Press Briefing by the Vice President, Secretary of the Treasury Lloyd Bentsen, Director of the Office of Management and Budget Leon Panetta, and Chairman of the Council of Economic Advisers Laura D'Andrea Tyson
Old Executive Office Building
10:05 A.M. EDT
THE VICE PRESIDENT: (in progress) -- help alleviate the stress on poor families and on children at risk by fully funding Head Start and WIC.
As we make this announcement today, those senators who held our jobs package hostage and worked for paralysis instead of progress are at the start of their spring break. Many other Americans who these senators represent, aren't getting a spring break this year. They don't have jobs with vacations or health benefits. And many don't have jobs, period. It's time to act in their behalf.
This recovery we're in is not putting people back to work. The unemployment rate remains stubbornly at 7 percent and unemployment claims are up. Our jobs package, if adopted by the Senate after the recess, will immediately provide work for more than a half million Americans, employing them in ways that are constructive for us all, like improving our highways and revitalizing our communities.
The people who will be put to work will not be getting jobs because they happen to be Democratic or Republican, they'll be getting jobs because they are Americans who need a chance at regaining their dignity and self-esteem, supporting their families and pursuing the American Dream once again. But our opponents apparently don't want to hear about the human costs of playing politics at the country's expense. So they talk and talk and stall, preferring to do nothing rather than creating jobs for Americans.
We want this stalemate to end with the passage of the immediate jobs program and investment program because it will put people to work and help make this recovery real, help make it one that creates jobs for the American people. So we're asking the senators to listen to the people as we have listened to the American people. And we urge those Americans who have made their voices heard during the past year to raise the refrain again during this recess period so that the senators who voted for gridlock instead of progress can hear the message of change so that we can all begin to move forward.
The three Cabinet members who are about to speak are some of America's best advocates for the changes our citizens so desperately want: more investment, real deficit reduction, more jobs and economic growth, and more opportunity for struggling middle class families. With the passage of the budget resolution behind us and adoption of the jobs package just before us, we can restore the vitality of the American Dream for all of our people.
I'd like to call now on the Director of OMB, Leon Panetta.
DIRECTOR PANETTA: First of all, I want to express my thanks to the Vice President for appearing here today on the announcement and presentation of this budget. I think his coming here indicates the importance that not only the Vice President, but certainly the President, places on the success of the economic program.
I want to also express my thanks at this point to the staff of the Office of Management and Budget and to the secretaries of each of the departments and their staffs who had to basically work on a pretty fast schedule to assembly the document that appears before you.
The budget is about 1,400 pages long, and it contains, as the Vice President indicated, the line by line budgets for each of the agencies and departments as well as meeting some of the technical presentations that are required by law.
There are lots of firsts here. The Congress obviously has endorsed the budget resolution and the economic plan. And this is probably the first time that the Congress basically has endorsed in its budget resolution, an economic plan that is now being presented in detail in the budget.
Secondly, it's obviously the first time that the Congress passed a budget resolution in rapid order, the fastest in the history of the budget process to have a resolution put in place. And in addition to that, as the Vice President pointed out, it's the first time that a new administration has had to submit a line-by-line completed budget during its first year in office. In the past, generally you build upon the budgets that the prior administration has presented. And in this instance the Bush administration did not present a formal budget, so we basically had to work from our own numbers and build the document that you see before you.
To look at it and to read through it reflects a lot of numbers. But I want to emphasize again that budgets are not just about numbers, they are about people. And this budget basically reflects the policies of a new administration trying to reduce the deficit, trying to change priorities for this country and set a new direction for the country. And most importantly try to give working families, our children and our nation a better future.
We have been pleased obviously by the response of the American people to the overall economic plan. And we're obviously pleased with the swift action taken by the Congress on the budget resolution. It tells you what can happen if Congress could only operate by majority vote. We've been pleased with the response, not only by the American people, but obviously all of the groups that now feel that we've taken a major step here with presentation of this economic plan.
Let me try to summarize if I can some of its key points. The first is that this budget provides when it's combined with the action of the Congress about $514 billion in deficit reduction over the next five years. So it truly does make it the largest deficit reduction package in history. It will arrive at about a deficit of $205 billion by Fiscal Year 1997, instead of what would be very close to about $350 deficit in that year under the current baseline.
The total includes $447 billion that are contained in this document, that number being a reestimate of the presentation that we made on February 17th. And there is an additional $57 billion in discretionary spending cuts and $2 billion in mandatory spending cuts that were endorsed by the Congress. And that all added up to an additional $8 billion in interest savings that we also gained, arriving at that $514 billion.
The President's budget provides for nearly $700 billion in gross deficit reduction, including more than 200 specific spending reductions in domestic and defense programs. Of that $700 billion, again, roughly a third of that goes for paying for the investments plus the stimulus over the five years. And two-thirds of that goes for deficit reduction.
If I could just point to this chart for a moment to make the point about where the deficits are, right now under the baseline that you're looking at, which is the top line, if you look at 1997, the number where the deficit at that point would be $347 billion. If you'll follow the second line, which is the President's budget as presented in this budget, the deficit would go down to $214 billion by FY '97. If you take the President's budget combined with congressional action, which is essentially where we're at, what will be enforced in the Congress will be this budget plus congressional action on top of it. You'll arrive at 1997, and a deficit of $205 billion. If you then take that reality, the President's budget, plus congressional action as contained in the budget resolution, plus the administration's economics -- don't forget we are using CBO economics with regards to these other numbers -- but if you add the administration's economic projections, which a lot of people think are pretty close to where we will be, but we have not used that in this document, we will be at a deficit in 1997 of roughly $160 billion.
You can see that we've almost cut the deficit in half in 1997, if we follow that latter course, which is pretty close to where we think we will be hopefully by the end of this implementation of the budget.
The second point I want to make is on deficit-to-GDP ratio. What we do is basically cut the deficit-to-GDP ratio virtually in half. It goes from 5.2 percent to about 2.8 percent. And again, if you add the savings endorsed by the Congress, that would push it down to about 2.7 percent by 1997.
Thirdly, on spending-to-revenue ratios, the ratio for the five-year plan as contained in this document, even without the congressional action, 52 percent goes to spending reductions and about 48 percent for revenues. If you look at just the fifth year alone, 1998, it's about 60 percent on spending reductions versus about 40 percent of revenue.
Now, if you add, obviously, the congressional action, again, which was largely on the spending side in discretionary savings and mandatory savings, then those ratios even get better with regards to spending reductions versus revenues.
Fourthly, on investments, the Vice President pointed to some of those. Let me just mention, we are looking at about $140 billion in investments here over five years. They are largely aimed at rebuilding America, the infrastructure; we fully fund the highway program; we also provide about $15 billion in technology. In addition, in life-long learning, it's about a $52 billion investment over five years; full funding of Head Start and WIC; as well as the President's national service plan; as well as several very innovative job training initiatives.
On rewarding work, the President was committed to trying to help poor, working families out of poverty, and therefore, there is an earned income tax credit that is provided as part of the proposal. Safe streets -- we have about $4 billion for anticrime initiatives, including an additional 100,000 thousand cops on the beat in both cities and towns. Health care is about $32 billion over five years, largely for women's health research, as well as full funding of the Ryan White Act for AIDs prevention and treatment, as well as veterans health care initiatives. Lastly, the private sector incentives -- roughly about $50 billion in business productivity tax incentives, including the small business tax credit, and capital gains exclusion and others that Treasury Secretary Bentsen will deal with.
The investments largely have not changed, but I should point out that because of the action of the Congress in keeping within the caps under the budget agreement for both 1994 and 1995, that the administration will have to fight for its investments within the caps that have been established. We are prepared to do that, but it needs to be pointed out that we'll have a difficult time, a difficult battle in fighting for those investments that we care about.
Fifthly, on deficit reduction, as I pointed out, it's close to $700 billion in gross deficit reduction. Let me just mention the key areas. First in defense, we have $114 billion in reductions in defense discretionary spending. That is slightly higher than what it was in the February 17th document, about 1.7 billion.
Secondly, we have 67 billion in nondefense discretionary savings. And again, you have to add the congressional savings on top of that number. We're looking probably at virtually a hard freeze on discretionary spending for these next five years with the combination of what the Congress and the administration have proposed.
Thirdly, on entitlement savings, it is about $126 billion, $46 billion in Medicare savings, $6 billion in agriculture, $3 billion in veterans programs savings, $2 billion in natural resources, largely from fees. I might also point out that included in this budget are the fees from the mining area as well as grazing fees. We fully intend to try to achieve those savings as a consequence of the targets we've established in the natural resources.
Lastly, we have $23 billion from the increased taxation of Social Security benefits. And I also should point out that the way this is fashioned, it would go and be directed toward the Medicare Trust Fund, which is obviously facing some serious shortfalls over these next few years. Lastly, some $328 billion in revenue increases,. There's is very little change, I believe, with regards to that area.
Those are the key areas with regards to deficit reduction. Let me mention, lastly, the changes that have taken place between the presentation on February 17th and the present, there really relatively few changes. The adjustments to the five-year deficit reduction totals reported in February are largely due to reestimates. If you look at it, of the $26 billion difference between this document and the February 17th document, $17 billion of the $26 billion is the result of reestimates largely in Medicare savings, as well as on Social Security.
In addition to that, we have on the outlay side some $1.8 billion in differences for FY '94. They are largely in four areas: veterans health care -- we provided additional outlays to try to provide full treatment to cover some of the new facilities in order to try to man some new facilities that are going on-line. In addition to that, there are some standards that have to be met that were implemented by the Veterans Department. And in order to do that, we had to provide additional outlays.
Housing, we had a proposal in the budget to basically consolidate housing programs with the home program. The Secretary of Housing felt that he needed more time in order to make that consolidation, so we have provided additional funding here for some of the public housing programs that ultimately would be consolidated into the home program.
Mass transit, there was basically a shift of defense related monies to mass transit. It doesn't really impact so much on the deficit; it basically takes it out of the defense area and moves it into mass transit and it's under the transportation budget.
The past point that I would make is that there is an initiative to try to assist those states that have a large influx of migrants to try to assist the impact that those states have to face, particularly with regards to medical care.
Those are some of the changes. As I said, they're relatively small compared to the document.
This is the economic plan. It remains, I believe, the most honest and comprehensive budget in recent history. I think Congress had enhanced it by adopting its own budget resolution to complement what is being presented here in the budget.
It's a courageous budget. It asks every American to contribute to our economic future -- senior citizen, federal workers, doctors, hospitals, farmers, the wealthy, everyone -- to try to contribute to this effort to put this country back on the right track.
Congress has acted with incredible speed on the budget resolution, and obviously we hope they will continue to act on the jobs bill and also act to implement this budget by moving reconciliation in the appropriation bills that will reflect the priorities in the budget.
It's a first step. This represents the first step in what I think is a major change of direction for this country. There is more to come. There obviously will be difficult battles along the way, but we have taken the first major step in changing the direction of this country.
I would like to introduce now the Secretary of the Treasury, Lloyd Bentsen.
SECRETARY BENTSEN: Thank you very much, Leon. Let me say that no one has worked harder and more effectively than Leon has in expediting this budget, getting it with such detail and getting it before you this early in the process.
Let me get right to the point. When it comes to revenues there is no news. We've made some refinements since February, some changes in the details, and I'm sure we'll make some more along the way, but the revenue side has basically the same numbers, stayed the same, as it was in February. Pretty dull headline.
But, just for a minute, let's think what it means for the country. We turned Washington's most intolerable task, raising taxes, into at least a tolerable process. I know from experience that the hardest vote to cast in the Congress is to raise taxes on your constituents. Talk to the Congress and they'll tell you that.
What we've seen in the past is time and time again the proposal for tax cuts. In fact, what we've often seen is a bidding war between the congress and the presidency, to see who could outdo the other one. As a result of that kind of process, for the past decade revenues went down, expenditures went up; and we saw the national debt more than triple. We didn't do that this time.
As you listen to Leon and some of the things that were touched, we went right out and touched that third rail in politics. We talked about entitlements. We talked about spreading the sacrifice, the contribution across the political spectrum.
So, the tax package that you see now is virtually what you saw in February. The whole process was made tolerable because President Clinton presented what we think of as fair taxes; an energy tax that will help conserve energy, cut back on dependence on often politically unstable areas for oil. Spread to every region of the country would cost a family making $40 thousand a year, $17 per month. If they refinanced their home mortgage, they would have saved several times that every month. An income tax rate on the wealthiest one or two percent of the country. And a corporate tax rate that went up just two percent. And that's substantially less than the corporate tax rate in Japan and in Germany. And those will be off set by business tax incentives that will help get this economy moving again.
You know, one week from today is April the 15th, the day when 117 million American must file their income tax reports. It's the time of the year when Americans think about their government and what they get out of it. And this year I think Americans will be asking two questions: one, when are they going to stop deficit spending in Washington? And, two, how much is it going to cost me?
I believe we have good answers. The progress on the deficit is real. And for 98 percent of Americans, their income tax rate will not increase. The rate this April the 15th will be the rate on April the 15th of 1994, '95, '96, and '97. Again, that makes for a pretty dull headline. But that's certainly good news for all Americans. So let me turn this program over because I'm not a senator anymore and I've learned not to filibuster. (Laughter.)
CHAIRMAN TYSON: Thank you, Lloyd. I thought I might do two things. Number one, talk a little bit about the underlying economic assumptions; and number two, talk a little bit about the economic rationale of what remains a three-part package to deal with the nation's short-term economic problems and long-term economic problems.
As far as the economic assumptions are concerned I think it's very important to emphasize that we have tried from the beginning to make this a credible deficit reduction effort by assiduously avoiding any rosy scenarios.
Indeed, what we have put into our underlying numbers, what we have built into our estimates are either the CBO economic forecast -- or even if you look at the administration forecast, the administration forecast which was, for example, in '97 give you a deficit of $160 billion rather than a $205 billion, if you look at this bottom line here, that administration forecast itself can hardly be called excessively rosy. If you look at the numbers, you will see that in '93 and '94 what we are predicting for growth rates is essentially right on track with what blue-chip is currently -- and most private forecasters are currently forecasting -- rates in the order of 3.1 percent, 3.3 percent for '93 and '94.
We have in the administration forecast built in a slightly higher growth rate than the CBO forecast. We've essentially given ourselves some higher long-term growth in the range of 2.5 percent rather than 2.0 percent on the grounds that if we really do shift the spending priorities of this country towards more private investment and more public investment, which is what our program is designed to do, then in fact we will do exactly what our economic objective is, namely to increase productivity growth in the long run and therefore increase the long run rate of growth of output.
So we have built into the administration forecast a slightly higher rate of growth in the outyears; but that is part of our -- the effects that we anticipate from our programs. So I just want to emphasize that there are, even if -- whichever forecast you choose to work with -- the CBO forecast or our own -- neither of them, I think, can be viewed as excessively rosy. Indeed, I think if there are surprises out there, they are going to be positive surprises assuming that our program is enacted; and that means assuming that we move forward with the stimulus, with an increase in public investment spending, and with serious deficit reduction.
The only other thing I will say about all of these forecasts, if you look at the interest rate assumptions -- the underlying interest rate assumptions in the administration forecast or the CBO forecast, you will already see that, again, these are not terribly rosy relative to reality, relative to what is really happening right now. We have seen long-term rates come down much more than either of these forecasts embodied. Long-term rates have been more volatile recently, but they are still near historic lows. If we continue on this course, which we believe we will from credible deficit reductions, lower long-term interest rates, then, indeed, all of these projections would actually look that much better.
For example, in 1997, one might anticipate an additional $10 to $20 billion just from lower long-term rates on the deficit. That would be below the -- that would be $10 billion to $20 billion below the $160 billion if we got the administration forecast, which doesn't build in all of the long-term rate benefits that we've already seen. So I just want to emphasize those points on the underlying economic assumptions. We think if there are surprises out there that they are likely to be positive, good surprises.
Now, let me talk a little bit about the rationale. It's a three-part program. I think it is very important to emphasize that all three parts are very important to this working. And that means that we really want to push very hard for a meaningful economic stimulus package. The arguments are the same that we've been making since February. The economy still has substantial underutilized capacity. We are still about four percentage points below the level of output we are capable of producing in this economy. We have an unemployment rate that is stuck at 7 percent. It's been 7 percent or higher for 16 consecutive months. In March, as you know, nonfarm payroll employment actually declined for the first time in seven months this year, of permanent job losers among the unemployed increased in March back up to 42 percent. It's near the record high of 45 percent reached last year. We have a slowdown in the rest of the world. We have consumer confidence weakening for the past three months. It is very important to give a boost to the economy to help it get closer to its capacity output so we can then maneuver through deficit reduction in the coming years.
The stimulus part of the package is important to get the economy ready for deficit reduction of a serious type. The stimulus package that we have put together is cautious, it is conservative, it does not undermine the credibility of our deficit reduction package; it is -- half spending and half taxes -- tax reductions. And our estimates of 500,000 jobs are based on standard macroeconomic modeling. They are widely accepted in the private community as reflecting what a stimulus package of this size would do for job creation in the economy.
So we believe that the argument -- the economic logic of a stimulus -- is still very strong. And, of course, for those who might have been concerned about was this going to feed into some upsurge in underlying inflation rates, I think the numbers that came out today on the Producer Price Index should quell some of those concerns. We looked at a March figure of core inflation up only 0.1 percent. That means over the last 12 months, core inflation in the Producer Price Index has only been 1.9 percent. That is close to the 1.7 percent 12 month figure reached in January, which was the lowest 12 month change on record.
So this is not an economy which is suffering from substantial increase in inflationary pressure. It is just not a credible or warranted position to take, particularly when you look at excess capacity in the rest of the world, excess capacity at home, unemployment at home, capacity utilization rates at home. So the argument for stimulus is still very strong.
Let me say a little bit about the investment package. This three-part program is designed to move the economy back to capacity and then to get capacity output in the economy growing more rapidly over time by increasing public and private investments. Public investment is an important part of this program; and it's not simply to reduce the size of the government in the economy, which this package does do. Government spending as the percentage of GDP does go down over time in our package, which reverses a trend that we have lived with for a long time.
But we also are requesting not just a change in government spending -- the size of government spending relative to the economy, but a shift in the purposes of government spending. And we do that because we are convinced that the government has been underspending on certain important foundations of economic growth. It has been underspending on civilian research and development. It has been underspending on education and training. It has been underspending on the basic infrastructure that is used to provide the underpinnings for private economic prosperity.
So we are asking for substantial increases in all of those areas. There is a very strong set of economic studies indicating both at the cost benefit level and at the aggregate economy-wide level, that these kinds of projects have a positive payoff and add to productivity growth over time.
Finally, let me just mention deficit reduction. The important part of deficit reduction, the economic logic for deficit reduction, is to essentially increase private investment over time by driving down the cost of borrowing and increasing availability of funds to the private community. And we have been very edified and gratified by the response in long-term rates which we have seen, and we believe that with the package -- the three-part package -- we will actually increase public investment, private investment, increase the rate of growth of productivity and output in the economy, and thereby restore hope and opportunity to most Americans.
DIRECTOR PANETTA: I have five more speakers. No -- (laughter). I'd like to introduce, though, Alice Rivlin, who is Deputy Director of the Office of Management and Budget, Gene Sperling who is Deputy to the President -- Adviser to the President on Economic Policy, and Jack Gibbons, who is the Science Advisor to the President.
And now, if you have any questions.
Q: This essentially, as you said, has been overtaken -- your budget has been overtaken by the congressional budget resolution. And there is a difference between those two line, which adjusts, in fact, shows that there's more cutting that you are going to have to do for FY '94. Have you thought about whether you're going to propose the cuts, or leave those to Congress? And will it offset some of what you're trying to do in the stimulus bill?
DIRECTOR PANETTA: Obviously congressional action has, as you know, established that they would not exceed the caps established under the budget agreement for both '94 and '95, so that obviously what we will have to do is define our sets of investments that we care about. We're going to have to basically offset those within the different appropriations bills in order to ensure that our investments are funded. And we're going to have to fight for those priorities below that cap. I mean, make no mistake about it, we understand that each of the appropriations committees have their priorities over past years.
We now have injected, though, a set of investment strategies that we think are extremely important for this country. We have defined some savings in the discretionary area. The budget defines close to $70 billion in savings. But for '94, obviously we're going to have to achieve more, and we are going to be prepared to identify those as we go into this process.
Q: Do you know when -- when you'll be --
DIRECTOR PANETTA: When we get into the appropriations battles.
Q: Can you tell us what the deficits would be beyond '98, given those models, in all three areas -- not the baseline deficit, but the President's deficit, the congressional deficit, and the deficit with your economic assumptions?
DIRECTOR PANETTA: Beyond '98?
Q: Going to --
DIRECTOR PANETTA: All right, I'm going to ask Laura to check me. But obviously, you go beyond '98 and, as you can see, beginning with the President's budget, the lines begin to go back up in terms of the deficit largely, again, because of health care costs. Health care costs, as that portion of the entitlement area, which is now about 30 percent of the entitlements, is expected, as many of you know, to triple, and as we get into the next century, almost quadruple. And because largely of those health care costs, the deficit begins to move back up. And that's why it's extremely important that if you want to continue this deficit line on a downward trend, that we have to enact health care reform that implements firm cost controls with regards to health care. Otherwise these lines begin to move right back up again. So this is the first step.
The second step is adopting health care reform that controls costs in that area.
Q: How much is the budget over the spending cap in '94, '95? How much is the President's budget, including investment --
DIRECTOR PANETTA: We are within the cap on budget authority. I believe we are about six -- no, on budget authority I thought we were below the caps. But on outlays --
SECRETARY BENTSEN: Above by five.
DIRECTOR PANETTA: Above by five. So that's the number we've got to fight for with regards to '94
Q: Mr. Panetta, where are you trying to go on defense conversion, both in terms of communities and in terms of personnel? And secondly, are there any substantive changes in the program that the President outlined up in Baltimore a couple of weeks ago in that area?
DIRECTOR PANETTA: No, there are not. Basically the budget reflects the defense conversion elements that were announced at that time. And we expect that, as part of our investment strategy again -- in other words, as you know, we're talking about some pieces that are in different appropriations committees. And we're going to have to pull together that strategy. But clearly, that is one of the President's primary investment strategies is to go after defense conversion. You cannot make the defense reductions work in terms of the communities that are going to be impacted unless we are prepared to fund meaningful defense conversion. And I can say that with a degree of personal experience having faced it in my own community.
Q: It kind of sounds like you've decided to go with separate tax rates -- top tax rates -- on the four personal income tax rates. And you said there was a shifting problem if that occurs. Could you tell us the rationale for making the change, and how are you going to deal with the shifting? You have a 30 percent tax rate for the top two percent of personal incomes, and only go to 33 for corporate tax rates. You're going up two percent, is that --
SECRETARY BENTSEN: Yes, we've gone up two percent. We've gone from 34 percent to 36 percent on corporations, I think with over $10 million of income a year. And even after that change you're still substantially below -- Japan has 40 percent as I recall and Germany has a 50 percent corporate tax rate.
Q: Mr. Panetta, what is your spending cuts to revenue ratio for Fiscal '94?
DIRECTOR PANETTA: Fiscal '94, it is roughly about 68-40 revenues to spending, something in that vicinity.
Q: Sixty-eight to what?
DIRECTOR PANETTA: Seventy to 28 is what -- tells me for '94. Now, that's in the budget. If you add the congressional savings on top of that, it gets more like, I believe, 60-40 spending to revenues for '94. It then turns about '95 to a 50-50 breakdown between spending and revenues and then moves as I said to 60-40 by '97-'98. So it starts that way. The main reason for that is obviously the savings, particularly on the entitlements, on Medicare, as well as on agriculture and a number of other areas. Those savings ratchet in over a period of the next four to five years. You don't begin with a heavy savings number just by the nature of how you deal with savings in the entitlement area. You don't just get an immediate drop. It gradually phases in, whereas taxes obviously immediately go into effect, and that's the reason for the difference in '94.
Q: Clarification. Are you including in that the user fees and the Social Security tax increase as spending cuts?
DIRECTOR PANETTA: Again, user fees have always been scored in the Republican and Democratic administrations as spending savings. And Social Security, we have made the distinction that it's roughly $126 billion in entitlement savings, $23 billion of that is on Social Security. Everybody understands that that portion of it is the additional amount that makes up the entitlement savings.
Q: Can you tell us why your estimates of the revenues you'd raise from the Social Security tax increase has dropped from $29 billion in February to $23 billion today? And also, can you tell us which of the changes in numbers that we see when we compare today's document to February's do reflect policy changes?
DIRECTOR PANETTA: Okay. Lloyd, check me. On Social Security, basically again, this is just the nature of moving very quickly in those first four weeks to try to get our numbers in line and using the best estimates we could get at that point. And basically, it was just a reestimate that we've done with regards to Treasury that reflected the drop on Social Security savings coming in.
Q: But no policy changes?
SECRETARY BENTSEN: There was an erroneous assumption made in the beginning concerning where the threshold was and that correction was made.
Q: What do you mean by that?
SECRETARY BENTSEN: Well, I mean, that the assumption was that the threshold would be dropped substantially and it was not; and therefore, that changed the rest of it.
DIRECTOR PANETTA: That it was a prior -- I think, we were working with several suggestions with regard to that proposal, and I think the number that we got reflected one of the proposals that was on the table but was not adopted.
With regard to the policy --
Q: Just to clarify. Are you saying that under today's proposal the increased tax would still affect people -- individuals above $25,000 and couples above $32,000?
SECRETARY BENTSEN: Over $25,000 and $32,000, that's correct -- with that one; that was not changed. As Leon says, there were several assumptions or options put out there and the wrong one was used in one of those midnight sessions as you're running the computers and we corrected that -- that's a usual thing that happens --
DIRECTOR PANETTA: On the differences, as I said, of the $26 billion, $17 billion of that in the difference of numbers is from the reestimates largely in the Medicare savings, as well as, Social Security; and about $6 billion of that reflects the additional outlays that I pointed out in largely housing, mass transportation, the veterans programs, as well as this new program to try to assist states impacted by migrants.
Q: Could you comment on the Medicare Part B as part of -- question? What change is he going to be making in the Medicare Part B proposal that accounts for the change in the savings -- the premium of Medicare Part B?
SECRETARY BENTSEN: Frankly, I don't remember the details on that. I know it was a recalculation and a wrong -- and there was a correction in some of the details. But I can get that for you and I will. I'll be happy to.
DIRECTOR PANETTA: Our intention, incidentally, on the shortfall on the Medicare savings is to, in fact, recommend proposals to the committee to try to make up that shortfall.
Q: Mr. Panetta, there's a lot of talk about investment in education. and there's a lot of talk about trying to make the United States more competitive by improving worker skills. But you have cut vocational education this year below the level of last year, and that's the major federal program to equip disadvantaged students with better skills. Can you explain that?
DIRECTOR PANETTA: Obviously, the question is probably more aptly directed to the Secretary of Education. The President, obviously, was concerned about and we were concerned about, is the importance of reflecting the President's priorities and key investments with regard to the education area. And that was largely on full funding, obviously, for the Head Start program, the additional amount to be provided for student loans, the national service program. Those were kind of the key priorities. Chapter one was a key priority for the President. As to whatever reductions occurred on vocational education, you've got to ask the Secretary of Education why that tradeoff was made.
Q: You said that basically once the Hill -- it's going to amount to a hard freeze on the domestic discretionary side, which then I presume is going to mean that you're going to have to find even more offsets to your investments program. Now, you've said earlier that you are going to identify them. Are you going to present those offsets as another package to the appropriators? Are you going to do them line by line? How exactly is that process going to work?
DIRECTOR PANETTA: I think it -- obviously, as most of you who are familiar with the process know, you've got 13 different appropriations committees. They have 13 areas of jurisdiction. And so what you have to do is within each of those areas define what we believe are key investments and provide for a set of tradeoffs or assisting the chairman in those areas for tradeoffs to try to ensure that those investments are funded. We believe very deeply that what we're talking about here is obviously not more spending because of the caps, but smarter spending, trying to redirect some of these investments. So we're going to be prepared to engage in the appropriations process to ensure that those investments are funded.
Q: from the Defense Department to mass transit? You referred to it, but didn't give it a number. And I don't see immediately.
DIRECTOR PANETTA: Sure. Two-hundred -- actually, I've got the number here. Mass transit, that would have been for '94, 315 on BA, 260 on out --
Q: What other kinds of similar shifts took place from Defense to the --
DIRECTOR PANETTA: That was -- the one's I've identified are the primary changes -- really there were very few others.
Q: Does the administration endorse the half COLA for federal and military retiree?
DIRECTOR PANETTA: We're prepared to work with the Congress to implement that. That's now part of the budget resolution. That mandatory savings I pointed out is in addition to that, and we will work with both budget committees to implement that in reconciliation.
Q: A clarification. Is that in the line-item budget?
DIRECTOR PANETTA: That is not in the budget that we presented here. As I've indicated, that is on top of it because of the congressional action.
Q: Mr. Panetta, on page seven of the budget, at the top there is what appears to be a summary of deficit reduction impact against the baseline. It says that from '94 until '98 the net effect is $130 billion. What am I missing on that?
DIRECTOR PANETTA: I don't know what you're talking about. Which chart are you talking about?
Q: The chart at the top of page seven -- Deficit Impact Reduction Summary; and for the years '94-'98 there is $130 billion against the baseline.
DIRECTOR PANETTA: So what's the question based on that?
Q: Is that, in fact, the net deficit reduction package program '94 -'98, $130 billion?
DIRECTOR PANETTA: Two-fourteen is where we would be under the administration's target for '97. I mean, those top numbers there reflect where we're going to be. If you're looking at '94, we'll be at roughly $264 on deficit reduction; at that time we're going to go from $322 this year down to $264 down to $246 down to $211 and then slightly up to $214. That's that second line there on the President's '94 budget.
Q: I have a question for Secretary Bentsen. Secretary Bentsen, are you meeting with Senator Dole today on the stimulus part of the package, and have you something to present him as a new administration option?
SECRETARY BENTSEN: Well, Senator Dole and I have been exchanging phone calls. But as we've been traveling -- he's out of town and, I guess maybe he's back now, and I'm leaving town -- so we have not been able to get into contact but we will be.
Q: Do you have some new administration option to present him or some compromise position? Or some threat? (Laughter.)
SECRETARY BENTSEN: I've been in negotiations for years with Senator Dole -- (laughter) -- and we turn those cards over one at a time. (Laughter.)
Q: Mr. Panetta, you've said here today that you see an additional $8 billion in interest savings. And before you talked about as much as $16 billion. Does that mean you ran out to $24 billion dollars in that interest savings through the changing --
DIRECTOR PANETTA: The additional interest savings would be from the congressional action, so that that would be obviously if you implement both our budget plus the additional amount -- that's where you get the additional $8 billion in interest savings.
Q: Is that from the changing of the mix of the maturities and the Treasury options?
DIRECTOR PANETTA: I think, no -- that would be basically because of the additional discretionary savings that the Congress enacted as part of the budget resolution.
Q: Are you still assuming that change though in the Treasury mix? At one time, I think that led to $16 billion in additional --
DIRECTOR PANETTA: The mix on the Treasury, we --
Q: And then what would that mix be, roughly -- Secretary Bentsen do know what the basic assumption on that is?
SECRETARY BENTSEN: Well, we have a commission making a study now which is supposed to be reporting back very soon. And we -- I don't want to anticipate that one, so we'll have to wait for it. I do not anticipate, as I stated previously, any radical change in the mix.
Q: So you wouldn't eliminate the 30 year or anything like that, you don't think?
SECRETARY BENTSEN: I just told you. (Laughter.) I tell you I've learned in this position not to take the bond market too openly. (Laughter.)
Q: Mr. Bentsen, you said the tax package is basically the same as it was in February. What -- (gap in tape) -- for example, that renewable fuel, and we decided to put it on the same basis as all other renewable fuel. And that was explained to us in some detail by the Senators from the farm states. (Laughter.)
Q: Mr. Secretary, you said earlier that individual tax rates are going to be the same through FY '98, I believe. Are you telling us that individual tax increases are now off the table -- that that's nothing that you ever want to look at? (Laughter.)
SECRETARY BENTSEN: How long is ever? We have no such planned income tax increases -- none.
Q: Can we read your lips on that? (Laughter.)
Q: Mr. Panetta, on the using the additional revenue from tax and Social Security benefits to shore up the Medicare trust fund, I have a multipart question. Do you intend to ask Congress to dedicate those revenues to the trust fund? If so, would that be temporary or permanent? Additionally, what fraction of the shortfall would that cover, and how do you propose to raise the rest? I think you, as a trustee, prefers changing the OASIHI mix within the payroll tax. Will that be administration policy?
SECRETARY BENTSEN: No, we still have to work that one out. We haven't made a final determination in that regard. But one of the reasons I recommended that diversion was because we are in trouble on that trust fund, and we have to do some additional things. That by itself will not take care of it.
Q: Well, will these income tax revenues -- the additional income tax revenues from Social Security benefits -- are you going to ask Congress to dedicate them to the HI trust fund?
SECRETARY BENTSEN: That's correct.
Q: Logically, one might also go back to the revenues that are already flowing from Social Security taxation.
SECRETARY BENTSEN: No, no.
Q: You're not going to do that?
SECRETARY BENTSEN: No --
Q: Only the additional?
Q: Mr. Panetta, as you look for additional savings -- additional cuts in order to come under the congressional caps, would you look again at defense discretionary spending or have you gone as low as you can on that?
DIRECTOR PANETTA: I would expect that we probably have gone as far as we're going to go with regardS to that category.
Q: If your health assumptions -- your health reform assumptions are adopted by Congress in 1994, how many years will it take those lines to start trending down?
DIRECTOR PANETTA: Well, obviously it depends on the health care reform proposal -- how quickly it's put into effect, how quickly you can put the cost control elements of that plan into effect. But we had anticipated that if you could enact a health care reform proposal with cost controls in this year -- 1993 -- and begin its implementation between '94, '95, '96, that you would eventually see that deficit line continuing on a downward trend to well below $100 billion in deficit by the year 2003, so that you could reach less than one percent of GDP in terms of the deficit ratio at that time.
We had anticipated I think it was going to be somewhere between $60 to $70 billion in deficits. So it shows you how important it is to try to --
Q: will be adopted this year -- the health --
DIRECTOR PANETTA: Well, we're certainly going to fight for it.
Q: If it's not adopted, what would the number be?
DIRECTOR PANETTA: It depends, again, on -- whenever it's adopted, how quickly you implement the cost control elements.
Q: I have a question for Dr. Gibbons. I wanted to ask you about your Fiscal '94 initiatives and if there were any changes in priorities or budgetary requests.
DR. GIBBONS: Any changes from what we announced in February?
DR. GIBBONS: No, not really -- at this point. (Laughter.)
Q: Do you anticipate any changes?
DR. GIBBONS: We hope not. Of course, a lot of those initiatives depend on the stimulus package -- for example, the support of programs at the National Science Foundation, some of the works between the national laboratories and industry on certain initiatives begin right away. The stimulus package is still under negotiation. But, we've made no fundamental changes to that announcement that we made in San Jose.
Q: Dr. Gibbons, in the budget it talks about strong and stable funding for basic research. It looks like basic research is going up by 2 percent, which is less than the rate of inflation. Is that strong and stable, and does that reflect -- or does that reflect a philosophy of not more but changing priorities within basic research?
DR. GIBBONS: First of all, we see -- we understand that in a time in which the heavy focus must be on deficit reduction that there is no program that can totally escape that situation.
At the same time, with a simultaneous focus on investment, laying in situations that will enable our economy to become more resilient, create better jobs -- clearly research and development technology activities are a fundamental ingredient of that reach for growth.
The R&D budgets are up at 3 percent, which means we are constant dollars for the coming year. And this we feel is part of the good news that we are able to hold on to that commitment. We hope in the outer years that it will indeed grow. But we also understand that everyone has to take a part of the pressure to keep this deficit down.
We also understand that the imperative of the defense conversion means that we will be not only just holding onto these resources, but we will be shifting internally between programs that have less relevance now in the wake of the Cold War toward other programs that have greater relevance as we try to regain our international competitiveness.
Q: Mr. Panetta, given the track record on the stimulus package, Mr. Panetta, how are you going to get Republicans to support this plan?
MR. PANETTA: I think the President has always stressed that this economic plan is in the interest of all Americans. And our hope has always been that we would get support on this plan from both Republicans as well as Democrats in trying to enact it.
Obviously, when the plan in presented for a majority vote, it wins. It won in the House on the budget resolution; it won in the Senate on a majority vote on a budget resolution. The stimulus, unfortunately -- the stimulus package unfortunately does not operate under the same rules. It passed the House. We are confident that it -- it came to a vote in the Senate; and if Republicans allowed it to come to a vote in the Senate, it would pass in the Senate as well.
So, if the American people, I think, sent any message in November, it's stop the gridlock and let the process work. In the very least -- you know whether you are for or against the stimulus package, and there are obviously criticisms on all sides -- but whether you are for or against it, for goodness sake, at least let it come to a vote. At least let it come to a vote.
And that's what we are basically fighting for at this point. So we're obviously going to work with the congressional leadership. We are going to work with the Senate leadership because our fundamental goal here is to bring the stimulus package to a vote and to try to at least implement that additional portion of this economic plan.
THE PRESS: Thank you.
END11:12 A.M. EDT
William J. Clinton, Press Briefing by the Vice President, Secretary of the Treasury Lloyd Bentsen, Director of the Office of Management and Budget Leon Panetta, and Chairman of the Council of Economic Advisers Laura D'Andrea Tyson Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/269175