- I don't have for you an explicit defense path.

In Medicare, seven year cuts totaling $102 billion for us, versus $201 billion for the Republicans, a difference of $100 billion.

Q: That represents like a $30-billion departure, a $20-billion departure from Daschle -- from Daschle's submitted, right?

MR. HILLEY: Daschle as submitted? No.

Q: The original Daschle had much smaller cuts in Medicare.

MR. HILLEY: Well, the original Daschle -- of course, this is the CBO scoring -- was -- well, we started earlier this year with $89 billion, which was -- our first foray was the $89 billion for the trust fund. But now we're at $102 billion. We basically incorporated most of the President's proposals, including the -- the only thing we do on premiums is the 25 percent extension current law. There's no increase in premiums up to 31 percent, as in the Republican --

Q: That's $77 billion in 2002 -- 2002 is at $77 billion?

MR. HILLEY: The cut? Oh, the premiums. I don't have the premium levels with me. I think it's $67 billion, wasn't it? I think it's $67-ish, in that world.

In Medicaid, another major difference, our seven-year cuts are $52 billion as opposed to the Republican of $117 billion. Then farm programs, again no further cuts on the Democratic plan because, as you know, there was a baseline revision that took up a lot of it, and so it will have no further cuts in the Spectrum.

Welfare -- we've broken that down into two pieces. Basically, the welfare reform package -- and then I'm showing EIT as a separate line, the 43 and the 2.

Q: -- the apples and apples Republican numbers on farm, FCC, welfare --

MR. HILLEY: Okay. On farm programs, the Republicans are $4.3 billion. The Spectrum, they are $15 billion. And on welfare reform, now, combining their welfare reform and their EIT they're at $82 billion, as opposed to our $45 billion. And then student loans, of course, we have no cuts in student loans, whereas they're cutting $4.5 billion.

And then the rest of these -- the veterans federal retirement -- the only thing worth commenting there is the only difference -- substantial difference with the Republican numbers there -- and of course, this is the bundle of mandataries that we're agreed upon early on -- is we have added this postal which is a required payment by the postal service to the federal government for health benefits.

Now, on the tax cuts, the President -- the tax cuts reflect the President's policies exactly with, as has been clear, the proviso that they detrigger under CBO in the last two years, but of course, if the economy grows as we think it will under the OMB assumptions, that tax cut will be much larger, as I'll come to in a minute. But these numbers reflect the President's tax package that triggers off in the last two years.

There is some spillover in 2001 and 2002 because, even though the tax cuts would trigger off on the first of the year, the filers finish filing on April 15th, and then, therefore, some of those tax credits would be paid out in the following fiscal year because they file in April.

Q: Just to clarify, if you didn't trigger out, it would be the 100 figure?

MR. HILLEY: If the didn't trigger out, you can see that at the bottom of the sheet -- if we didn't trigger out -- and I'll come to this dividend business, but the answer to your question I'd like to explain a little bit more, would be $147 billion under the full dividend.

Corporate loopholes and other taxes -- we have $60 billion of loophole closures. That is substantially the list that was -- attached at the back of this is the joint tax accounting of those revenue raisers, and this is substantially the list we presented in close-door negotiations about two weeks ago with the Republicans.

Q: Where is that?

MR. HILLEY: It's the last three pages of this handout that you're looking at right now .

Q: Is there a comparable Republican figure?

MR. HILLEY: The comparable Republican figure is $18 billion. But to go back to the tax cuts, that is the President's proposal. That's $87 billion as compared to the Republican tax cut of $241 billion.

Q: But the Republican tax cut is a seven-year; yours is only a five-year because you trigger out?

MR. HILLEY: Well, our seven-year number, as you can see looking at that stream there, is $87 billion, but it does trigger out after five years. But some of the tax benefits continue to flow, as you can see in the sixth and seventh years. You see that? Look at the tax cut line. The 17 and the 2, even though it triggers off as I explained, because some of those benefits continue because of the difference between fiscal year and the filing dates for your tax refunds, that's why they fall over into the out-years even though it's been detriggered. And again, that comparison was $87 billion for the President and $240 billion for the Republicans.

On corporate loopholes and other revenue raisers, $60 billion versus $17 billion.

Q: You said $18 billion a minute ago.

MR. HILLEY: I'm sorry, $18 billion. Excuse me. And then the total deficit reduction, net deficit reduction is, in the Democratic plan, $602 billion; $664 billion in the Republican plan.

Now, just to go through -- if you turn back to the top sheet, maybe any of these things that I haven't hit before I'll just go through quickly. On the balanced budget highlights, it does balance under seven years, as you see by the CBO letter. You see from that other table the $600 billion. I've I think explained the taxes.

Our Medicare package does extend the solvency of the trust fund to 2011, the same duration as the Republican plan. And as you've seen, our cuts in Medicare is $100 billion less than the Republicans; in Medicaid, $65 billion less. In Medicare our cut is $100 billion less; Medicaid, $117 billion versus $52 billion is $65 billion. And on tax cuts, the difference is approximately $154 billion more tax cuts with the Republicans.

Unlike the Republican plan, our plan contains zero special interest giveaways, spenders, and out-year deficit busters. If you look at their tax proposals, the estate tax, their capital gains and their back-loaded IRA explode in the out-years.

Now, the final thing I think that needs explaining is the investment dividend. And you can see -- I think the best is to go back to the detailed table called the Balanced Budget Proposal, and if you look at that, the distribution of the possible investment dividend. And this is what I'd like to walk you through now.

Down at the bottom under the sub-heading, Distribution of Possible Investment Dividend, as you can see, there is a remaining difference between the CBO and OMB baselines of $194 billion over seven years. That is OMB, and I might add, the blue-chip and the other private forecasters, believe that the economy and the deficits -- and therefore, the deficits will be $194 billion less than projected by CBO.

Therefore, what this exercise is -- and we have language that does this -- is if the economy grows at the rate that OMB forecasts, then we have a system of triggering in this extra dividend where we divided up -- one-third will go for deficit reduction, one-third for additional tax cuts, and one-third for additional investments to the discretionary accounts.

And you can see that dividing that $194 billion up in thirds, and just to go to the results, is that if the world looks like OMB says it will, instead of getting a $1 billion surplus in 2002, look at the line that says "adjusted deficits with dividend," you see a much lower deficit path and actually a surplus of $28 billion in 2002.

As for tax cuts, if the world goes like OMB says, then rather than being $87 billion, the tax cuts will be $147 billion. And with regard to domestic spending, rather than being cut $295 billion, it will be a $235 billion cut. And just as a frame of reference, that would be $23 billion above a freeze in the discretionary accounts.

And so, part of our proposal is also, although this is completely scored and validated by the CBO, it makes room for further tax cuts, deficit reduction and spending based on a scenario where the world looks more like OMB and the private forecasters say that it looks.

Q: It looks that if it happens -- if I see the numbers here -- it's basically the last two years --

MR. HILLEY: Yes, the last three years. It's dominated by the last three years. And I think that's where the President's --although his tax proposal is a hard $87 billion locked into law, that under this world it could go up to the higher figure of $147 billion.

Q: Since the President said that this plan shows that you can still preserve tax cuts for working families, and still in the final year we seem to have here a $2-billion cut in EIT, how can you reconcile those two --

MR. HILLEY: The EITC? Okay, I'd be glad to. The EITC, that $2 billion of savings on EITC, that's a seven-year total, so that's not in the last year. But that is only from the administration's compliance initiatives. There are no reduction in benefits to any of the EITC folks. This is simply a tightening of compliance, waste, fraud and abuse, which is the administration's proposal.

So unlike the Republican plan, which in EITC has a $28-billion cut, this $2 billion is simply the compliance initiatives and not any cuts in EITC.

Q: Are there any other waste, fraud and abuse mechanisms in any of these other savings that you have?

MR. HILLEY: Not as explicit as the EITC.

Q: But there are some others?

MR. HILLEY: Well, in some of our Medicare language there is, and of course, there's the IRS initiative that's a part of the administration's proposal, which is a compliance initiative also.

Q: Within Medicare, how big is the figure in terms of --

MR. HILLEY: I do not have that. I could get that for you. And you can see in our detail, in our package, there is some description -- if you turn back in our packet there's a description of the Medicare, and I don't know if it pulls that number out explicitly. Fraud and abuse, $7 billion. Thank you. Seven billion on fraud and abuse. Thanks.

Q: Can you compare real quickly your savings announced tonight to the savings in some of the big categories that Clinton announced in his last seven-year plan? For example, Medicare number: now it's $102 billion. What was it in his last seven-year plan?

MR. HILLEY: It was $97 billion.

Q: And what accounts for the difference?

MR. HILLEY: Well, like I say -- this is fundamentally the same thing. I'd have to have our Medicare people talk to you about that.

MR. SPERLING: That was the first proposal, but since then there's been a lot of work on the staffs back and forth on the scoring of different proposals, so these are just within the mix --

MR. HILLEY: I think if you took our detailed Medicare page, that by about six or seven categories I think you might be able to reconstruct it if -- but I don't have the original administration breakdown along that lines with me.

Q: Just to continue the comparison. Medicaid -- what was your number in the last plan?

Q: And then, briefly, is there a policy difference now that --

MR. HILLEY: No. What happened is basically we have gotten a more favorable scoring on the dish* payments than we had originally anticipated.

Q: Okay. What about discretionary? It's $295 billion now. What was it?

Q: -- ten-year proposal?

MR. HILLEY: No. We're talking about the --

Q: The last seven-year plan that Clinton tried to -- what was it?

MR. HILLEY: $250 billion. Something around there.

Q: -- You just decided to go for deeper savings without specifying where they come from?

MR. HILLEY: Well, I mean, there's a process, as you know. These are the caps that would be written in, and that's the numbers the appropriators have to live under.

Q: What about farm? What was that?

MR. HILLEY: Well, I mean, the original farm proposal, I think -- now, you've got to be careful. This is pre- and post-baseline. We had a farm number, I think, of $4.5 billion before the baseline revision. But the baseline revision lowered farm spending by $8 billion, and so our farm number is now zero. But you've got to be careful on that because there's a baseline change on the farm.

Q: The welfare savings are achieved roughly how?

MR. HILLEY: Okay. The welfare savings -- and there's a sheet on that that we've included -- there are three explanatory sheets and back on the welfare reform savings, I think, by the major categories it tells you where those savings are.

Q: -- welfare.

Q: What was your proposal on CPI last time around?

MR. HILLEY: Identically. Well, the $.2 billion is already built into the baseline. And so the move from $.2 billion to $.3 billion is we've done as a baseline adjustment this time. The $.2 billion is built into the December baseline already, and this is a further baseline adjustment for the $.3 billion.

Q: What were your welfare and EITC savings last time around?

MR. HILLEY: The EITC, that's where we've been all along. That's the administration's compliance proposal --

Q: -- welfare.

MR. HILLEY: Gene, can you help me on the welfare? What was our welfare before, do you remember? In the President's last proposal.

MR. SPERLING: I believe it was $38 billion, including the EITC.

Q: Looking at the details on the welfare reform, I wonder if we could get some comparison. Like, for example, on nutrition programs, you say that cuts in food stamps would be roughly $21 billion?

MR. HILLEY: Yes.

Q: And child nutrition, $3.3 billion?

MR. HILLEY: Right.

Q: How does this compare with what you were doing before?

MR. HILLEY: We were doing $19 billion before in food stamps and the same number in child nutrition.

Q: You're actually doing less of a cut in child nutrition than you were before or the same --

MR. HILLEY: The same number of child nutrition; slightly more in food stamps. $1.6 billion more in food stamps.

Q: What about SSI and child care?

MR. HILLEY: SSI is identical. Child care is identical. Non-citizens is identical. And --

Q: What about AFDC?

MR. HILLEY: AFDC is --

Q: -- that's police.

MR. HILLEY: That's right.

Q: Is this policy the same as the Senate-passed measure or --

MR. HILLEY: In the Senate-passed -- no, it's not because, as you know, in the Senate-passed measure there was $66 billion of savings, and we're well below that.

Q: So what is distinguished -- you still terminate AFDC? You still basically remove the entitlement?

MR. HILLEY: No. We do not remove the entitlement. We do not remove the entitlement.

Q: -- entitlement of limited duration. Is that two years?

MR. HILLEY: It's an entitlement, but it's limited by five years. That's right. Which is in the Senate welfare bill. Yes. Although there are provisions for states to exempt a certain percentage of those, which is also in our bill.

Q: -- corporate welfare.

Q: I haven't looked at this stuff yet, but can we go over that where you get so much money you've got the $60 billion --

MR. HILLEY: Yes. In terms of specific proposals, I'm not your person to answer these, but I can, you know, in terms of the --

MR. SPERLING: Let me just one kind of general point -- is, obviously, there's been negotiations and conversations and what the President -- this budget does not

Q: Gene, can you step up to the mike so the stenos get it for the transcript?

MR. SPERLING: This budget does not -- that Senator Daschle prepared -- does not represent line by line, dot by dot, you know t-cross by t-cross exactly what we would propose. But, as the President said, it is very consistent with our principles, and it is well -- well within the range of options that if Congress passed it, he would sign it and be proud of it. But I don't you want you to confuse it, every little line here represents -- you know, is exactly the same as the administration.

MR. HILLEY: Good point.

Q: How are we attributing this? Are we attributing by name?

Q: What he just said is an important perspective on this. Can we use that on the record from Gene? Is that on the record?

MR. HILLEY: Yes.

Q: To follow up, why is Clinton today, as opposed to yesterday, three weeks ago, a month from now proposing a CBO-certified balanced budget?

MR. HILLEY: I've been involved in these things every day. And these are really exactly the kinds of options that have been being discussed for a month. I mean, this is where we've been on basically all these provisions. And so this is really nothing new at all.

What this is is simply a drawing together of sort of where our positions have been to prove what we have been saying all along which is it is indeed possible to balance the budget in seven years under CBO and protect all your priorities. And this is the argument we've been making in the negotiations.

This is what we've been trying to do in good faith. This is, in a sense, a drawing together of a lot of what's been going on in the last month from our position.

Q: What's new, though, and that -- and McCurry himself as late as this afternoon was saying we are beyond having to produce our own seven-year CBO plan. What's new is that for the first time you've put it all together and released it publicly. Why is this happening?

MR. SPERLING: First of all, we had a -- there was, up until this moment there was negotiations, which are still going on, and there was generally agreement not to discuss specifics. This is really nothing more, as John said, than presenting some specifics that were within the room. But clearly -- clearly -- if you look at the weekend as a whole, the Republicans have made a decision to correct a mistake and open the government. And there was no reason for us to stand in the way of a clear effort to open the government.

Q: But, Gene, I guess the question is, couldn't this have been done --

Q: -- that this is a technical -- we're trying to get all the technical and now on to others.

Q: But couldn't this have been done before then. I guess, the question in my mind is, is that you suddenly, it suddenly dawned on you that this could happen?

MR. HILLEY: Well, I'll defer to my colleague because, again, I came up here to walk you through the specifics of the budget.

Q: -- get some technical before --

MR. HILLEY: Yes.

Q: Just to get -- about the nomenclature of this, describing this as the Daschle budget. The Daschle budget that was unveiled and this Daschle budget are actually two different -- policy-wise, they are very different.

MR. HILLEY: Oh, they're not very different. I mean, which, the Daschle --

Q: This one has tax cuts and the other one didn't.

MR. HILLEY: Yes. Right. But on the fundamentals, the last -- let me draw the similarities because I don't think --

Q: -- is that what you're saying?

MR. HILLEY: No. What I'm saying is both balance CBO seven years. Right?

Q: Yes.

MR. HILLEY: Both protected our priorities. This one we have made room, relative to the original Senate proposal, we have made room for the President's tax cuts and still managed to protect our priorities. And so this is fundamentally the same structure which is CBO balance in seven years while protecting our priorities.

Q: What did you do to the Daschle proposal? We've been making comparisons both to the Republicans and the earlier administration proposal. What did you do to the Daschle proposal to make up the cost of the tax cuts that you put into it?

MR. HILLEY: Well, you can see that we went a little bit -- we did things around the margins basically is the answer, is on sort of up and down the ladder, we made marginal adjustments that still protected our priorities, but made room for the tax cut. But there were no significant policy or structural changes between this and the last one. There was marginal trimming to make way for the tax cut.

Thanks.

THE PRESS: Thank.

END 10:00 P.M. EST