Press Briefing by Leon Panetta, Chief of Staff

Chief of Staff's Office

1:40 P.M. EDT

MR. PANETTA: What I wanted to do is to summarize letters that we've sent to Speaker Gingrich and Majority Leader Dole, as well as both Chairmen of the Appropriations Committees, Livingston and Hatfield, on the news stories that we have about the CR, the continuing resolution.

To put this in context, obviously it's clear that some kind of continuing resolution is going to be necessary. We would prefer that not be the case, but it's obvious at this point that Congress is not going to complete their budget work before October 1. So we will need to have some kind of continuing resolution in place in order to not penalize people because of that -- not meeting the -- the completion of the budget.

The leadership meeting that we had last Tuesday, between the President and the bipartisan leadership, basically discussed this issue. And at the time, the President made clear that he obviously wants to avoid a shutdown of the government and wants to be able to negotiate a continuing resolution that could resolve differences. And the leadership was encouraging that they would want to do the same thing at that time.

We are, therefore, disappointed that instead of hearing directly from the with regards to the elements of a continuing resolution, we read about it in the press this morning. That's not a good way to try to work out an agreement. However, we still remain encouraged that the leadership obviously does want to avoid a government shutdown. And for that reason, we think that it's important to have a CR that provides a level playing field on which the negotiations can continue with regards to the larger issues involved in the budget. It should not favor one side or the other. And that's kind of the key element that want included in any CR.

So let me just summarize the important criteria for a continuing resolution. Number one, that it should be clean. In other words, no legislative riders. For those of you that don't follow this, each of these appropriations bills has a huge number of legislative additions -- for example, in the environment and other things. We would want all of those to be stripped and --

Q: -- agree to that?

MR. PANETTA: It appears that they've agreed to keep it clean, which is a step in the right direction.

Secondly, we are willing to, for purposes of the continuing resolution, accept the level of savings that is provided in their budget resolution. I mean, the formal talk, it's what's included in what's called their 602A. But it is essentially the level of spending -- savings, the level of savings they would achieve in their budget resolution for that period.

Q: Leon, what is the figure on that for next year?

MR. PANETTA: Well, I mean, for the year, just to give you a rough estimate, for the year their savings would be below the '95 level, somewhere between $17 billion to $18 billion on budget authority. If you took the six -- four to six weeks that they're talking about a CR, you're looking about $500 million. So in other words, whatever -- we would look at a percentage of whatever they want to achieve in a year, and we're willing to accept that level of savings.

Q: That's across-the-board percentages about -- I can't remember what the total is -- three percent or something?

MR. PANETTA: It's -- it depends. It depends on what you do on defense, whether you're -- you know, what level you include defense. And it also obviously is going to depend on what -- how many bills we sign in terms of the appropriations. But you're --you're in the ball park.

Q: -- $500 million or is $17 billion-$18 billion --

MR. PANETTA: $17 billion-$18 billion for the year, but for the period it would probably be somewhere in that vicinity.

Q: The base year is 1995 --

MR. PANETTA: That's correct.

Q: So every program at that percentage -- every program in the budget at that percentage --

MR. PANETTA: Well, what we would then -- I mean, the third point I would make, and this is probably the most important, is that their proposal was to accept, I think, the lower of either the house or Senate or '95, which means that what they're proposing is that we essentially accept their priorities. And while we're willing to accept, you know, the savings level in their budget resolution, the President is not willing to accept their priorities in a continuing resolution.

I mean, the CR ought to basically be -- put things on hold so that the priorities can then be decided within the context of the individual appropriations bills. I mean, it's -- if we're going to have a cease-fire, and this is essentially a cease-fire, what they are asking us to do is to basically turn over our weapons and allow them to have, you know, a thousand troops as hostages. That doesn't work if you're going to have a fair cease-fire. And the same thing applies here with the CR. So our approach would be that it should be across the board, and it should not lean one way or the other with regards to priorities. That's the fairest way to have a CR put in place.

Lastly, I would mention this, that we do believe that a continuing resolution ought to be a for a shorter period of time than they're proposing, rather than allowing Congress to have, you know, this long -- I think they're asking almost four to six weeks to get this job done. I think we prefer that it be on a shorter time frame, just to be able to do the work of the country. But I also have to tell you that that's negotiable depending on whether they're willing to satisfy the formula that we think represents the fairest approach to this.

Q: -- one reason you want to have it shorter is to keep pressure on them so you have a negotiating -- have a little leverage over them?

MR. PANETTA: That, and in part -- I think it's -- more importantly it's that they are behind in terms of completing the work on the budget. And, frankly, the country deserves to have the budget completed rather than operating off of a CR. This is something we've been able to avoid the last few years. It's unfortunate that we have to do this, but again, I think both sides recognize that we don't want to wind up with having to shut down the government. And to that extent that's good.

So hopefully we can work this out, but at least we wanted to make clear what our priorities are with regards to any CR.

Q: Are there any plans for another meeting to work this out?

MR. PANETTA: Well, in the letter I basically asked that, you know, we're willing to work with them on this. And I guess my hope is that we can set up a meeting within the next few days to do that.

Q: Have they talked to you today about this or anybody in the White House about it? -- still the only communication you have is through the newspapers?

MR. PANETTA: That's right.

Q: Why do you think they didn't --

MR. PANETTA: I should tell you that we asked -- I mean, we asked both Chairmen not to -- not to go public with the CR until we had had an opportunity to talk with them about it.

Q: Why hasn't the White House tried to make contact with them today to verify what's in the newspapers?

MR. PANETTA: We will now. We've sent the letters up, and I'll be following it up with phone calls.

Q: Does this mean you're willing to accept their 602A?

MR. PANETTA: Not as -- not as part of a final deal.

Q: You specifically asked them not to go public and exactly what they did is -- exactly what they did is exactly what -- what you asked them not do --

MR. PANETTA: I think that's probably -- we asked --

Q: Shocking, isn't it? (Laughter.)

MR. PANETTA: Yes -- we're getting used to that -- (laughter) -- but we thought it might be a better way to negotiate if we could do it before they went public with what they, you know --

Q: You had talked about, I believe, a one to two percent below the FY '95. Are you suggesting that you're willing to go a little deeper if it's across the board?

MR. PANETTA: Well, I mean -- any -- first of all, an across-the-board formula we think is a much fairer way to do it so that we in fact are not in a position where we have to drastically cut education, environment, crime and some of the other areas that are cut drastically in their appropriations bills. So an across the board formula is important.

We think it ought to be -- what will determine what that formula is will be what -- how much we decide to put into defense. Now, I think we are prepared to go with a '95 defense number. I think -- I'm not sure -- they've got a larger defense number. And we are also prepared, you know, to obviously try to see if we can sign some of these appropriations bills that are in conference now that are coming down here. We would like to sign some of those.

So depending on what that all turns out like, whatever across-the-board formula we have ought to meet the savings level that we -- that we have established as our target. That will be our principal guide.

So I can't give you the percentage --

Q: So you're willing to agree to -- for the CR, you'd use '95 defense. They would -- their 602B is for somewhat higher --

MR. PANETTA: I think that's right.

Q: And if you have some savings that are maybe deeper than whatever the average is in these appropriation bills you sign, then that would allow you to go somewhat lighter on the formula on the other --

MR. PANETTA: -- possible.

Q: Isn't this -- the folks out here are reading the paper and watching this on TV -- isn't this another example of how these folks can't do anything right? I mean, not only is the homework not done on time, but now you guys are fighting over who's going do what -- numbers on the test and who's going to -- when are you going to turn the homework in, and who's dog ate it up? I mean, this is awfully --

MR. PANETTA: They haven't finished their homework on time, and that's -- (laughter) -- why we're having to extend the time to get the papers in.

Q: You guys can't even -- you guys can't even decide on who's going to --

MR. PANETTA: We're prepared -- I mean, look, we have -- we've said from the very beginning -- I mean, if you look at some of their quotes on train wrecks, some of them have been pretty threatening. And at least they've backed away from those kind of threatening comments. And I think that's healthy.

The President has always said we ought not to reach the point where we have to shut down the government. So we're prepared to work out a CR. As I said, I think it was disappointing that they decided to go directly to the press rather than try to talk to us because we think that's a better way to get a result.

Q: Doesn't this dismiss some of the optimism we had last week when you agreed on a CR -- now we're heading for a train wreck on the CR itself, right?

MR. PANETTA: Well, again, we're hopeful that we can avoid a train wreck, but we also want to make clear to them what's important to the President. And what's important to the President is that we are not going to be blackmailed into accepting their priorities, whether it's in a CR or anything else.

Q: Are you less optimistic about -- avoid the train wreck than you were when you walked out of that meeting with them last week?

MR. PANETTA: Well, I think the fact that they -- they're now talking about a clean CR, the fact that they're willing to agree to avoid the train wreck scenario and the shutdown of the government tells me that they should be willing to talk about a fair formula --

Q: Are you more or less -- are you less optimistic than you were last week, though, because of this?

MR. PANETTA: Probably about the same. I never get too optimistic in this job.

Q: Then why -- why can't one look at what they did as a fair compromise? I mean, they -- they did, in fact, get rid of the riders. They did agree not to zero out any programs.

MR. PANETTA: The biggest -- I mean, the biggest problem is that they would -- they require us to take the lowest of either the House or Senate mark. And obviously the House is probably -- (laughter) -- the lowest in most instances, I think. And, you know if this --

Q: That's traditional, isn't it?

MR. PANETTA: It's traditional when in -- I mean, in most years, you know, let's face it, we were talking about increases from year to year. This is a different year. And we're talking about some very dramatic cutbacks and some very dramatic differences in terms of priorities. And so the fairest way to approach it in this kind of year is to basically say, look, let's put this on hold. We can fight out our differences and priorities in the context of the appropriations bills.

But you cannot put the President in the position of saying we're going to buy into your priorities in a CR. That just does not work.

Q: How short would you like the continuing resolution, Leon, if not six weeks?

MR. PANETTA: Frankly, I think you always ought to do that on the basis of maybe two to three weeks as the better way to do it. But, again, as I said, that's an issue we're willing to negotiate on.

Q: Whey they see this letter today, is this going to be the first time that they've seen your criteria or --

MR. PANETTA: No.

Q: -- did you talk about this on --

MR. PANETTA; We've pretty much indicated that these were the areas that we thought we could work something through.

Q: And what was their reaction to this when you talked to them --

MR. PANETTA: Said thank you. (Laughter.) I think we got the response last night. (Laughter.)

Q: Will you be any more specific with them, or is this as specific as you can be or will be on outlining what you want in the CR?

MR. PANETTA: When you sit down -- I mean, when you sit down and start to negotiate, there will be a lot more questions raised. But, you know, I think this at least lays out the parameters where we think this needs to go.

Q: Has there been any progress on the debt limit issue at all?

MR. PANETTA: No. I think -- Bob Rubin has asked for some action on the debt limit, but as far as I know, I see nothing moving in Ways and Means.

Q: Gingrich told the Public Securities Association this morning that he wasn't going to schedule a vote until -- for the debt limit -- until he had a balanced budget, welfare reform and Medicare. What does that mean?

MR. PANETTA: It means the cannon is pointed at all of our heads -- (laughter) -- until we give in. He -- in fairness to him, he said that at the leadership meeting, that basically the debt ceiling would be very difficult to do until we, you know, see what happens on reconciliation, on the budget, on welfare reform.

Q: Can I ask you about the Medicare proposal that was --

MR. PANETTA: Yes.

Q: I'm sure you support it. Can you outline the reasons you support it for me -- what you think of the proposal.

MR. PANETTA: Well, I think as most of you know that looked at it, we're just dealing with another press release today. We have seen no specifics in terms of numbers, no numbers approved or disapproved by CBO. I mean, all of this has to be reviewed by CBO. We have no specific policies outlined in terms of specifics. And I think they're just -- you know, they're continuing to hide the tough policy decisions from the American people that are involved here in Medicare.

I mean, the only thing we know is what we've always known, which is that they want to cut $270 billion out of Medicare, and that a big chunk of that is going to go to cover their tax break.

Q: When the President this week -- he at one point indicated that means testing on welfare recipients -- Medicare recipients, sorry -- you know, was perhaps not a bad idea. Was he signaling that you see some sort of compromise in that area of the -- I realize you've had this before in other of your own proposals. Is there --

MR. PANETTA: All of us have basically said it's -- I mean, you know, means testing is a principle that we think is -- is not something to be rejected out of hand. On the other hand, it should not be implemented if it's not needed. And right now if the main concern here is repairing the trust fund, you can do that without having to add additional costs to beneficiaries.

Q: Can I change the subject again? Who was the President trying to reach out to in his remarks yesterday on Calvin Klein? Was that another -- another pitch by him in the cultural war that's going on in the presidential race?

MR. PANETTA: I have to tell you I didn't read those comments.

Q: -- 10:30 at night on this side of the country.

MR. PANETTA: (Laughter.) Although, you know, on these speeches he starts to bring in a lot of things -- (laughter) --

Q: The later it gets the more creative. (Laughter.)

MR. PANETTA: -- you're probably right. (Laughter.)

Q: Do you think that we're going to reach the debt ceiling or are you reasonably optimistic that you'll be able to work something out before that comes?

MR. PANETTA: I can't tell you. I mean, I look a what's happening now on a day-to-day basis, and I don't know how any of this is going to wind up. I know that we're going through a lot of Kabuki right now, and it's tough to tell what the end game is going to be. A lot of this clearly is going to have to play out. And I don't -- I am not encouraged right now that there is any interest in trying to resolve these differences. It's just -- we're just too far apart.

Q: How do you spell Kabuki? (Laughter.)

MR. PANETTA: I'll tell you later.

Q: How hurt are you by relations with the Democrats right now? Is what Moynihan saying about welfare and going back to the -- when he introduced the 10-year plan and there was a lot of criticism from Democrats -- are relations any better? Is the party over there with you?

MR PANETTA: We've had -- I mean, we've had, I think, very good relations with -- we talk with the leadership on both sides. And the members who worked on welfare reform, John Breaux, Daschle, Chris Dodd -- were in very close touch with the administration as we went through that bill. And we're in close touch with the leadership on the House side as they go through the Medicare issue.

So we're in pretty good touch. I mean, obviously, Pat has strongly disagrees with what's happening on welfare reform, and I respect that. But I think he could be -- he could much more constructive in terms of the conference if he, you know, brought his background and his beliefs to bear.

Q: -- danger is it of this -- of your willingness to compromise and then leave the Democrats, like Moynihan complains, like they complained during -- in the summer on the overall budget that you're asking them at some point to stand with you and then you jump to a compromise position and leave them there.

MR. PANETTA: Well, I mean, I think on the Senate side what was -- I mean, the strategy both on the Breaux-Daschle bill, as well as the amendments, was something we worked on closely with the Democrats that wanted to see whether they could improve the bill. They were successful in doing that in a number of areas. And the result was that you got 87 votes in support of that welfare reform bill with a large number of the Democrats voting for it.

Obviously, as I've pointed out, the principles that are in that bill, they have to be improved on in the conference. And they certainly can't move backwards. And if they move backwards, the President has made very clear that that's not acceptable.

Q: Can you draw that line firmer? I mean, is it really at the Senate bill or is there any -- is there any --

MR. PANETTA: Well, there are obviously some basic principles that are involved here that interrelate to the family and responsibility and work that were included on the Senate side that -- you know, if they start moving towards what the House bill looked like, we said we would veto the House bill and he would veto that kind of bill if it came out of conference.

Q: -- really not a huge fundamental difference between the two bills and that a lot of what this is posturing, political posturing, just to make it seem like --

MR. PANETTA: I don't know -- you talk to some of these Republicans who are going to be conferees, they think there's big differences.

Q: Then why is the Senate bill, in the administration's view, preferable to the current welfare system right now with the waivers that you all have been granting?

MR. PANETTA: Well, I mean, I think -- the President's always felt that we've kind of approached this in two fronts. One is obviously the waivers and the states that we've provided the waivers so that they could basically implement some of these provisions. Under the law, the bill itself, obviously, would implement more permanent changes. But the key right now is to make sure that you provide the right support system so that families that have to work have the child care, have the kind of maintenance of effort requirements that will sustain them.

I think, as I said, I think some of these can be improved in the conference. We hope they are. But at least considering where they were at the beginning when they were going to put kids in orphanages and put teenage mothers out in the street, you know, they made significant progress in the Senate trying to move this bill so that it certainly is more acceptable than what we saw at the beginning.

Q: -- you're arguing why the Senate bill is better than the House bill. Her question is, why is the Senate bill better than the current welfare system under which you can grant waivers to let the states do a lot of their own.

MR. PANETTA: Well, you know -- I mean, the President has always said, look, you know, we have to change the system as we know it. I mean, he was never one to say that we ought to just simply --

Q: -- why is this bill better than the current system? Are you just changing it for the sake of changing it?

MR. PANETTA: No, because you are mandating that people have to go to work. You've got to -- you're making -- you know, you provide the kind of support system in terms of child care to help them while they do that. We are requiring greater responsibility in terms of what they have to do, in terms of parents as well as, you know, fathers that go charging off and don't meet their responsibilities. And there's a whole series of steps that frankly do toughen up the welfare area, which is what the President has always felt needs to be done.

Q: Do you believe the Senate bill is better than the current system?

MR. PANETTA: I don't think there's any question that it would be better than the current system. The real question is, can you -- you know, will they stick with the thrust that was established by the Senate in the conference. That's what I'm concerned about. I mean, my greatest concern right now is that House members are going to come in there and reverse the direction that the Senate took. And that would be wrong.

END 2:02 P.M. EDT