Press Briefing by Leon Panetta

The Briefing Room

1:05 P.M. EDT

MR. PANETTA: What I would like to do is to basically follow up on -- the briefing that we provided following the House action on reconciliation was to kind of outline some of the specifics that each of the committees did. And I would like to kind of summarize again what the Senate did to indicate that the President's plan is well on track with regards to adoption.

Deficit reduction, the incentives for growth, helping families -- that was the key behind the President's economic plan. And we feel that we're very much on track to getting those provisions enacted. Most of these are contained in the provisions of the 12 committees on the Senate side that reported pursuant to their instructions of reconciliation. And while the administration did not embrace all of the changes made by the various committees, we do commend the Senate and each of the committees for achieving $500 billion in deficit reduction.

The key elements of the President's plan are pretty much presented here and you have a good sense of what, in fact, were maintained through the House and through the Senate versions of each of these. Let me just kind of summarize the plan.

Obviously, $500 billion in deficit reduction. We started -- the administration was slightly below $500 billion, it was about $496 billion; when proposed in the House it was about $502.9 billion; and in the Senate, according to OMB estimates, it's about $516 billion; according to CBO it's about $507 billion.

On the entitlement, each of the key areas on the entitlements, we have achieved the savings that we've been after here. The first on agriculture, it's $3.2 billion, and that's true across the board -- the House and the Senate. On veterans, we wanted $2.6 billion -- that's true across the board. We achieved that in the House and we've achieved it in the Senate. On Medicare savings, we achieved $50.4 billion, roughly about $50 billion in Medicare savings in the House. And obviously that's the one area where the Senate has increased the savings there by an additional $19 billion. We're looking at $67 billion on Medicare savings there.

On Medicaid we've got approximately $8 billion; the Senate's slightly higher at about $9 billion on Medicaid savings. And on Social Security, that was the one area where the House did about $32 billion. The Senate did $26 billion, and that was because they increased the thresholds with regards to those who would be paying on the benefits under Social Security.

Discretionary cuts -- this is about $102 billion across the board. Those cuts, obviously, are reflected in the caps -- hard freeze caps that are adopted by the House in their version and that will be adopted by the Senate as well.

The energy tax -- there is a major difference there as well. We had about $72 billion, obviously, in the energy tax in both the administration as well as the House. The Senate adopted about $25 billion as a result of going to the gas tax.

Taxes on the wealthy are roughly in the -- about $114 billion, in terms of increased taxes on the wealthy. That's the increase in the rate as well as the surtax.

And on the investments, that's probably where the major difference is with regards to both the House and the Senate as well as the administration. There we have identified the principal investments -- the earned income tax credit, hunger prevention, immunization, family preservation, and empowerment zones. The House basically included all of those in their version of reconciliation. In the Senate we do have the EITC, although it's been reduced. We do not have the hunger prevention bill. We have a version of immunization that was included. We do not have family preservation or empowerment zones. And that's obviously the key difference with regards to investments.

We have tax incentives included in all three packages, a little less in the Senate than what was in the House. And obviously the deficit reduction trust fund was included in the House and we expect that it will also be included in the Senate as well.

Those are some of the key elements that obviously reflect the President's economic plan and the fact that this economic plan, as I said, is well on track, both through the House and the Senate. I want to just mention some specific spending cuts in each area. We've provided a package to each of you that goes into each of the committees. But again, understand that each committee had to enact specific savings with regards to cuts. This is not a situation where they basically tried to grab a number our of a cap or what have you. They basically had to identify specific savings.

In agriculture they reduced efficiency payments, specifically with regards to what's called the Pay 92 Program; they've increased assessments by ten percent on sugar and peanuts and also lowered payments with regards to honey, wool, and mohair.

Arms Services Committee -- just to give you a sense of what we're looking at -- there is a delay on cost-of-living increases for the uniformed services, the retired, all of the uniformed services, by nine months from January through October and delays in - - COLA by eight months. Very significant savings there and a tough vote, I'm sure in the Armed Services Committee.

In commerce we were able to retain the spectrum auction, which is the ability to auction that part of the radio spectrum. That's going to produce almost $7 billion in savings right there. Hard rock mining fees were increased in energy. In the Finance Committee -- obviously, I referred to the Medicare cuts -- those are all specific recommendations on Medicare cuts that are included in that committee.

In the Foreign Relations Committee there was a threemonth COLA delay for foreign service retirees. Another cost-ofliving hit from '94 through '96. In the Government Affairs Committee there is a three-month cost-of-living delay for civilian retirees for '94 through '96, and it permanently eliminates the lump sum retirement option as well.

We have a modified version of the President's direct student loan program -- the direct student loan program on the Senate side, but obviously, a significant savings could be achieved with that change. And on veterans affairs, there were significant changes made, particularly with regard to GI benefits.

So in each of these committees the recommended cuts are specific, they're real, they affect everyone from farmers to the elderly, from doctors to hospitals to veterans to federal, civilian, and military retirees. Anyone who says there aren't real spending cuts in this package ought to ask the tens of millions of Americans who will be directly affected by them.

Now, let me speak to an allegation that's been made over the last few days about whether or not the counting on the $500 billion is real or not. First of all, there's the allegation that we're taking discretionary spending cuts, we're using user fees and interest payments, and that those should not be counted. When President Bush and the Congress negotiated the 1990 budget agreement, savings from the five-year discretionary spending caps that were included in that provision were included -- the numbers were included in the total. So were the fees, and so were reduced interest on the debt.

And let me just say, when you have the savings on the discretionary caps, those are real. You've locked them in. If you don't achieve those savings there is a cut across-the-board that takes place on all spending programs. So there are teeth here, there is an enforcement mechanism. And the fact is from the 90 agreement we've achieved every year savings on discretionary savings by virtue of having that tool in place. So those are real. And they were counted in the '90 budget agreement and we count them because they are real.

The same thing is true for interest savings. I mean, to assert that somehow interest savings ought not to be counted as savings -- most corporations and businesses, when they reduce their debt, they obviously reduce their interest payments and those are savings. We do the same thing. If we're not paying on the interest. That's a legitimate savings in terms of the federal government. And, again, it's been counted in the past.

And on fees, when you offset federal spending by having individuals that either go to parks or what have you pay the fee, it reduces the amount of spending that you have to then contribute. So it, too, has been -- and has always been scored as a spending savings.

Bob Dole, as you know, when he was speaking on the '90 budget agreement, basically defended the fact that there were $500 billion in deficit reductions using exactly those same score-keeping methods. John Kasich with the Republican alternative in the House -- his plan counts interest savings, it counts fees, and it counts discretionary savings as well.

And regarding the discretionary spending caps -- for anyone who doesn't think that those are real, let me indicate to you that I have sent a letter out to all of the heads of departments and agencies at the end of last week asking them to begin the process of planning how to meet the caps in the 1995 budget. We estimate that we're looking at approximately a 10 percent reduction in most of those departments in order to reach those caps. Those are tough caps. This is a hard freeze. And everyone who is going to have to work through those savings understands that these discretionary savings are very real.

Lastly, let me also indicate -- I mean, I think we've always indicated the tests that we abided by in presenting the President's economic plan to the country in terms of deficit reduction, the fact that it was real and progressive and what have you. I want to establish the same tests, if I could, for whatever Republican alternative might be offered with regards to this deficit reduction effort.

The first test is it should achieve $500 billion in deficit reduction in real terms. That's the goal. That's what we feel is necessary if we're going to put this country on the right track with regards to deficit reduction over these next five years -- $500 billion in deficit reduction.

Secondly, that it should be progressive, with the wealthy bearing their fair share of the burden. At least 75 percent of the tax increases that we have in this proposal come from those earning incomes over $100,000. And, as you know, under the Senate version, it approaches almost 80 percent that comes from those at the upper income brackets. So it must be progressive.

Now, if, by chance, the Republicans decide to eliminate all tax increases on the wealthy, that means that those who would carry the primary burden of deficit reduction would be the veterans, the farmers, the doctors, the hospitals, the elderly, working families, and the wealthy would bear no share of that burden whatsoever.

Thirdly, there ought to be no gimmicks. There ought to be specific spending savings proposals. We did it in the proposal that we submitted in our budget, the House has done it, and the Senate has done it. There are no gimmicks here. What you see is what you get in terms of the proposals for spending savings. It's easy to try to grab a gimmick like some kind of entitlement cap and say, look, ma, no hands-type of approach to deficit reduction. The tough part is to do it in specific policy terms. And so what we want and what we expect -- and I think what the American people expect -- is that if they're going to produce -- if they're going to provide additional spending cuts, tell us specifically how it's going to be achieved. Senators Boren and Danforth, in their alternative, were specific, and I give them credit for that. Surely, if there are to be alternatives from the Republicans, those two ought to be very specific about where the cuts are going to come from so that everybody understands where the pain is going to take place.

Lastly, it must be fair. Programs protecting low income Americans must not be placed in jeopardy. And, in our view, agriculture, veterans, Medicare, Medicaid must not bear an unfair portion of the responsibility for deficit reduction.

Let me read a quote if I can, which I think is very appropriate to the debate that we're now having. This was a quote from October of 1990. "I think a lot of people forget what this is all about. It's about deficit reduction. It's not about the gas tax or the cigarette tax or Medicare. In the long run, it's about deficit reduction and our children and our grandchildren." That quote was from Bob Dole in October of 1990, and I think it applies now. This is not about all of the tough choices that have to be made. Yes, the tough choices are there. But the bottom line is it's about deficit reduction and trying to improve the future for our children and our grandchildren. What he said then is also true today. And that's what this effort is all about: our children and our grandchildren.

I'll be happy to answer any questions.

Q: Mr. Panetta, in terms of tough choices, there's a draft report from the Department of Energy's Inspector General on the supercollider, which has found that 40 percent of the costs are excessive or unwarranted, including a $35,000 Christmas party and $56,000 for potted plants. In light of this report, do you still believe that the supercollider should be funded and that the taxpayers should foot the bill for it, with the House is considering it later this week?

MR. PANETTA: Our approach in the budget was, I think, the correct approach, because we saw some of the problems with cost overruns. And our approach and our recommendation is that we ought to stretch out the costs to ensure on a year-by-year basis that they, in fact, are spending the money correctly, and that, in fact, the science associated with it is doable. And so that's why we proposed essentially what is a stretch-out, and I think that's what the committee has supported and the President supports.

Obviously, it's going to be debated on Thursday. It's going to be, I think, a good debate. I think it's going to be a close vote. But from the President's perspective, the proposal we put in to basically stretch out that funding gives us a chance to continue to oversee it to make sure that that kind of waste doesn't go on.

Q: How does that deal with the waste that's already taking place, and how does it deal with the waste that will take place in the coming year if it's --

MR. PANETTA: I can't answer for the waste that took place in the last administration, but we do have to answer for any waste that takes place in this administration. And I can tell you, one of my goals will be to very closely oversee spending in that area.

Q: Let me ask you the same question I asked the Secretary of the Treasury yesterday, for which he had no answer. And that is that you are so far -- your x's there disguise the fact that on many of these issues, the energy tax, in particular, and on some of the investments, you are so far apart between the liberal Democrats in the House and conservative senators in the Senate. What strategy do you have or what middle ground do you see to bring these people together besides -- and the only thing he offered yesterday was that the alternative is worse, the idea of having nothing is worse, and that was basically the administration's argument it seemed.

MR. PANETTA: First of all, look, you're getting $500 billion in deficit reduction here. I recognize that, obviously, some of these pieces are high profile and they draw a lot of attention. But when you look at the work of all of the committees here, and you look at even the work of Ways and Means and Finance, overall, these committees have done one hell of a job getting the $500 billion in deficit reduction.

Are there some differences? Sure, there are differences. In the energy area, there's going to be a major difference between the House and the Senate that's going to have to be resolved in conference. In some of the committees, on Medicare there will have to be a major difference resolved in conference. And in some of the committees there will be some differences that will ultimately be resolved. But the fact is they're taking the step. They're moving this forward. I mean, what you see here is happening. There isn't any other game in town right now. This is it.

The President's made this proposal, the House is moving it forward. They've made modifications on it. The Senate is moving it forward -- moving the plan forward. And the Senate has made modifications. That's the nature of the legislative process. But I am fully confident, and I think the President shares this confidence, that ultimately we are going to be able to resolve this in the conference committee, and the end result is going to be very much what the President presented to the country in his economic plan. I don't think you're going to see a lot of differences in the final product.

Q: One of those differences is in the energy tax. Administration officials have said that the President still wants a broad-based energy tax. The Btu tax is dead. So what shape would the energy tax take? Would it be a combination of what kind of broad-based tax in conjunction with a gasoline tax? Could you describe to us what exactly you think that will --

MR. PANETTA: No, I don't really think I should at this point. I think, basically, this is going to be a conference item. The President has made very clear what his test is. He wants a broad-based energy tax for the country. He's made that clear. That's what he presented to the country; that's what the House enacted. The Senate has enacted an energy tax, but at least it kept an element of an energy tax alive. And ultimately, it's going to be resolved in conference.

But out primary goal right now is to get this package adopted by the Senate. This is going to be a tough vote. I don't think we ought to assume that somehow the Senate vote is going to be an easy vote. We've got a lot of work to do. And Senator Mitchell and Senator Moynihan are working it now. But ultimately, we're confident that we can get it passed. And in the conference that difference is going to have to be resolved. But I feel confident that the end result is going to, in fact, have a broad-based energy component to it.

Q: But are you shooting to raise that $24 billion energy tax that the Senate passed? Do you want to raise more money than that, or are you going to try to reach a middle ground between the 72 --

MR. PANETTA: From my perspective as Director of OMB, the bottom line is we want $500 billion in deficit reduction. And so it obviously depends on what is done with the spending cut portion of it. If, in fact, on Medicare cuts those are brought down, you've got to be able to make up that loss of revenues in other ways. That's the balance you're going to have to work out in a conference.

Q: What about the length of time you think it will take the House Senate conferees, assuming the Senate passes it, will they resolve their differences and come up with a compromise before the August congressional recess, or will it go into September? And how, secondarily, will that affect the release of the health care reform package?

MR. PANETTA: I have every confidence that the differences will be resolved in August before the August recess. You understand here, for those of you that have not been through a reconciliation process in the past, you've got 13 committees on the House side, 12 committees on the Senate side. Some of these issues involve multiple conferences because they involve different committee jurisdictions. So you could have as many as 60 to 70 different conferences on different issues that are going to have to be tracked.

We hope to begin that process, assuming it passes the Senate, begin that process next week. And then have the staffs work on it when members come back, really go into a crash program to get it enacted before the August break. Obviously, I think the President's interest is to try to get this done before the August break, and our primary focus is getting the economic plan done and then turning to the health care proposal.

Q: So that would delay the health care until September?

MR. PANETTA: I think the primary focus remains getting the economic plan done. There hasn't been a decision to formally delay the health care bill because, frankly, that continues to be worked on. But our primary focus right now is to get this economic plan done.

Q: Are we to assume from what you've said that the administration strategy essentially, when it gets to conference, will be as it is now with the Senate, as it was with the Senate Finance Committee -- let them do their work; we're not publicly expressing any position on any of this as long as they reach $500 billion?

MR. PANETTA: I think you will find the administration engaged in the conference.

Q: Along those lines, from the point of view of the economy, would the administration prefer to see more done on the spending side or more done on the revenue side to reach that mix that gets you to $500 billion? I know that the House measure which does a little more than the Senate does on revenue and a little less on spending cuts is closer to your original measure. But as you get down to it now, would you rather see more done on the revenue side, more on the spending side -- something more like the balance that you discussed originally?

MR. PANETTA: Bottom line for me is deficit reduction. And if it --

Q: I understand that, but do you have -- a way to do it?

MR. PANETTA: I don't tie it to any magic formulas. I think the key here is if it's dollar for dollar, I think that's approximately what we're looking at in the House version, approximately what we're looking at in the Senate version. And if we can have 50 percent of this come from spending cuts and 50 percent from revenues, that I think is doable.

Q: Have you done an estimate of what would happen -- I mean, under the Senate plan, they strip out many of the business incentives that you had fought for and wanted. Have you done an estimate, adjusted your estimates of what would happen to the economy by taking those out?

MR. PANETTA: Obviously, a primary focus in the conference committee will be the restoration of investments, both the investments that we talked about here as well as restoring some of the business investments as well. I think that's going to be a primary focus of the conference.

Q: Have you made any effort to hold back efforts to amend in the Senate and have the real work of compromise done in conference? In other words, to shorten the Senate floor debate process, have you asked anyone to hold off on that and save it for conference?

MR. PANETTA: God, anything that will shorten the Senate debate would be a welcome event. I think the reality is that you're going to see a lot of amendments offered on the Senate floor. Our goal here is to work with the leadership to do whatever we can to move this process through the Senate. And we are working with them in that effort.

The key right now, fundamental point is that we've got to pass this through the Senate to get it to a conference and to get it done. And I think the American people are really looking to our leadership to get that -- to make that happen. This is a good plan. I think it's a good plan for the country. It's an essential plan for our economy. And ultimately, the American people realize that our ability to keep our economy on the right track depends on passing this economic plan. And there isn't any other game in town. That's the problem.

Everybody can throw grenades at this and they can all make their criticisms and they can all find their own little magic way to solve the deficit problem. But the fundamental problem is that those proposals and those attacks don't result in a plan happening. We have the responsibility to make this happen. We've got it through the House. I think we're on the threshold of getting it through the Senate. And we can get it done. And I think the American people understand that that's ultimately what has to be done here if we're going to avoid gridlock and deal with our economic problems.

Q: On that note, a lot of the talk recently has been how Republicans have been shaping this whole debate and how they've been winning. Do you think you're gaining ground? Do you think you're now winning how this really looks and it isn't realistic?

MR. PANETTA: I think the reason we're winning at this point is because every time you focus on the opponents and say to them, be specific, tell us how you're going to do this -- I mean, everybody can make criticisms about any plan. I've made criticisms about plans -- that's the fun part is to criticize deficit reduction plans. The tough part is to put a package together that can get you the votes to get it done.

As these opponents try to do that, then the public is going to have to focus on just how do they get there; what are their simple answers to dealing with the problems of deficit reduction. And I think what you're going to find is they're going to use gimmicks. Gimmicks have been used in the past. They're going to say, oh, we'll do some kind of entitlement cap across-the-board. We won't tell you what that means in terms of cutting benefits for the elderly, or cutting benefits for the poor, or cutting benefits for doctors or hospitals. We're not going to get into those specifics. We'll just do a cap across-the-board.

Frankly, that's not good enough anymore. And I think the public can read through that. So I think you're going to find over these next few days that the debate is going to change a great deal here because I think what we've presented is credible. I think what you're going to find our opponents presenting is not going to be credible.

Q: Mr. Panetta, your charts suggest that there isn't a lot of disagreement over this plan between the House and the Senate anyway, and you sounded very confident today and Mr. Bentsen sounded confident yesterday. I don't really understand why you're so confident given the confrontational rhetoric coming from the Hill. What is changed to lead you to believe that the House and the Senate are going to agree on this package?

MR. PANETTA: Because, look, number one, the process and the plan is moving forward. Everybody has complaints about portions of it. That's the nature of the legislative process. But we are working through those problems. We worked through them on the House side, the Senate is working through those problems and ultimately the conference is going to work through those same problems.

If you look, as I said, at the overall package, you know, again, a good 80 percent of this package is going through without much change. We're looking at about less than 20 percent where the main controversies are. Well, you know, again, that's understandable -- everybody has different positions and reflects different feeling from their constituencies. But ultimately in this give-and-take process, it's working, we're getting it done. And that's what makes me confident.

Look, at this stage of the game we're on probably the fastest track we've ever been on with regards to getting a budget resolution done and getting reconciliation accomplished. The fact that we're on that track tells me a lot about the hope that it can be done.

Q: If I could just follow up. While you're trying to get this through the Senate, are you also talking with key members of the House to bring them on board --

MR. PANETTA: Yes.

Q: so that they don't vote against this --

MR. PANETTA: Yes, we've communicated -- I've been communicating with both the House leadership as well as the Senate leadership on this issue and that's almost on a daily basis.

Q: Mr. Panetta, as long as you're here, why is it taking so long to find out who did what in terms of the summary firing of the travel office staff? One month or more.

MR. PANETTA: Mr. McLarty and I are -- we have an ongoing investigation within the White House now and we're hoping that that will be brought to a quick conclusion within these next few days.

Q: Until when?

QQ: Are you holding off the release of the report until after the debate this week for political reasons? Don't want to mix your messages?

Q: In the next few days?

MR. PANETTA: No. No, no, it's -- I mean, it's a continuing, you know, it's an investigation that's ongoing.

Q: Is it anywhere near done?

MR. PANETTA: Pardon?

Q: Anywhere near done?

Q: Can we have one last budget question?

MR. PANETTA: Frankly, I don't know whether it's -- I mean, my understanding is that it's continuing and that it should be completed, hopefully, within these next few days.

Q: Well, have you been briefed on the substance of it, Mr. Panetta?

Q: I thought you were doing it.

MR. PANETTA: We basically wanted -- they're doing the investigation and we're going to be --

Q: They're doing it for you, you're not doing it yourself -- you and Mr. McLarty --

Q: Who is they?

Q: Who is they?

MR. PANETTA: I've been involved with the budget process and we've identified people within the White House that are doing the work and they're going to be presenting briefing to us.

Q: Whose doing the work, because we keep being told that it's Mr. McLarty and you?

Q: And Gearan.

Q: Who is doing the work?

MR. PANETTA: It's basically people within the White House that are doing the main work.

Q: accountability.

Q: What happened? Last week we were being told that it would be in the next couple days. Why is it now a week -- what's caused the delay?

MR. PANETTA: Believe me, I'm very confident that we're going to get that report out to the people; we have to.

Q: Not this week?

Q: Maybe Dee Dee or Mark can tell us, on the record, whose in charge of this investigation.

Q: Thank you. It's the only game in town.

MS. MYERS: We never said it would be done in a couple of days.

Q: Yes, it was.

END1:35 P.M. EDT