THE WHITE HOUSE
Office of the Press Secretary
PRESS CONFERENCE OF THE PRESIDENT IN CONFERENCE CALL WITH NEWSPAPER EDITORIAL BOARDS
Room 459 Old Executive Office Building
3:25 P.M. EDT
THE PRESIDENT: Hello?
Q Mr. President, I want to give you the first question, and to point out that the attention you've given our Senator Herb Kohl in the last couple of days has raised his level of notoriety to a point that he hasn't known since he was elected. Now, I know you wouldn't trade a vote, but is there anything that you and Senator Kohl mutually want in terms of legislation or other benefits for Wisconsin that you have an interest in?
THE PRESIDENT: The main thing that Senator Kohl was concerned about -- he was interested in two things, to be fair, and there was -- in the national interest. One was to minimize the burden on middle-class taxpayers. And when he looked at the whole package and saw that working families with incomes under $30,000 were held harmless and that working families with incomes of $50,000 and $60,000 were looking at a $33-a-year burden with the spending cuts, I think that really made a big difference to him.
The other thing that he was interested in that I think is even -- certainly as significant over the long run is he wanted a program that had some real economic growth incentives, that had some business help in it. And this program does a lot for small businesses. Over 90 percent of the small businesses in the country are eligible for a tax reduction if they reinvest more money in their businesses. It does more for research and development. It does more for revitalizing homebuilding and real estate. It does more across a whole range of issues. For the heavy industry in Wisconsin, under this plan, there will be more incentives to invest in new plant and equipment in Wisconsin to be competitive there as opposed to going overseas. So all those things were important.
And then the third issue that he raised, which I certainly agree with him on, is that we need to bring this deficit down to zero. And in order to do that, we're going to have to cut more. But to do that, we have to reform the health care system. So the next issue is how to bring down health care costs so we can get this budget deficit down to zero and not just take $500 billion off of it.
Q Have you convinced him, Mr. President, that these changes are enough to get his vote on this issue?
THE PRESIDENT: Well, I hope so. I've worked hard on that. That's going be up to him, not me, and I don't think I should speak for him. But let me say this: I think he is really done a good job here, and he has been very important in bringing a business pro-jobs perspective to the whole debate. So we'll just see. But we've got a $495 billion, $496 billion, $497 billion -- something in that range -- deficit reduction package. We're now going to have more cuts than tax increases in the package. The top 1.2 percent of the American people, of people with incomes over $200,000 will pay more than 75 percent of the burden now. And there are quantifiable spending cuts now in excess of $250 billion across the whole range of federal programs. So it is a very important first step here.
Q Mr. President, you haven't had quite as good as success with our Senator Boren, who, I think like many people in Oklahoma are concerned that the spending cuts to come later when we went through that in 1990 and they never came.
Why should things be different this time?
THE PRESIDENT: Well, for one thing I'm going to have a trust fund and all the money will have to be put into the deficit reduction package, both the spending cuts and the tax increases. What actually happened in 1990, Jim, to be accurately about it is that the Congress adopted a plan based on the previous administration's rosy revenue estimates. And no one really thought the revenues would grow that much, so they didn't. And then spending increased because the recession went on and more people were entitled to Medicare and Medicaid. And between those two things, they were in deep trouble.
Now, let me just address the major objections Senator Boren has, because I think he's right, but I don't think -- I think what he says is right, but it's not a good reason to vote against this program.
What he says is that in order to take the deficit from where we're taking it down to zero, you have to do something about the entitlement programs, especially about Medicare and Medicaid. Now, that is true. But the problem is if you don't reform the health care system, that is if you don't fundamentally restructure the system of the way health care is insured against and the way the - -cutting out a lot of the paperwork and a lot of the things that are more expensive in America than anywhere else that have nothing to do with health care, and you cut the medical expenses of the federal government, all in the world you're going to do is have a hidden tax on the private sector because the providers will do what they always do -- they'll pass their costs on to people that have insurance.
So that, for example, The Daily Oklahoman would have its medical premiums go up more than otherwise would be the case because the government's not paying the full cost of its health care.
So I don't disagree that we have to do something about health care costs and entitlements. But the time to do that is in the context of a health care reform debate, which we're going to start as soon as we can get this budget out of the way. If we don't adopt the budget, we'll never get there. Everybody who looks at it can see that this budget's a lot better deal than the one in 1990. The numbers are more realistic, the growth package is realistic. We've got new business capital gains tax in there and all kinds of other incentives for small businesses to grow. Over 90 percent of the small businesses can get a tax reduction under this plan because of it. This is going to create some jobs, too. So it's a better package.
But you can't solve all the problems of the world in this bill. That's my quarrel and dispute with Senator Boren, not that -- he's right, you've got to get the entitlements if you want to go to zero, but we're going to have to do it in two steps, not one.
Q Mr. President, a lot of people are concerned with out here the fact that the spending reductions, the major ones, seem to come so late in the plan, and the tax increases come so early. Wouldn't it be better to go back in and make another slash, even if this means delaying the budget a little bit?
THE PRESIDENT: Here's the problem with it: First of all, there are going to be more spending reductions all the way along. The House of Representatives has already approved $10 billion in spending reductions over and above what's in this budget, But working with me; I've encouraged them. The Vice President is going to have a reinventing government report out sometime next month, which will provide a lot more savings. So we're just getting started on the spending reductions. And then as I said, we're going to bring -- we'll have a -- we'll be able to project a decade of spending controls in the health care area if we do health care reform.
The problem is that no matter what you do with that, the budget we have now and the budget we're going to have next year --we're already preparing to cut more off next year right now. But that is not an excuse not to act now. Still the big reductions in spending are those that aggregate up over time. That is, if I cut $10 billion this year and $10 billion next year, then that's $20 billion over this year's figure. And then $30 billion and $40 billion -- you see what I mean? So the spending cuts are always going to look bigger in the out-years because they compound one another.
Q Mr. President, we're relaying some of our readers' questions. One of them was how can the job market grow when small businesses are afraid new taxes and the health plan will put them out of business?
THE PRESIDENT: Well, first of all, new taxes and the health plan won't put them out of business. We've tried to send a clear signal to the small business community that any -- there won't be a tax problem here, but if they have to have a premium to cover their own employees, we will limit how much of their payroll it can be and it will be phased-in over a period of years.
But let me flip it over to you on the other side. Seventy percent of the small businesses in America provide some health care coverage for their employees, and almost all of them pay much more than they should because we're the only country in the world that forces employers who cover their employees to subsidize employers who don't. And that's what happens. Everybody in this country gets health care, but if you don't have health insurance and you can't pay for it, you get it too late when it's too expensive. You show up at this hospital, you get cared for, and then the providers -- the doctors and the hospitals -- in effect, raise their costs to everybody else. So you could argue that the small business community as a whole in this country is more hurt by the system we have than by the one we're moving to.
Also, let me make one other point. We spend about 10 cents on the dollar more than any other country in the administrative costs of our health care system because we have 1,500 separate health insurance companies writing thousands of different policies, all with different rules and regulations, so that the cost of compliance is staggering and then the government aggravates it.
So I think the small business community will wind up ahead on this. But we've tried to send some clear signals that we're not going to pop them with a big payroll tax and that -- I do think employers who don't provide anything for their employees should bear some responsibility through the private insurance system. But it ought to be limited and phased in so that nobody goes broke doing it.
Q Mr. President, on Friday, last Friday we had a conversation with Roger Altman about your budget plan, and one of the questions we asked him was what the administration would have done differently to sell this plan. And he said that -- he was very frank about it. He said, we would have started a lot earlier. And I'm curious in terms of your strategy why you didn't really start giving everybody the hard sell a lot earlier.
THE PRESIDENT: You mean not in the Congress, but in the country?
Q Yes, talking to the people.
THE PRESIDENT: Well, actually we did a lot of that, but we didn't have our war room set up and we were, frankly, just overwhelmed by the day-to-day news coverage of Republicans carping about taxes and unable to kind of break through about what the facts of the program were.
I worked hard -- for two months after I made my State of the Union address I went out into the country once a week, I did my best to talk about the program. But we didn't have the kind of organized disciplined effort we've had for the last few weeks in reaching out to local newspapers and other -- and television and radio stations, and bringing in opinions leaders and doing all these things we're doing now. And I think we did loss control of the debate. Also, to be fair to them, to Roger Altman and the others, an issue like this tends to go through cycles. I told the people about it on February 17th and they liked it. Then the sort of negative rhetoric took over. Now we're kind of coming back to reality and all the surveys show we're bringing it back our way now.
Q Mr President, Alan Greenspan has been giving some subliminal signals about raising interest rates. Wouldn't that sort of derail your plan for reducing the deficit if the interest rates went up? And are you worried about that?
THE PRESIDENT: Yes, I am. I don't thing you should raise interest rates until there's real economic growth that brings on real inflation. I mean, there's no real inflation in this economy and we can have growth without inflation. I think all he was trying to do is to say -- and I think we may be reading too much into his remarks.
Q Have you talked to him directly about what he did mean since he made those remarks?
THE PRESIDENT: No, but I talk to him fairly often, and I'm scheduled to have another session with him pretty soon. But my -- I know him pretty well and my read on what he said was if inflation warranted it, he might raise interest rates. But if you think about it, what we're trying to do in bringing the deficit down is to justify keeping the interest rates down even when there's economic growth because the federal government will be taking more -- I mean less capital away from the markets and, therefore, there won't be as much competition for it and we ought to be able to keep lower interest rates. That's our theory. He has constantly and consistently supported the deficit reduction efforts of this administration in very explicit terms. So I would be surprised to see him raise interest rates when we're doing something to support the reverse. If we were having 4 or 5 percent growth and inflation was getting out of hand, I could understand it. But there's no grounds for it now.
Q Mr. President, obviously, in this part of the country it would have been more popular to cut spending first, raise revenue later. You used the early year forecast of the deficit to go back on your pledge for a middle class tax cut. Since there have been other estimates. Lately you've gone back to a cut spending first program.
THE PRESIDENT: Well, first of all, we are cutting spending. We are cutting spending. This idea that we're raising taxes -- we're putting in the -- taxes come in constant amounts. If you put in -- whether it's a fuel tax or an income tax.
But let's get back to the -- this is a dodge. David Stockman, who pioneered Reagan's program in 1981, has now admitted in repeated interviews that they cut taxes twice a much as they meant to because they got into a bidding war with Congress; that there is no way to restore any kind of fairness to the tax code or reduce the deficit to zero unless there is a revenue component. So if I were to say, okay, we'll put these spending cuts in for a couple of years and then we'll raise taxes, all we would do by doing that is basically have a bigger deficit in the first years because we'd have the spending cuts but not the taxes, and we would have higher interest rates and we'd have slower economic recovery.
Let me just say, in the year that I'm in now -- which I'm not even responsible for this budget until October the 1st -- our deficit is going to be about $25 billion less than it was predicted to be when I became President.
But to go back to the middle class tax argument, after the election but before I took office, the previous administration said, oh, by the way, the deficit's going to be $165 billion bigger over the next five years. So I always in that campaign said I am not going to say "read my lips" because I've run a government long enough at the state level to know that sometimes circumstances can change on you. I've been very candid with the American people about that.
I think most people with incomes of $50,000 a year don't think $33 a year is too much to pay. I think what most people have believed is they've been told that they're going to be paying a fortune. And --
Q Mr. President --
THE PRESIDENT: Now, wait a minute. Let me just finish this. I want to make this point. I haven't -- I'm going to be President four years. We've got opportunities to have even more fairness in the tax code. If we're bringing down the deficit and we are opening up economic growth, there are all kind of options to do things over the next four years. But the most important thing now is to do something about the deficit. The truth is that all these people who say they want to cut spending now, what they really want is an accounting practice which still would have all the spending cuts come in the third, fourth and fifth year of this budget cycle.
What they're really saying is let's pass a bill that says it's going to cut spending later now before we raise taxes. They don't propose more spending cuts in these first years than I do -- none of them do. And to go back to Senator Boren's bill, particularly the one he offered in the Senate didn't have nearly as much support as the one I offered, because it didn't have the kind of deficit reduction unless you did what he proposed to do, which was to take more out of Medicare for middle class people. And even then it wasn't going to happen for the third, fourth or fifth year, most of it.
So the people that say cut spending now are saying, we don't want to cut any more spending than Bill Clinton does right now, but we want to pass a bill that cuts spending in the third, fourth, and fifth year in health care without health care reform, and then talk about whether we should tax the wealthiest Americans later. That's what they're really saying.
Q Is there any chance, do you think, that this bill will go down? Is there any chance that it will not pass in the Senate?
THE PRESIDENT: Well, sure there is. But I think it will pass. And the reason I think it will pass is this: I think most of those people are going to say, is this a better bill than we've ever had before and better than we had in 1990? And the answer to that will be, yes. Is this fairer to average Americans than the ones we've been considering? The answer to that will be, yes. Does this restore some economic growth incentives for small business, for new high-tech businesses, for housing, for real estate that we haven't had in the tax code for seven or eight years? And the answer to that will be, yes. Does this bill lift the working poor out of poverty and encourage people to get off welfare -- not with a government program, but by using the tax system to reward people who work, even at very low wages? The answer to that will be, yes.
And then the last question is, do we want to hang around here in Washington for 60 or 90 more days and debate this, and either come back here and pass something very like it or something that's so much weaker that will have higher interest rates, more uncertainty, and we'll waste two or three months when we could be dealing with health care, with welfare reform, with a crime bill, with things that will grow this economy with a new world trade agreement -- all these things we need to get on about the business of doing.
We are literally paralyzed here. We can't get anything else done. The only other major initiative that's going to come out of this is the national service bill that I've been working on for a long time. Other things cannot even be dealt with.
And again I want to say to those of you interested in the cut issue, keep in mind the Vice President is going to issue our reinventing government report within 60 days. The Congress is still cutting some other spending with my strong support. We are going to have more cuts even than we have now. But to delay this program is a great mistake. All it will do is paralyze the government, paralyze the financial markets, and leave us with uncertainty. The time --we've been talking about this since February. It's time to move.
THE PRESS: Thank you.
END3:43 P.M. EDT