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Office of the Press Secretary

For Immediate Release December 19, 1994
                      REMARKS BY THE PRESIDENT,
                        AND THE VICE PRESIDENT,
                      OMB DIRECTOR ALICE RIVLIN,
                     GSA DIRECTOR ROGER JOHNSON, 
                        OPM DIRECTOR JIM KING 
                               Room 450
                    Old Executive Office Building   

12:13 P.M. EST

THE PRESIDENT: Last week I outlined my proposal for a Middle Class Bill of Rights to help the American people restore the American Dream. The G.I. Bill after World War II gave a generation of Americans a chance to build their own lives and their own dreams. Now we can help a new generation of hardworking people get the right education and skills, raise their children, and keep their families strong so that they can get ahead in the new American economy.

I want to take just a moment to remind you of the four features in that Bill of Rights. First, for a family making less than $120,000, the tuition they pay for post-secondary education, training and retraining would be fully deductible from a taxable income, phased up to $10,000 a year.

Second, for a family with an income of $75,000 a year or less, a tax cut phased up to $500 a year for every child under the age of 13. Third, for families with incomes under $100,000 a year, the ability to put away $2,000 tax-free into an IRA, and then withdraw that money tax-free for a cost of education, health care, first-time home, or the care of an elderly parent.

Finally, we will make billions of dollars available that the government normally spends itself through separate job-training programs directly to workers, who can decide on how best to use the money to learn new skills.

There is only one reason we can afford to do this at this time. We have worked very hard to cut government spending and to bring the deficit under control. The government debt increased by four times during the 12 years before I took office. I want to remind you what that burden means; it means that this April when people make out their checks to the government, 28 cents of every dollar of federal income tax will be necessary to pay interest on the debt accumulated between 1981 and the day I was inaugurated. It is our responsibility to turn that around, and we have been working to fulfill it. We have already passed budgets that cut the deficit by $700 billion, eliminate 100 government programs and cut over 300 others.

A major part of this endeavor has been the Reinventing Government Initiative, led by the Vice President. I have worked hard to reduce and to redirect governments for many years, since my early days as governor of my state, when we were one of the first states in the country to adopt a statewide total quality management program, which resulted in cutting regulation and paperwork, eliminating agencies and departments and programs that were unnecessary. Now we are cutting things that can be cut. We propose to stop doing things that government doesn't do very well and that don't need to be done by government. And we believe that we should increase our efforts where government can make a real positive difference in the lives of ordinary Americans. We have to change yesterday's government and make it work for the America of today and tomorrow.

In the last two years, we have made a good beginning. We have begun to shrink the federal government's bureaucracy to its smallest size in 30 years. The work force of the federal government is already almost 100,000 below where it was on the day we were inaugurated. We are on the way to a reduction of 272,000 positions -- cuts that are freeing up money to invest in our people. For example, every dollar that goes to fund the crime bill, which is a direct transfer of investment to our local communities at the grassroots level, comes from the cuts we are making.

Later today, at the Justice Department, I will announce new efforts under the crime bill to finish our commitment of putting 100,000 more police officers on the street, and stop the crime that punishes so many American families.

We have to continue to meet our responsibilities to the next generation. We must pay, therefore, for the Middle Class Bill of Rights, with new reductions in government spending, dollar for dollar -- spending cuts to pay for tax cuts, with no new cuts in Medicare and Social Security. I call on Congress to meet that same responsibility in their deliberations.

Our administration has just completed a review in which we have identified $24 billion in cuts in bureaucracy, red tape, and outmoded programs to help to do this. And we are committed to continuing the freeze on discretionary spending, which will save another $52 billion in the next five-year budget cycle.

We will do even more to shrink yesterday's government. I have called on the Vice President to review every single government program and department for further possible reductions. He's also going to review the federal regulatory process, and we have spent a good deal of time on that already, so that we can get better results for the public with less interference in their lives.

Vice President Gore is here to discuss the details of our next round of proposals in reinventing government, along with Director Alice Rivlin and the heads or representatives of five agencies in which we are proposing reductions now, including Secretary Cisneros, Secretary Pena, Deputy Secretary White, General Services Administration Director Roger Johnson, and Office of Personnel Management Director Jim King. I want to thank them and our entire economic team for their hard work in the last few weeks.

I also want to say a special word of thanks to people who often get overlooked in this, and that is the employees of the United States government. The work they have done in the last two years to help us to reduce the size of the federal work force by 100,000 already; to implement plans to take it down to a total of 272,000, and even more, with the announcements we are making today -- that work is truly exemplary. It would be envied by many of our biggest corporations in this country. They have rolled up their sleeves, they have been creative, they have found ways for us to save taxpayer money and redirect that into the Middle Class Bill of Rights and to investing in our future.

This has been -- I want to emphasize -- a very disciplined, well-organized process. We have not let rhetoric and recklessness dominate it. This has been about reality. And, again, as we go into the New Year, that ought to be our motto, as I said the other night: Country first, politics as usual dead last; focus on reality, not rhetoric and not recklessness.

It is not enough to cut government just for the sake of cutting it. Government is not inherently good or bad. In a new time, with a new economy, with new demands on ordinary American families, we need a leaner, but not a meaner, government. We need to put government back on the side of hardworking Americans.

That means I will oppose certain cuts if they undermine our economic recovery, undermine middle-class living standards, undermine our attempts to support poor people who are doing their best to raise their children and want to work their way into the middle class, undermine our attempts to improve education, protect our environment and move us into the future with a high-wage, highgrowth economy.

As I said last Thursday night, what we really need is a new American government for this new American economy in the 21st century -- one that is creative and flexible; that's a high-quality, low-cost producer of services that the American people need and that can best be provided at the national level. The best thing we can do in this process is to follow the model that smart companies have done, which is to develop a good plan, put good people in charge and pursue the goal with vigor.

I am confident that I chose the right person to lead the reinventing government effort. I want to thank the Vice President and all of his team. They have done wonderful work. And I'd like now to turn the podium over to Vice President Gore.

THE VICE PRESIDENT: Thank you very much, Mr. President. Thank you very much for your kind words, and thank you for your kind words about the members of your administration who have really done this detailed work, and your kind words about the federal employees who have really been the source of virtually all of the ideas that we've implemented as part of the Reinventing Initiative.

Thank you most of all, Mr. President, for your proposal for a Middle Class Bill of Rights. It is exactly what this country needs to make a transition to the future. Hardworking Americans have earned a break. And we can and will cover the costs of it by redoubling our campaign to reinvent government. We are sticking to the principles that we used in the first National Performance Review -- principles that underpin America's most innovative and successful private companies. Those principles are: put customers first, cut red tape, delegate authority and cut back to basics.

That is how we will decide what government should stop doing. We'll put customers first in this review by getting them involved at every stage of the process and listening carefully to their opinions and ideas. We will stop producing red tape and start paying more attention to results than we do to processes. And as you have asked, Mr. President, we're going to also see about reinventing the government's approach to regulatory issues and to regulatory process. That's well underway also.

We will stop making so many decisions in Washington that would be better made by state government, local government, or individual citizens. And we will replace Washington interference with local opportunity.

Two weeks ago, I joined with seven Cabinet members to sign The Oregon Option, a pact with the state of Oregon to turn problem solving over to the people closest to the problems; and we need to do a lot more of that. Cutting back to basics means that we should shed the remnants of yesterday's government, because yesterday has gone.

For example, we don't need an agriculture field office within one day's horseback ride of every farm. And so we're closing over 1,200 USDA field offices. We're looking to close a lot more field offices in other agencies, as long as we can continue to improve customer service. Americans know that they don't have to sacrifice good service to get low cost. In fact, reductions in cost and improvements in service often go hand in hand. That's why we've emphasized our effort to create a government that works better and costs less.

Cutting back to basics means stop trying things that are not working. For example, public housing projects simply do not achieve the results that we are after. We've tried long enough to fix them; it's time to try something completely different, time to try market solutions instead of administrative solutions.

Cutting back to basics also means stop trying to run businesses by bureaucratic rules. We plan to make air traffic control a corporation, and to do the same thing with mortgage insurance. We'll consider a long list of other government functions that could be incorporated, or that we could simply purchase from the private sector more cheaply and more efficiently.

We're going to make government work better and interfere less. We're going to cut out functions that are not needed. We're going to trade interference for opportunity. We're going to make it possible for middle-class Americans to have the break they've earned to raise a family, educate their children and get ahead in life. These are ideas and initiatives that President Clinton and I wrote about when then-Governor Clinton was the nominee in 1992 in the book that we coauthored, entitled, Putting People First. We've worked very hard on these efforts and we're making tremendous progress, and I'm going to have some more to say about it in just a moment.

I'm going to introduce each of the individuals who are going to be making brief presentations, and then respond to questions.

I now want to invite up my partner in this endeavor, the Director of the Office of Management and Budget Alice Rivlin. And joining us are the leaders who developed the bold changes that have already been decided by President Clinton: Transportation Secretary Pena will tell you how we're going to stop directing traffic from Washington. HUD Secretary Cisneros will describe our plan to raze the 60-room mansion of government grants and clear the lot so communities can decide for themselves what to build. Deputy Energy Secretary Bill White will outline our plan to bring that Cold War and OPEC-era department up to date. Roger Johnson and Jim King will tell you how we are phasing out old-fashioned centralized management of the government, turning commercial functions like training and real estate rental to the private sector where they belong, and giving front-line managers the opportunity to actually manage.

I'm going to ask each of them to make a short statement about the major reforms in their agencies, and they will join me in being available to answer your questions. But before they begin, I know that you are all aware that we gave serious consideration to totally eliminating each of these agencies. In these cases, the President and I were convinced that the reinvention and reform option was preferable. But over the next several months, we will be looking at every other agency and program asking the direct question, do we really need this agency; do we really need this program; is there a better way to do it; is there an opportunity here to give middleclass Americans a break? We have already eliminated over 100 programs. We will eliminate a lot more in the weeks and months ahead.

I'd now like to -- as the President departs, I'd now like to ask Alice Rivlin to lead off the detailed presentation.

Q Can we ask the President a question?

THE PRESIDENT: Let me just -- let me make a brief statement. I want to say just two things about the North Korean situation. First of all, I called the families of the two soldiers involved today to express my concern and, in the case of the gentleman who was killed, my condolences, to the family. And I told them what I can tell you. I've worked on this all weekend; I'm going to keep working on it; and we're working on an early resolution of it. We're doing the very best we can. I don't have any details to tell you now.

As you know I think, Congressman Richardson is in North Korea and he is working with us, and also doing a very fine job. I have nothing else to say at this time, except it's a high priority; we're working on it and we're going to do our best to resolve it.

DIRECTOR RIVLIN: Thank you, Mr. Vice President. I think we're talking about three important aspects of the Clinton administration's plan today. First, we're talking about restructuring -- thank you. Three important messages for today. First, the Clinton administration is paying for the tax cut that we have proposed. And the savings that we will be talking about today are an important part of the way we are paying for that tax cut.

The savings in the agencies that we are discussing today -- the five agencies -- will total $20 billion over five years -- at least $20 billion. We have another set of detailed savings that come to more than $4 billion. That's $24 billion from these savings. In addition, we are extending the caps on discretionary spending, which give us another $52 billion. That all comes to $76 billion, and we have more than paid for the $60 billion over five years that the tax cut will cost.

Perhaps more important, we are streamlining the government, reducing its size and intrusiveness. But much more important than that -- and you will hear the details from the five Secretaries -- we are rethinking what it is that the federal government ought to do. Some decisions that the federal government now makes ought not to be made in Washington, they ought to be made closer to the people by states or by local communities. We are consolidating whole groups of programs with complicated rules and saying states or localities will make decisions about that money, it will not be made in Washington. There are some things that would be better done by the private sector. We are spinning those off to be done by the private sector and to compete in the marketplace.

But there are some things that must be federal. We must have highway and air safety that we can all count on. We must pay attention to the revitalization of our cities. We must have a national energy plan. And we must have federal services that work. That's why we didn't eliminate these agencies; we are restructuring them in major ways which the agency heads will tell you about right now.

SECRETARY PENA: Thank you very much, Mr. Vice President. Good morning, everybody. Almost two years ago, this administration came to Washington determined to make this government work better for the people who pay for it, and that is working families. At the Department of Transportation, this is precisely what we've been doing for the past two years.

We have found a way to increase investment in our roads and bridges and infrastructure. We have responded quickly to Americans who have been hit hard by floods and earthquakes and other disasters. We've helped transportation industries like aviation and the ship-building industry revitalize itself and save thousands of high-skilled jobs. And all during this time we have trimmed the Department of Transportation by 4,000 employees, saving $250 million a year in salaries.

Today I want to outline my vision for the Department of Transportation, which is to position it in a role of leadership as we look to, as the President said, the 21st century economy. That vision would give more authority and flexibility to the governors and to the mayors who best know how to make strategic decisions in their own communities. We will increase total transportation investment by cutting red tape and forming dynamic partnerships with cities and states and with the private sector, leveraging the limited dollars we have at the federal level, and we will reduce the size of the Department of Transportation by eliminating inefficiency and duplication, the way so many American businesses have already done.

I believe this vision reflects what Americans want us to do, and I look forward to working with the Congress to implement that vision.

Today, we're taking the next bold step by announcing a major restructuring designed to focus our resources on our two primary missions: first, investing in critical transportation infrastructure and, secondly, ensuring the safety of the traveling public.

We have developed three key strategies to do this. First is consolidation. We will take the current 10 operating agencies in the Department of Transportation and consolidate them to three. Secondly is downsizing. We will continue to eliminate every redundancy we can find to reduce our work force, to save taxpayer dollars, to make sure that we get the most out of every dollar we invest.

As the President said, we will function more like a corporation. We will take the 40,000 employees in the Federal Aviation Administration assigned to the air traffic control operation and put them into a corporate-like structure.

The third thing we will do is to streamline. Today the Department of Transportation has 30 different loans, grants and subsidy programs, each with their own individual rules and regulations. We're going to combine those 30 programs into three broad programs. The first will be a unified grant program to be provided directly to the states and localities who can best decide how to invest those dollars. I think that will discourage or "disincentivize" mayors and governors from having to come to Washington to ask for very special earmarking of certain projects.

Secondly, we will establish state infrastructure banks, which will be capitalized with federal dollars, which will allow us to leverage federal dollars and state dollars with the private sector to actually have more investment over time.

And third, we will create a federal discretionary fund in Washington to allow us to support those infrastructure projects in states and cities which have regional or national importance, or which need national coordination.

All these steps will produce a leaner, more efficient Department of Transportation. What we are about is building bridges, not bureaucracy; picking priorities, not pork; moving people, not paper; and above all, ensuring traveler safety. It's also about continuing the crusade that the President and the Vice President have led so well -- to make this government work better and to cost less. All told, these and other changes will save tax payers $6.7 billion over the next five years. And we'll pass those savings on as tax relief to working families.

To the millions of Americans who want better transportation to either get to work, or take their children to school, or to move their goods throughout the transportation system, I say these changes will help us serve you even better. The way in which we move these changes forward in the next several months will determine whether we pass on a superior quality of life to our children and to our grandchildren. We, at the Department of Transportation, are prepared for this challenge.

Thank you.

SECRETARY CISNEROS: The Department of Housing and Urban Development is a department that deals with some of the most troubling situations in American life -- people who are very poor who live in our cities, the problems of race and class in America's most troubled neighborhoods. But it does not follow from that challenge that the department must function as it has. Indeed, many aspects of this department are simply indefensible. We cannot maintain public housing as we have for the last generations and cannot allow landlords, for example, to keep people in slum conditions because the government provides them a check that enables them to do that. So change is necessary.

We have been working for the better part of the last year, and certainly intensified in the last months, to create that kind of change. The ideas that I want to present now are not pulled from thin air, but have a history. Principally, they are a result of the kind of intensive thinking that was required by the Vice President's National Performance Review -- a host of different analyses and reviews have converged to allow us to come up with the basic ideas that will be presented here and accelerate them from things that we might have considered over the next several years into the time frame that is not involved. Absent this kind of intensity, I doubt that we would be right at this moment with these three concepts.

The first is a dramatic consolidation of the programs by which we assist communities across the country, from 60 different categorical programs that too frequently have led to great inflexibility and micromanagement intervention on the part of the federal government in communities to three.

The chart that you see here outlines 60 programs down the left column to eight that will become effective in Fiscal Year 1996, or October 1st of this year, after appropriate legislation is passed; and then in the final -- in the end game, Fiscal Year 1998, three performance-based grant programs. One of them are family and individual assistance programs, which are so-called Section 8 vouchers or certificates to help families and individuals; the second, an affordable housing fund in which our supply side, production, rehabilitation programs focusing on what communities can do with them; and finally, a community opportunity fund, which is our economic development and jobs-related programs.

The thrust here is to give maximum flexibility to local communities, keeping in mind that there are national objectives that are sometimes intentioned with local communities, such as fair housing and lending discrimination and mobility for populations that must be maintained. It's a difficult tension that we will have to negotiate. But clearly we come down on the side of flexibility and maximum discretion for local leaders who are closest to the problems and for people who can influence their solution in communities across America.

The second large piece of what we're proposing is a dramatic transformation in public housing as we know it in America today. The first step is to decentralize public housing authorities so that instead of HUD's direct daily involvement with their management, they can use funds interchangeably and make a difference in the conditions that exist in public housing. The long run, the end game, is very bold. It is, in effect, to provide certificates or vouchers to the residents of public housing so that they will be able to make the choice as to whether they want to stay in places that are unacceptable or, in effect, vote with their feet and move to another location.

We're, in effect, changing HUD's constituency from the bureaucratic entities of housing authorities that we've always worked with directly and have been our focus, to the residents; and the residents will make the choice as to where they can move. This is a very complex change, and it will require some years to get there. Deregulation, blocking of the funds, increasing flexibility in the short run so that the housing authorities can get to the point to where they are competitive, a level playing field with market apartments, and then vouchers so that people can make the choice as to whether they have sufficiently improved so that the people can stay, or that they will go.

If the people choose to go, some will criticize and say, but you have all of that stock, and what about the bureaucracies of the housing authorities? The answer is, who are we to say that because the housing authorities have failed and a system of housing has failed, people ought to have to live in those God-awful conditions. And so we're really putting the power with people to make those kinds of choices.

The third and final piece is the dramatic change in the way the Federal Housing Administration has functioned -- FHA, a 60- year-old institution, too frequently characterized by bureaucracy. And what we are doing is creating a government-owned corporation so that it can use the latest technology and use the kind of personnel that are needed to function in the marketplace as the modern, competitive insurance company that it is.

This is the essence of the three changes that are presented for the department. Obviously, these are very large, but we believe -- I must tell you, I believe strongly, am of strong conviction that if we do these things, and we do them well, we can serve the poor people who have been our constituency far better than this department has served them to date. And we can do it with respect for leaders across America, and we can do it in a way that the American taxpayers gain confidence that money for people who work and want to improve their lives, improve the lives of their children is money well spent.

THE VICE PRESIDENT: Deputy Secretary Bill White is representing DOE. I'd like to say, in introducing him, that Secretary Hazel O'Leary has been very deeply involved, obviously, in this process. I just left here in Moscow, where we have meetings and she had a previously-scheduled meeting on nuclear waste storage that was extremely important for her to continue with, and we agreed that the Deputy Secretary would make the presentation here this morning.

DEPUTY SECRETARY WHITE: Thank you. At the Department of Energy, we are going to cut our budget by at least $10.5 billion -- more than $10.5 billion, and I think we can do better than that. And these are real cuts. They're not just some cuts from some projected future increase -- that is, cuts relative to the existing level of funding.

We know we can do it because we've been doing it. The budgets that we've submitted in the last couple of years since we've been in office, under the leadership of the President and Vice President, have taken a billion dollars out of the budget of the Department from the one that we inherited.

We've cut our contractor work force by over 15,000, and that contrasts with an increase in the budget of the Department by over $3 billion, which occurred in the years before we arrived at the Department of Energy.

Earlier this fall, under the leadership of Secretary Hazel O'Leary, we asked all of our employees to come up and reorganize our department so that it was based on five product lines which were identified by our customers. And we're going to finish that process this next spring.

Now, most of the cuts I've talked about -- and these are real cuts -- come from several different sources. One is from eliminating layers of middle management and internal regulations. Another is from getting more for the dollar of services that we buy. We've already made historic changes in the way that we procure our major services in the Department of Energy based on competition and performance agreements with our contractors.

Finally, we're going to get rid of some programs that are programs that the Vice President referred to as programs of yesterday. Let me give you an example.

Back in World War I, the Navy decided to change the fuel in battleships from coal to oil. But people were worried that we might run out of oil during the war, so the Navy needed its own petroleum reserve, the Naval Petroleum Reserve. And to this day, the government continues to own and operate one of the larger oil fields in the United States.

Well, our battleships don't need that oil anymore. It isn't going to run out. And by turning the management of that field and the ownership over to private enterprise, we're going to save the taxpayers well over $1 billion. Private firms, our studies have shown, can operate the field more efficiently, as they do every other oil field in the United States and most of the oil fields in the world these American companies participate in because their efficiencies. And these companies can also provide private capital to further develop the field at a better rate than it is being developed today.

I could give you the same story and tell you the same type of situation, even where the government continues to operate some of these programs. Take our environmental remediation program. We did a study comparing what the overhead costs when the government cleans up a dump site compared to what the private enterprise spends when it cleans up a dump site. And because of the red tape and internal rules of the federal government and its contracting practices, the federal government spends twice as much on overhead as the best companies in the private sector do. So we're going to do what they do in order to cut our budget.

All of this will require cooperation from Congress. Our department does some very important things. We deal with the biggest trade problem we have -- that problem of oil imports. We are the custodians of the nuclear weapons and we must retain the essential functions performed by the Department of Energy. But with new legislation and some things we can do internally, we can make big changes and make the government leaner.

THE VICE PRESIDENT: Roger Johnson is, of course, Director of the General Services Administration.

MR. JOHNSON: Well, the GSA is not one of the most wellknown organizations in this town, but let me tell you, it spends an awful lot of money or controls it. As a matter of fact, this agency has direct or indirect responsibility for about $60 billion of spending each year.

I wasn't sure how much that was. I've been in private business all my life with large companies, but never $60 billion. But I discovered in 1993, the total net earnings of America's Fortune 500 companies was $63 billion. That made $60 billion pretty big.

We haven't been doing too badly since we came here about 18 months ago. Not only have we reduced the federal buildings fund and buildings projects by about $1.3 billion over that period, but using the same time-honored review process, we have reviewed about $18 billion of the country's largest information technology systems, cancelled $6 billion already, another $7 billion are under review. When these programs restart, they're going to start at much lower dollars with much more effective systems.

This work has been going on at the same time we've been accelerating the downsizing of the agency. We'll have, by the end of this year, 3,600 fewer people from the 20,000 we started with. It's really the work of these people, as the President and Vice President said, that have caused this to happen. In the process, we've also been restructuring our organization so that they're much better able to be compared with the private sector, much better able to be benchmarked. And that's going to let us start the next phase of cost improvement and service improvement through this agency.

This afternoon I'll be talking to the management across the country through a television-phone hook-up, and asking them to accelerate the work they've already done in reorganizing, repackaging the organization. That's going to be done so that soon, we'll be able to take pieces of the agency and offer it to our employees for sale. We'll be testing every single thing we do against why can't it be done better in the private sector. One of the best ways to do that is to create some ESOPs. We actually do things in this agency that could be done and run and managed by our own people; they're good people.

For those parts of the agency or those things we do that are too large or too complex or cost too much for our own people to do, we'll be packaging that work in such a way that we'll invite private sector proposals to privatize those pieces where we will take the whole business out, including the people, including facilities where that's appropriate. When we get through with that process, we'll then look to put whatever else is left in the best place in the federal government for it to be done effectively. We'll put work in other agencies where that's effective.

When we get through with this, we're going to have a much smaller GSA, probably 50 percent smaller, or maybe less. It will be concerned with oversight and policies. Whatever it does, however, will have stood the test and it will be determined that it, in fact, is doing things, whatever it does, better than any other alternative.

The federal worker is a good person. The federal worker works hard, is intelligent. I've never had a better work force in private industry. Through the National Performance Review and the things we've been doing, we've been gradually -- and now it will accelerate -- removing all of the rules and regulations and an awful lot of the stifling atmosphere that has heretofore prevented that great federal worker from doing everything he or she knows how. I think with this privatization, it's going to accelerate that process. And not only will we have an agency that does things better and costs less, but I think the great number of our people will end up with the ability to use their creativeness and a situation where their own professional and financial situations might be a lot better off.

THE VICE PRESIDENT: Jim King, the Director of the Office of Personnel Management.

MR. KING: Thanks, Mr. Vice President.

Early in the Vice President's effort to reinvent government, the Office of Personnel Management employees, their unions and its leadership came to a fundamental conclusion that we would redefine success here in Washington. Together we shared decades of inside-the-Beltway conventional wisdom. We decided success no longer means a bigger payroll, more central authority, more control, more turf. To OPM, success now means a smaller, flatter, customer-driven and service delivery organization.

In the last 18 months, we have transformed OPM from an authoritarian rule-bound, road-blocked-to-progress, to an agency that is already a model of reinvention. Fully one year ahead of schedule, OPM essentially wiped out the 10,000 Federal Personnel Manual, that's known as the FPM. And that happened to be a compilation of all the rules, regulations and guidance governing our personnel system. The infamous FPM was 10 times longer than the Bible and even more open to interpretation. (Laughter.)

At the ceremony held to mark its demise, the FPM arrived in a wheelbarrow and it left in a dump truck to be recycled, of course. And to mark this new year, OPM will free people looking to work for the federal government from the onerous standard 171. As of midnight, December 31st, the public will no longer have to work days on a form that ends up looking like this. And I happened to bring my own, just so you can get an idea.

Here is a 171 when it's fully filled out. Now, I reach about eight feet. That has more information than my mother knows about me. (Laughter.) Do you really need to know this? And the answer is, no; nobody uses this sort of thing. Generally you find it in another location, but -- (laughter). Most people will now be able to use a resume. Many will be happy and able to apply by simply spending several minutes on a touch-tone phone. That's in lieu of what I just showed you. And all of this was achieved while we reduced OPM employment by 22 percent in cutting our supervisory ratio in half. OPM is now poised to complete its redefinition of success and start paying reinvention dividends to the American people.

And I want to thank you, Mr. Vice President, because this is the dividend time now, and it wouldn't come without that leadership.

After closely examining our own core mission, and the services we provide to our customers, OPM will focus on maintaining our nation's 100-year tradition of nonpolitical federal work force, as well as strengthening our leadership role in federal pay, benefits, labor relations policy and hiring. In addition, OPM will continue to administer the federal retirement, insurance and health benefits systems. The bottom line -- OPM's contribution to the reinvention dividend will be to cut its spending in half and its staff by one-third; faster than most of you will believe.

I do thank you, and I thank you, Mr. Vice President, for the opportunity to be here today.


We'll be glad to take your questions now, and I'm going to ask Alice and my colleagues here to help me respond.

Q Could you tell us agency by agency, department by department, how many jobs will be cut over the next few years?

THE VICE PRESIDENT: No. There have been -- by next week, there will have been 98,000 positions eliminated. We were previously committed before today's announcements to an additional 175,000, for a total of 273,000. The FTE savings associated with today's announcements will be over and above, or under the limits already announced. But the specifics will flow from the detailed plans in each agency and department.

Q Mr. Vice President, could you spell out the $52- billion freeze in discretionary spending in 1999 and 2000? Where will those cuts be made specifically? Which departments will be frozen?

THE VICE PRESIDENT: That is closely related to the President's other announcement today, which is that he is directing me to look at every single department and agency and program, and take the same approach that we have been taking to reinvent the entire process, and to eliminate programs and commissions, agencies that are not needed.

The $52 million that comes from the freeze on domestic spending is, in essence, the bogey that we will have to hit for the remainder of the reinvention process. Now, there are other related efforts at cutting and saving that will also enable us to hit that $52-million bogey.

Q How did you come up with $52 billion if you don't know what's going to be frozen and where the spending cuts are going to come from?

THE VICE PRESIDENT: Well, that's the result of extending the caps. That's the process that we have used in the last two years. In order to accomplish the kind of radical reinvention that we began a year and a half ago and that we are accelerating now, you have to have incentives for the agencies and departments to meet the goals. The cap on spending is one such incentive. The FTE numbers have been such an incentive also. The threat of elimination is the third incentive. These are all changes that will very much benefit the American people, and will really and truly create a government that works better and costs less.

But in order to bring about the kind of dramatic changes that are involved here, you have to have the strong incentive to do so. And we have that, and we're going to succeed.

Q How much will you save by putting the air traffic control system into a private corporation, and to whom will that be accountable?

THE VICE PRESIDENT: Well, let me ask Secretary Pena to respond to that. There are 40,000 employees associated with air traffic control, and the function can operate a lot better in the private sector. But let me ask the Secretary.

SECRETARY PENA: Well, let's first understand what problems we're trying to correct in air traffic control before we talk about why we're putting it into a corporate structure. We have three major problems we're trying to address. One is a personnel system that does not allow us to attract and then place people where we need them at our busiest airports.

Secondly, we have a procurement system that doesn't allow us to bring on new technology on a timely basis to install it so we can keep up with a technologically-advanced aviation industry that we govern every second of the day. And, thirdly, we need to access the capital markets in order to finance, long-term, the multibillion dollars in improvements to the air traffic control system we're going to need in the next 21st century.

Those are the three problems we're trying to correct. We have concluded that the best way to do that is to take the approximate 40,000 people currently in the FAA, take them out of the FAA, put them into an independent corporate-like structure so they don't have to deal with all of those problems. We are very much convinced -- given the fact that for many years the airline industry has been proposing this, many of the labor groups have been proposing this, this is an idea that has been suggested for probably the last 10 years. We're now poised to do it.

Q How much money can you save by doing this? These are supposed to be savings. How much money are you going to save?

SECRETARY PENA: You start -- if I could, Mr. Vice President -- by taking the 40,000 people -- they are no longer going to get any support from the general fund, they will now be wholly financed by the fees that the airline industry pays. So that's a tremendous relief to the general fund. And, secondly, the billions in dollars of waste that we have seen over the last 10 years in an inefficient procurement system I think will be eliminated. And that corporation will be able to use that same kind of procurement that any private company can do and bring them that technology much more cheaply, much more efficiently and off the shelf.

THE VICE PRESIDENT: Let me add just one word to that. Those 40,000 -- that's an example of 40,000 FTEs that are not included in the original 273,000.

The second point: The employees involved, have strongly supported this move. The air traffic controllers and their organizations have support it. The airlines that will be footing the bill support it. Most -- the President's commission that was appointed two years ago, that worked in parallel with the NPR -- they reported around the same time we did -- also came to this conclusion. This is something that is really overdue.

Q Would that be a truly private entity, in which employees would have the right to strike, or if it would be somehow a government chartered corporation, in which they would be treated, for those purposes, like government workers in the sense of vital service providers?

SECRETARY PENA: Good question. That is why last year, in our proposal to the Congress, we had recommended that the corporation be a federal corporation, so that the employees would not have a right to strike. Others have suggested that it become a totally private corporation. If so, then you do have the problem of the right to strike.

Q So your current proposal is a --

SECRETARY PENA: -- is a federal corporation. There may be other ideas, but the concept is to get the inefficiencies that we currently have in the FAA out into a corporate structure. As it respects fees, we would take --

Q Sir, does this mean that the air fare will be increased?

SECRETARY PENA: No. The way in which we currently finance the system is through a 10-cent ticket tax, that all of us pay for when we fly all over the country. We would propose taking 8.25 percent of that 10-cent ticket tax and move it and transfer it with the corporation so that the corporation will have that funding stream in order to operate. And we think that the airlines support that strongly. And over time, in fact, from the beginning, it would be self-sufficient.

Q Secretary Pena, I'd like to address the changes in the grants and subsidies. How will that affect specifically the airport improvement program and the funding for it? That will be returned to states, or will --

SECRETARY PENA: The general process here is to take decisions out of Washington and give them to the states and the localities. As respects the aviation trust fund, which is currently a distinct fund, it will remain a separate fund. The same is true with the highway trust fund -- it will remain a separate fund. But we will find a way to devolve, or to send back those dollars so that each state and locality can decide how best to use those funds in their own states.

Q Can they take those funds and put them into another mode, for example?

SECRETARY PENA: No, the aid -- right now the way we have proposed it is a trust fund in aviation will be used for aviation purposes. The federal -- the highway trust fund, which currently is supporting transit, highways and other things, will continue to do that. But there will be a separation between both funds.

Q I have a question for Director Rivlin. Director, what is the economic rationale for a tax cut right now? And isn't paying for it with unspecified spending cuts five or six years down the road the kind of gimmick that President Clinton promised he wouldn't use to pay for it?

DIRECTOR RIVLIN: The economic rationale is we have had an excellent economic recovery that shows up in all kinds of statistics. But average working people have not benefitted from that. It is sharing the benefits of the recovery with the middle class.

We are not paying for anything by unspecified cuts; this is not a budget briefing. We will have budget briefings when our budget comes out in February, and you will see all the detail. Extending the caps is something that we have done before; that's how we have held down spending over the last two years. We have stayed under those caps specified in the law. And we will do that not only for the next three years where they are specified in the law, but we are saying we will get under those caps in specific ways for the last two years as well.

THE VICE PRESIDENT: Let me add to that response. These are very real. And I think that this team has compiled some credibility in cutting spending and in reducing the deficit. After the previous period where the national debt quadrupled and where deficits climbed out of control, we're having the first -- we're having three years in a row of deficit reduction for the first time since President Truman's administration, and the cuts are real.

Now, on the first part of your question, Director Rivlin made the point that middle income Americans have not sufficiently participated in the benefits of the recovery, but added to that, we have seen the emergence of this gap between those who have the education and training that equip them to compete for tomorrow's jobs, and those who do not. And by focusing a major portion of the middle-class tax cuts on education and training, we are building a bridge to the future that will enable all Americans to participate in the benefits of this sustained economic recovery that we're now experiencing.

Q Isn't that a social goal -- both these things -- sharing the benefits of the recovery, enabling people to get education -- those are social goals, are they not, not economic goals?

THE VICE PRESIDENT: No, not at all. They're related. They're related, because if those who get the education and training can participate in the jobs of the future, then that's desirable for them not just for social reasons, but also for economic reasons. They're better off, and the economy of the nation as a whole is better off.

Q Is there any purely economic rationale for these tax cuts -- any at all?

THE VICE PRESIDENT: Absolutely. Because there has been an uneven quality to the benefit of the recovery, and that, in itself, threatens the sustainability of the recovery. We cannot be satisfied with a recovery that doesn't persist into the future, and it will not persist unless and until middle-income American families are able to participate in it, and until their children and they themselves are fully able to take advantage of the opportunities to get the skill and the training and the education needed to hold down these jobs.

We've now got an economy where the average working person changes jobs several times in a lifetime in order to make sure that they are not only able to get those new jobs, but to compete successfully with their counterparts in other countries and continue building our economy in the future, we've got to focus the benefits on them.

Q Hasn't the very purpose of reinventing government now been reinvented?

THE VICE PRESIDENT: No, not at all. In the first phase, we use the benefits not only to reduce the budget deficit, but also for a specific purpose. And that is to finance the crime bill, the punishment programs and the prevention programs. In this case, we're doing the same thing. We're using it not only to reduce the budget deficit, but also for a specific purpose. That is to finance the President's Middle Class Bill of Rights.

Q Thank you, Mr. Vice President. On the Department of Energy, what type of legislative changes were you saying that were -- might be necessary, and are you also looking at export of Alaskan crude as --

THE VICE PRESIDENT: I'm going to ask the Deputy Secretary to respond.

DEPUTY SECRETARY WHITE: Some of the big changes would allow us to sell Elk Hills, that I've just described, and to exempt certain programs from some of the, you know, red tape under procurement and civil service laws that has increased the cost doing business. And none of it depends on the export of Alaska crude.

Q So the legislation would just simply -- on the Elk Hills, and then -- I mean, can you be specific? What do you need from Congress, the authority to do this?

DEPUTY SECRETARY WHITE: Most everything will require either an appropriation or an authorization, and much of it will require changes in authorization laws.

Q I'd like to ask you a quick question, while you're up there, about the Bonneville power administration. It had been rumored to be on the auction block; it apparently is not --


Q Why isn't it?

THE VICE PRESIDENT: There's a big distinction between Bonneville and the other power marketing administrations -- South East, South West, Western -- all have between six and eight percent of the customer base in the territory as part of their customers. With Bonneville, it's like 65 percent. It is completely different. You'll get a more detailed briefing on exactly what is involved, but that is not involved.


Q Aren't you being stampeded by the Republicans? It sounds -- much of this sounds very Reaganesque. And aren't you really putting the peoples safety and health -- if government is so bad, how come you didn't eliminate the whole thing?

THE VICE PRESIDENT: (Laughter.) Well, the answer to both --

Q How about the savings and loan debacle, and all of these things that led to deregulation, where you have no supervision and now you coming --

THE VICE PRESIDENT: Well, the answer to both questions is no. (Laughter.) That won't surprise you, I'm sure. (Laughter.) But let me give a detailed reason why the answer to both questions is no.

In no case will health or safety be compromised one wit. They will be enhanced. There is not a single example in any of the reinvention plans or proposals that we have made that in any way reduces the commitment to effective protection of health and safety.

Now, to the first part of your question --is this a reaction instead of a proactive move? No, it is not. And as I mentioned in my opening comments, the proposal to reinvent government; to move some decision-making authority to the state and local level; privatize some functions of the federal government that can be much better performed in the private sector to change the way the government operates so that the centralized management and control functions are handled much more efficiently and intelligently -- these are all proposals that President Clinton and I ran on in 1992. These are all proposals that we talked about extensively; that we wrote about in the campaign book, Putting People First; and that we pledged to do when reinventing government was begun, almost -- well, a little over a year and a half ago. We have accelerated it; we have speeded it up; and we will continue to do that.

Q Mr. Vice President, will you oppose -- or rather, will President Clinton oppose with a veto the elimination of any of these agencies? And what is your position on the elimination of the Commerce Department, as suggested by Senator Domenici?

THE VICE PRESIDENT: Well, we're not in favor of that. With respect to these agencies that are represented here, in each case, we took a very hard, intense look at the question -- are they needed at all? And the answer in each case was, yes, but a lot of what they're doing now is not -- some of what they're doing now is not needed, a lot of what they're doing now can be done in a lot better way for less money.

And in most cases, I think really in every case here, the leaders of these agencies and departments had long since begun to take a visionary approach to what they would like to see their departments or agencies evolve into in an ideal world if they could really make changes that people might have considered radical a year or two years ago, and we gave them permission to come in with the boldest and most radical approaches that they thought are really justified, then we'll really improve the service delivered to the American people while we're reducing the cost.

I'm going to just take one more, and then we'll have to cut it off.

Q Will the tax cut go fully into effect in '96, or will it be phased in over a period of years? And, also, where are you getting the $4.5 billion in savings that are listed under "other," other than the five agencies that were here today?

DIRECTOR RIVLIN: Yes, the tax cut will be phased in over a period of several years; and when we get the legislation, that will be clear. The other $4.5 billion --

Q Can you tell us by how much you're starting with them in '96?

DIRECTOR RIVLIN: Not exactly. I mean, there are three parts to the tax cut, and we are working out exactly the phasing to match the phasing with the spending, because we have to pay for it not only in the aggregate, but year by year. So we can't phase it in faster than we can make the cuts.

That will all be evident in the budget, as will the additional $4 billion. We're not doing a budget briefing today, we're just giving you the highlights and focusing on these five agencies.

Q Will the $4 billion come from these five agencies, or from other agencies -- others?


THE VICE PRESIDENT: Others. And let me say, in closing, that each of these individuals and their teams will be giving extensive background sessions the rest of today. You'll be able to get a lot more of these details from them, and we'll be telling you more in the days ahead.

Thank you very much.

END1:15 P.M. EST