Remarks on Budget Proposals and an Exchange With Reporters

The President. First of all, I want to welcome the Members here for this meeting. And as you know, we're going to be discussing the budget. And we'll just make a couple of observations.

I have just returned, as you know, from my trip, and I look forward to having the opportunity to study in detail the budget resolutions passed by the Senate and the House—or offered by the Republicans in the Senate and the House.

Obviously, I believe that deficit reduction is good for our economy. It lowers interest rates. It promotes growth if it's done in the right way. We're using 7-year figures now. The last Congress reduced the deficit about a trillion dollars over 7 years, or about as much as the Republican proposals recommend.

I am concerned, as I have said repeatedly for months now, about three things. I do not believe that we should cut Medicare deeply, cut long-term care for the elderly deeply to pay for tax cuts for upper income citizens. I believe that we have to slow the growth of Medicare. I am glad to hear the majority in Congress acknowledging that, after 2 years of denying that there is a crisis in Medicare; I agree that there is. But the proper way to do it is within the context of health care reform so that we can consider the implications on the health of our people, the welfare of our people, as we do this.

And the third thing I would say is that we have two deficits in the country that are hurting us badly. One is the budget deficit; the other is the education deficit. The most significant thing about America in the last 15 years is the stagnant wages of working people and the growing inequality among middle class people because they do not have the skills they need to compete in the global economy. So I don't think we should cure the budget deficit by enlarging the education deficit.

Those are my three preliminary observations. And I look forward to having the chance to study this and to work with them and with the Democrats in the Congress to continue to bring this deficit down. We must do that. We all agree with that. But there's a right way and a wrong way to do it, and we're going to be discussing that in greater detail today.

Budget Proposals

Q. Senator Dodd says it may be time to drop all proposals for a tax cut right now and to focus instead on deficit reduction. Are you willing to drop your middle class tax cut proposal if the Republicans drop theirs?

The President. Well, first of all, I believe that we can pay for something in the range that I have proposed with a dramatic—[inaudible]— deficit reduction. I think you could—I think we can achieve that. But I—I want to—that's my position, but I want to have a chance to meet with these folks today and hear from all of them, and we'll be talking more about this.

I believe that what I recommended is the right course. I'm prepared to hear from anybody else who's got any other ideas. My concern is, I don't want to see us just jump off the deep end on Medicare cuts without understanding what the implications are to pay for huge tax cuts which we plainly can't afford and which mostly go to upper income people. I do not believe that we can fix Medicare unless we have some idea of how the system is going to be reformed and what the consequences will be. And I don't believe that we should be eviscerating the education budget and making it harder for people to go to college and stay there, for example.

Now, other details and other issues—I'm going to review their proposals and evaluate them, and then we'll be glad to work with them and go forward.

Japan-U.S. Trade

Q. [Inaudible]—go in effect today. [Inaudible]—when you meet with Prime Minister Murayama you'll be able to resolve this matter and avoid a trade war with Japan that could affect security and other strategic interests as well?

The President. I certainly hope that we'll be able to resolve this. And as you know, we— the way this issue works—the Trade Ambassador, Mr. Kantor, will announce the details of what we propose. They won't actually go into effect if we can avert the disagreement with the Japanese. But if you look at the special problem of autos and auto parts and how long we have labored over them and how reasonable the United States has been for years, even for more than a decade, I believe that this is something we have to go forward on. The Japanese Government has acknowledged that we have important security interests and other interests in common and that we cannot let our entire relationship be left by this. That is a welcome observation by them, and I agree with them. But we can't anymore deny this or sweep it under the rug. We've got to go forward; we're going to do that.