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Press Briefing by O.M.B. Director Leon Panetta, and Treasury Deputy Secretary Roger Altman

July 15, 1993

Office of the Director of Communications

5:5 P.M. EDT

MR. ALTMAN: We just wanted to talk for a moment because we wanted to respond to a particularly ironic development which occurred this afternoon; namely, the notion from the Republicans that somehow the deficit outlook has changed and somehow we don't need to do as much deficit reduction as the President has proposed.

The facts that we've got a five-year budget plan on the Hill which would reduce the deficit, as you all know, by $500 billion. The outlook for that five-year period of time has not changed in any fundamental way. Therefore, the need for that deficit reduction hasn't changed either.

But it's especially ironic for the Republicans and Senator Domenici, who's been criticizing the Clinton plan because the ultimate deficit, the resultant deficit -- excuse me -- would be too high, now say, whoops, the deficit is not going to be as high as people thought and, therefore, we don't need to do this hard work. And when you consider the absence of any serious alternatives on the Republican side, and the Senate Finance Committee, as you well know, the Republicans offered 11 amendments, not one of which would have cut one dime, it's setting new heights of hypocrisy. And we wanted to respond to it because the need for this budget hasn't changed. The President's courage in how he proposed as much as $500 billion is there. And we're going to succeed in getting it passed. But the notion that suddenly the need for it's changed is fallacious.

Q: Can you go over the numbers -- exact numbers?

MR. ALTMAN: Well, the 1993 deficit -- remember, '93 is almost over -- is going to be approximately $25 billion lower than the most recent estimate.

Q: $25 --

MR. ALTMAN: $25 -- approximately, now.

Q: What is that -- compared to what number?

MR. COHEN: Compared to the $310 billion, not the $322 billion.

MR. ALTMAN: All right, then it's going to be $285 billion.

MR. COHEN: CBO says it will be between $260 billion and $280 billion, and the range there, there is no way of knowing. But most of that is due to the -- a large chunk of that is due to the fact that we haven't spent the --

Q: How much is due to lower interest rates?

Q: And increased employment?

MR. ALTMAN: It's my impression -- I'm using that word because I haven't had a chance to check every last figure here --that more of that is attributable to the lesser rate of failure of banks and thrifts than to lower interest rates.

Q: Does that mean the money will not have to be spent?

MR. ALTMAN: Not only fewer banks and thrifts -- yes, that's right.

Q: I understand. The money will not have to be spent?

MR. ALTMAN: That's right.

Q: So this is not a question of money not getting spent, this is money that --

MR. ALTMAN: You only liquidate those institutions if they deposit one time.

Q: Got you. So these are both circumstances that have to do with basically the performance of the private account.

MR. ALTMAN: Well, real estate markets have improved some, so there are fewer failures. The economy has moved up some, interest rates are lower -- a combination that has enabled a bunch of institutions that were otherwise expected to collapse to get by.

Q: So what you -- you have legitimate deficit reduction here, don't you? This is not deferred payments?

MR. ALTMAN: I look at it the other way. I look at it the other way. The amount of change in '93 that is attributable to lower -- to fewer bank and thrift failures is a one-time change. You're not going to fail, you're not going to pay off the depositors. That doesn't change the underlying deficit. It's a one-time change. The interest rate effects are an ongoing change, but since more of it --

Q: A one-time expense, right?

MR. ALTMAN: But the point is if you're going to make a bunch of one-time payments, whether it's in your own checkbook or whether it's the federal government, in connection with banks and thrifts, and you're not going to -- whether you make them or you don't, your ongoing structural problem isn't changed. That's my point.

Q: I'd like to back up for a second to the numbers that you gave --

MR. ALTMAN: -- to use a slightly different number?

Q: Not different, just to make a narrow range -- can I do that? Well, actually, before you do that, I'd like to dispute the $260 billion to $280 billion entirely. OMB earlier today -- How are you, Mr. Panetta. Your office was saying earlier today that the deficit, starting off with a base of $310 billion, forget the 12 for the stimulus, that you've gone down to $285 billion for FY '93. Right, that's what you're saying?

DIRECTOR PANETTA: Yes, that's correct. And we said that -- as a matter of fact, the President in Iowa said that we were at $290 billion, which is roughly what we were estimating the deficit to be at.

Understand that we are talking about, first of all, the midsession review. I don't know if you mentioned this, Roger. We're talking about the midsession review of the President's budget. That's what it's titled. That's what it's always been titled. We do not have a President's budget because that's in conference right now. And so, as a result, you can't do a full midsession review that looks at the next five years and tells you where we're going without a budget in place.

There is precedent for this. Over the last 12 years, five times the midsession review was delayed until August because a budget was not in place. I did not hear Senator Domenici complain at those times.

Lastly, as we've said --

Q: Did you complain at those times? (Laughter.)

DIRECTOR PANETTA: Good question, but I don't think I did, as a matter of fact, because I understood that you have to have a budget in place in order to do a legitimate midsession review. But I think the one thing that strikes me as strange is that Republicans, now having done nothing to confront the deficit, are now somehow saying to the American public that we ought to accept $285-billion, $290-billion deficits as an excuse for doing nothing.

We're looking at, without this plan in place, a $300- billion deficits into the future. Surely, we ought not to say that because the deficit has come down slightly as a result of RTC and lower interest rates, that now we're not going to confront the deficit problem as vigorously or as courageously as we should. I'm very surprised and shocked by Senator Domenici, who I think generally represents the Republicans, who now have not only lost their direction, but lost their spine in terms of dealing with the deficit.

Q: But there is a law and there is a budget in place. It's not your budget, but there is a budget. How does all this work, and what are the exact requirements? Explain.

DIRECTOR PANETTA: The law requires that we do this midsession review by July 15th, assuming that a budget is in place.

Q: Does the law say that?

DIRECTOR PANETTA: The law always allows you to extend --

Q: Well, there's a budget in place; it's the Bush budget.

DIRECTOR PANETTA: It's the Bush budget and --

Q: So why aren't you --

DIRECTOR PANETTA: Well, if we --

Q: by law to comply if a budget's in place?

DIRECTOR PANETTA: Wait a minute. All we would do is basically revise the deficit for '93, which we've already told you, which everyone knows is down somewhere around $290 billion --

MR. ALTMAN: And which is history anyway.

DIRECTOR PANETTA: -- and which is history, anyway. The purpose of the midsession review is to say where we're going to go legitimately in the future. And to do that, you need a budget in place to look ahead five years. Otherwise, I can tell you what the next five years is without our plan; it's $300-billion deficits.

Now, that doesn't do anybody a hell of a lot of good, because we all know that. Please understand that the purpose here of holding on the midsession review is basically because we assumed that over the next few weeks the economic plan will be put in place, and then we can legitimately do a midsession review of the President's budget that give us real estimates about where the economy's going.

Q: There is more in the midsession review than just a deficit prediction. You've got other economic indicators.

DIRECTOR PANETTA: All of the economics, to a large extent, in part are going to be affected by what kind of plan you put into --

Q: Are you going to give us any paper on this?

MR. ALTMAN: We're not out of line with the leading private sector forecasts. If you want to get a sense of where we're headed economically, the blue-chip forecast is right where we are.

Q: one paper or is this it?

MR. ALTMAN: I said to the question about the economy, we've been very consistent with the private sector forecast. Bluechip forecast is the most widely followed. Very few differences between the administration's outlook and the blue-chip outlook.

Q: And that still is true?


Q: Can we go back to Square One for a second?

Q: What about the lower-than-projected interest costs? What would be the ramifications of that over five years? I've heard as much as $100 billion.

DIRECTOR PANETTA: No, no. Right now, we are looking at maybe kind of a $10-billion flux one way or the other in terms of the deficit numbers in the out-years. It is not a large variance right now, even based on what we're seeing in the economy right now.

Q: Why aren't lower interest rates helping this more?

DIRECTOR PANETTA: Well, you have a combination of projected lower growth numbers, plus what we're seeing in terms --

MR. ALTMAN: If I can say, there's something like $1.5 trillion of deficits estimated for the next five years, cumulatively. I think the maximum change we're talking about might be in the area of $50 billion out of $1.5 trillion. I mean, you're talking about no fundamental change in the outlook.

Q: But isn't the President trying to have it both ways? I mean, we have him on Capitol Hill just now saying that because the deficit is going to be smaller, we can have more to help for floods, et cetera, et cetera, and then in the same breath you're saying, but we have to be very careful because the budget still is bad.

DIRECTOR PANETTA: I mean, look, we're doing an emergency declaration for the floods. Clearly, that is being done under emergency designation without offsets. That, I think, is legitimate because it's being handled the same way we've handled disaster declarations on Hurricane Andrew, Hurricane Iniki, Hurricane Hugo and the Loma Prieta disaster. Everybody supported emergency declarations on that.

Q: Leon, there's another --

Q: But could I just follow that, Brit, because -- but why is he saying that it's because of these new figures? I mean, isn't he undercutting his argument about the seriousness of --

DIRECTOR PANETTA: He's trying to show that we've had some relief on the deficit this year because of RTC and lower interest rates, and therefore, people shouldn't be as concerned about it as they otherwise would be. But, frankly, we're still very concerned about the size of the deficit. We've got a hell of a big deficit on our hands. Even assuming the reduction in the deficit for 1993, we are looking at huge deficits into the future.

Q: I don't understand how the President can go to Tokyo and Honolulu and tell us all again and again over there how much clout he had with everybody because they asked us to do something about the deficit and in Honolulu he went so far as to say, we've done that. Now you guys are saying you can't produce an economic review because you don't have a budget yet. I mean, you talk about having it both ways, that's perfect.

DIRECTOR PANETTA: Wait a minute. This is --

Q: He says, we've done it. He talks about this program as if it were in place.

DIRECTOR PANETTA: Look, would you please look at the title of this, which is called "The Midsession Review of the President's Budget."

Q: There is a President's budget that is in place.

DIRECTOR PANETTA: There is not a President's budget in place, it's George Bush's budget.

Q: Well, he was the President, and he was required to submit a budget and did. But the fact of it is -- this is not bound by the law because it wasn't your budget?

DIRECTOR PANETTA: Listen. Every time this has been faced in the past when a budget's not in place, there's been a delay until the budget's been put in place. Five times -- five times we've done this the last 12 years.

Q: when there was no budget in place.

DIRECTOR PANETTA: Well, there was no budget -- there was always a previous year budget in place.

Q: But he submitted a budget for this year, didn't he?

DIRECTOR PANETTA: And so has every other president, and they still delayed it. Every -- five times -- five times this has been done. This is not an unprecedented delay.

Q: Isn't this the administration of change? It wasn't going to do things the same old way, with the same old funny numbers and the same old stuff on the budget?

DIRECTOR PANETTA: What are the funny numbers here? You tell me what the funny numbers are.

Q: What I'm talking about is you've said again and again that this is the administration of change, it wasn't going to use the same economic forecasts and the same kind of accounting that was done where tax increases on Social Security were counted as budget cuts and so on -- was all going to be different. And you all have done much the same thing, and here you are saying that you can't meet the terms of the law because you don't have your budget in place, no matter what the law says.

DIRECTOR PANETTA: But we're trying to be honest with the American people. In order to look at a midsession review, you need to have a budget in place. And it has to be a legitimate budget. We can't just basically base it on a budget that was introduced by George Bush that -- while we're in the middle of a battle, putting a $500-billion deficit reduction plan in place. If we fail to get the plan in place, we're going to have to do a midsession review. If we did it in place we do a midsession review that's based on the impact of that plan over the next five years.

We're trying to be honest with the American people on that, and that's the honest way to do it, very frankly. It would be baloney for us to do a midsession review without a budget in place and somehow convince people that this is a legitimate midsession review. It's not.

Q: Back to square one here. Is the OMB or the administration putting out new numbers today or are you here to talk about -- is there something that's being released by the OMB today? And, if so, I'm not sure what. I've heard Alan talk about a CBO number, I heard the Lawski numbers, but I'm not sure what the -- if Lawski is disputing those numbers. And what are you guys saying today about what the deficit is?

DIRECTOR PANETTA: The problem is that we were looking at putting out at least a preliminary estimate on where the '93 budget deficit is because there have been these arguments that somehow people don't know what that deficit number is. The President has referred to it; we have referred to it.

Q: What is the number you're using?

Q: Because we hear different -- you've said $290 billion, you've said $285 billion.

DIRECTOR PANETTA: The number we're looking at right now is we estimated the budget deficit at about $310 billion.

Q: So you're $285 billion.

DIRECTOR PANETTA: Yes, $310 billion, so we're going to be at $285 billion.

Q: Does it mean you're not sending any review up and you're not sending a statement?

DIRECTOR PANETTA: But we are not going to send a formal midsession review up until we get a budget in place.

Q: Why tonight? Why are we getting it tonight?

Q: Can you break out that $25 billion and say what the components of that reduction were?

MR. ALTMAN: I believe it's more the RTC than lower interest rates.

DIRECTOR PANETTA: Yes, I'm sure it is. It's more based on RTC funding than it is --

Q: accelerated tax collection?

DIRECTOR PANETTA: Talk to the RTC guy.

MR. ALTMAN: Who's running that RTC anyway? The place must be working like a charm.

Q: And you're not breaking the law?

DIRECTOR PANETTA: We're not breaking the law. If we were breaking the law -- Dick Darman would have served a lot of time in jail. (Laughter.)

Q: How much is the RTC figures --

Q: Did the Republicans basically force you into this? Did the Republicans force your hand?

MR. ALTMAN: Leon, is that fair? The change is higher revenues than forecast -- very little of it, right?

DIRECTOR PANETTA: Yes, it's really more --

Q: The President said about more people working than there were -- jobs were up and that this was adding to revenues.

DIRECTOR PANETTA: In terms of revenues there may be a slight impact on revenues, but the primary thing was the RTC and there's been, obviously, some impact because of lower interest rates. But those are the main two features.

But as you track them into the future, again in the absence of an economic plan in place, if you track them into the future there isn't that much variance. We're only looking at roughly about a $10 billion variance. And so, it means essentially we're still looking at a $300 billion deficit.

Q: Are you going to deliver some kind of document to the Hill on this? Or is this your message?

DIRECTOR PANETTA: No, no. We are writing a formal letter to the Hill that will basically indicate what I've just told you.

Q: Are you going to do the out-years, too? For instance, what is '94? You say there's not much difference but then you said maybe $10 billion.

DIRECTOR PANETTA: Well, again, you know, we would be basically revising the baseline without a budget in place. And we can provide that guidance, but what we want to do is provide real guidance about where the economy's going and you need a budget in place to do that.

Q: But you said this is a one-time windfall. But what is the baseline for '94? You must have calculated that, you must have those figures, too, just to show it is, in fact, a one-time savings.

DIRECTOR PANETTA: What is it, $310 billion for '94. Ninety-four we're looking at about a $310 billion deficit.

Q: Will your future deficit calculations be based on a lower rate of thrift failures?

MR. ALTMAN: Brit, let me just explain this. It's a one-time event. In other words, there's been a change in the outlook for the number of bank and thrift failures, bank and thrift.

Q: That's what I was asking.

MR. ALTMAN: And that's a permanent change in the outlook. Of course, it's just an outlook, it's not a fact.

Q: But it affects what you've estimated to spend, not just this year but in the years ahead. Is it not?

MR. ALTMAN: No. That primarily affects this year. You were going to make that spending one time. You close an institution, you pay off depositors. It's not a recurring need.

Q: You have no out-year projections for -- have you done that? It's just a question of how you're --

MR. ALTMAN: Now, there's some. But all of the RTC closures are projected for this year because the RTC is scheduled to go out of business in terms of taking on new thrifts at the end of this fiscal year. All the RTC --

Q: You won't have any out-year effects of any consequence, this was -- rate of failure?

MR. ALTMAN: Not to the RTC.

Q: That's all I'm asking.

Q: When will you send your letter to the Hill and to whom and when is this going out?

Q: And what does it contain?

Q: I mean, will there be other numbers other than this single deficit projection?

DIRECTOR PANETTA: I hope to get the letters out this evening. And they'll contain, as I said, these preliminary estimates and they will indicate that on the formal review itself or the formal midsession review, that we will await the enactment of the President's budget plan.

Q: Preliminary estimates of what, just this deficit figure or are there other numbers --

DIRECTOR PANETTA: It's basically the deficit numbers. You're basically revising the baseline --

Q: Will you have interest rates --

DIRECTOR PANETTA: No, we won't do any formal, you know, projections with regards to other economics.

MR. ALTMAN: I'm told we should wrap this up. Can I make just one comment -- and then you may want to add to it in terms of why we're all sitting here. We're sitting here for one big reason and one little reason.

The big reason is the Republicans say there's been a fundamental change in the need for this deficit program, and that is not the case. And if I can just quote, if you don't mind, if I can just quote today's Wall Street Journal, not us, The Wall Street Journal saying -- this is the Dole plan -- offers, "no general tax cuts or special business incentives; rejects the administration's new spending proposals. Would cut the budget deficit but not as much as $500 billion." And if I can add, would protect the rich.

And this is just The Wall Street Journal. This is better than we can put it.

Q: Isn't what Domenici said really that if the deficit was, in his estimation, when he came out with his numbers, $50 billion lower, you're saying something different, but if it was as low as he said, that what that could mean is that you could come up with a deficit plan that may have that much lower in tax increases in it, still attack the deficit. Not do nothing --

MR. ALTMAN: But the question is has the outlook for the budget period. We've got a five-year plan there. It's up there -- '94 through '98. Has the outlook for the '94 through '98 changed in terms of the deficit. The answer is N-O, no.

DIRECTOR PANETTA: I have never heard Pete Domenici -- I have never heard Pete Domenici be satisfied with $250 billion to $260 billion deficits. This is something new.

Q: Leon, that's not the point. The President has told everybody in this room, every reporter, about 10 times that the reason he wanted a -- the one tax that was on the middle class, the BTU tax, whatever it's called, is because when "I got into office these deficits were much bigger than I would have thought." That's what he's said to us. That's why we think it's important. Suddenly if the deficit is, in truth, lower than he thought, what' then the rationale? You're saying --

DIRECTOR PANETTA: Not the deficit over the period.

Q: No, no he didn't say the deficit over the period. He said the deficit for this year -- look, that's what he said. It's on tape a million places. That's what he said. Maybe it's still good economic policy to want taxes to attack the deficit, but the President has offered this as an explanation. Because the deficit was bigger than I thought it was going to be, that's why I needed this tax. I didn't want to do it. Now, these guys are saying, hey, the deficit's lower, maybe you don't need the tax. Now, I think that's a fair point and you haven't really addressed that that I --

MR. ALTMAN: Maybe we're just not getting through.

Q: We're pretty dense. It's possible.

MR. ALTMAN: No, I am, too. We can get along well. We put up a budget plan, right? It's not a one-year plan it's a fiveyear plan. Is the amount of the deficit over that period that we face bigger than was happening in the campaign? The answer is yes. Has there been a fundamental change in the size of the deficits we're out there trying to face? The answer is no. Is there a change, therefore, in the amount of deficit reduction needed? The answer is no.

Q: The answer is it's still bigger for the four years.

MR. ALTMAN: Yes, by a lot. By a huge amount.


Q: You guys want us to quote you by name, don't you, since you were quoting Domenici by name?

DIRECTOR PANETTA: Yes, yes, yes.

THE PRESS: Thank you.

END6:25 P.M. EDT

William J. Clinton, Press Briefing by O.M.B. Director Leon Panetta, and Treasury Deputy Secretary Roger Altman Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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