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THE WHITE HOUSE

Office of the Press Secretary


For Immediate Release February 6, 1995
      PRESS BRIEFING BY VICE PRESIDENT GORE, SECRETARY OF TREASURY
     BOB RUBIN, COUNCIL OF ECONOMIC ADVISORS CHAIR DR. LAURA TYSON,
       AND OFFICE OF MANAGEMENT AND BUDGET DIRECTOR ALICE RIVLIN
                                    
                                Room 450
                     Old Executive Office Building

10:45 A.M. EST

THE VICE PRESIDENT: Thank you, Mr. President. I want to pay tribute to your economic team -- Secretary of the Treasury Bob Rubin, and the Chairman of your Council of Economic Advisors Laura Tyson, and on this day, especially, even more than on other days, the Director of OMB Alice Rivlin and her whole team that has done a terrific job in putting this budget together.

Alice and her team have prepared a citizens guide to the federal budget. This was one of the recommendations of the National Performance Review, to simplify and put into plain language a presentation of what the budget is all about. I also commend to your attention the CD-Rom version of the entire budget if you don't want to lug around all of the materials in written form.

I want to add just a few words to what the President said and emphasize the extent to which terminations and consolidations and reinvention has made this budget what it is. I would again like to thank Alice Rivlin for the very close teamwork that her people and the National Performance Review made possible to give the National Performance Review the opportunity to make advice and to have input as the budget was being put together.

And I think that it is important to add, to put this budget into historical perspective, if you look at the quadrupling of the national debt between January of 1981 and January 20th of 1993, the interest on just that portion of our national debt is larger than the entire budget deficit this year. So to state it another way, the budget would be in surplus this year, except for the interest on only that portion of our national debt that was accumulated from 1981 through January 20th of 1993. As a footnote, when interest rates go up, as they have several times this year, the expense of carrying that debt increases and, of course, has an impact on the budget.

We have, in spite of that, charted a budget course which, as this team will tell you, cuts the deficit as a percentage of our gross domestic product in half. We have now moved from a period in which our country had a sputtering economy, slipping in and out of recession with higher interest rates, higher inflation and higher budget deficits and rapidly growing unemployment to a strong, sustainable economic expansion, with lower deficits, six million new jobs, decreasing unemployment, the lowest African American unemployment in 20 years, and progress in almost every category, including, especially, productivity.

Now, one of the ways this has been possible is through reinvention. In the first phase of the National Performance Review, we set out to make government work better and cost less. And this budget reflects continuing progress toward the goals outlined in the first National Performance Review; that work is ongoing.

In addition to federal work force reductions that the President mentioned a moment ago and that are reflected on the graph behind Bob and Laura, we are also seeing -- and, incidentally, we're now on a track to do that even more rapidly -- and 2,000 reductions already; another 170,000 already blocked in; quite a few more on the way; for example, the 40,000 alone with the privatization or the corporatization of the air traffic control operations.

This budget also reflects significant streamlining in a number of agencies that have cut headquarters and obsolete field offices. For example, the Customs Service is cutting its headquarters by one-third and abolishing seven regional offices. The Agriculture Department is cutting over 1,200 field offices. The Interior Department will cut its headquarters staff by nearly 50 percent as part of its overall restructuring. And the Labor Department will close many regional and field offices as it streamlines for the 21st century.

We've also made changes to make the federal government more results oriented. More than 100 agencies and departments have set for themselves more than 1,500 customer service standards by which they can be held accountable and with which they pledge what they will each to do serve the public according to measurable standards.

Agencies are measuring their results and reporting on their progress. To date, the administration has designated 75 pilots covering more than 400,000 employees. In the future we will use performance information in the development of budget priorities. The administration is also committed to using technology to make government work better. One quick example -- currently 38 states are working to implement electronic benefits transfer, which will help deliver nearly $500 billion in benefits with great savings in monetary terms and also large reductions in the rate of fraud.

In the second phase of the National Performance Review which started in December -- we actually announced it back in September, but the formal beginning was in December -- we plan to continue our efforts to improve how government works and add a second focus by asking, what should government be doing?

The second phase of the performance review has three elements. It is examining every agency and program with an eye toward whether they should continue to exist, and if they can be privatized or consolidated, or if they can be streamlined significantly so they can provide better service at lower costs. We have some early results and they are reflected in the budget being unveiled today.

For example, this budget proposes to terminate the Interstate Commerce Commission; cancel highway demonstration projects; privatize portions of the National Weather Service; privatize the helium program; rely on the private sector for NASA communication with spacecraft; expand lease authority in our national parks so their run in a more entrepreneurial way; and privatize the Naval Petroleum Reserve.

Several agencies such as HUD, Transportation and Energy have radically restructured their operations. At HUD, 60 programs have been collapsed into three flexible, performance-based funds. At the Department of Energy, significant efficiencies have been outlined in the areas of nuclear waste clean-up and management. And at the Department of Transportation, the old rigid structure based on modes of transportation, has been replaced by a more modern and efficient organization.

Finally, this budget takes a big step in providing more flexibility to state and local governments by consolidating more than 270 programs into 27 performance partnerships that are based on trust and accountability -- trust in the ability of state and local governments to get the job done without federal micro- management, and accountability to the federal government for the spending of federal dollars. They will tie federal aid to performance, not to compliance with an administrative process.

The largest of these new partnerships will combine 70 job-training programs into one system; combine 108 public health and human services into 16; and combine 12 specific environmental grants into one. Together, the changes from the second phase of reinventing government total over $26 billion, and there is much more on the way. In the next few months, we will continue to improve and streamline and reinvent the federal government.

Now, let me say in closing that reinventing government is not all about cutting; it's also about making the government we must have work better. Anybody can propose to cut departments or to take a certain percentage out of the government. But, as some of our adversaries in Capitol Hill are finding, doing the actual review and separating out what can be cut from what must not be cut is a delicate and difficult business, and I don't think they've put any cuts on the table yet.

President Clinton has done just that, and will continue to do just that. This budget is a statement of his courage in taking on the tough job of creating a government that works better and costs less.

Secretary Rubin.

SECRETARY RUBIN: I'm going to make a few comments, and then Dr. Tyson will comment, and then Dr. Rivlin.

From the beginning of this administration, as the President mentioned, the members of the Cabinet, the White House staff involved with economic issues have worked together as a team in a way that I think was quite remarkable, relative to prior experience in Washington. And it is our view that that teamwork has contributed very substantially to the quality of advice the President has gotten, and as a result, the decision-making and the implementation subsequent to the decisions being made.

The President, from the very beginning of this administration -- actually, going back to the transition - - had a broad-based economic strategy to create and then protect the recovery; to position the country for the long-term; and to increase the incomes of working Americans. As the President said, the budget we are submitting today furthers those objectives. I'll focus very briefly on two aspects of that furtherance.

Firstly, the budget continues the process of deficit reduction. This administration worked very hard to break the trend toward ever-increasing deficits which we inherited. We cut programs; we cut the federal work force; we restrained the growth in certain entitlements; and we raised taxes on the top 1.2 percent -- the top 1.2 percent -- of taxpayers. The result, as the President said, was a reduction in the deficit as a percentage of GDP by over 50 percent by the end of this decade.

Secondly, in December the President announced his Middle Class Bill of Rights. This proposal is targeted squarely at middle-class families and will immediately improve their standard of living through the tax cuts involved and, over time, will increase their standards of living and economic growth by incentivizing education and training, providing more resources for young families to invest in child rearing, and through stimulating savings.

Let me address each of these three components of the Middle Class Bill of Rights very briefly. First, the $500 child credit for children under 13 is, as I said, designed to help younger families, where economic pressures tends to be greatest, to provide better child care, after school activities, and other requisites for child rearing. This is an investment in children, the future of our country. This credit would reduce the federal income tax burden of a typical two-child family, with an income of $50,000 by almost 20 percent when fully phased in.

Second, a $10,000 deduction for post-secondary school education and training. This deduction is available to all members of the family, including spouses and children, and should better enable middle-class families to obtain the education and skills which are absolutely requisite to function effectively in a modern economy.

And thirdly, the expansion of the individual retirement accounts. This program will substantially increase the availability of individual retirement accounts by raising the income ceilings to $100,000 for joint account filers, and $75,000 for individuals. Moreover, the flexibility of the individual retirement accounts has been enormously enhanced. An individual can either deduct the contribution when the deposit is made up front, or forego the up-front deduction in favor of tax- free withdrawal of all accumulated earnings at a later time. And withdrawals may be made not only for retirement, as is the case with current IRAs, but also for specified purposes, such as education, a first home or certain medical expenses. Our judgment is that this more flexible IRA will be far more widely used, and will result in a considerable increase in savings.

To conclude, a great deal has been accomplished in the last two years to put this country on the right track economically, but much remains to be done. This budget is designed to carry that process forward, and we all look forward to working with Congress on implementation. Thank you.

Dr. Tyson.

DR. TYSON: Let me just give a little bit of the highlights of the economic forecast that was used to make the budget. We always have to have a forecast. We complete the forecast work in late November; that's when you need to complete it to do the budgets. So keep in mind that there have been some developments in the economy since that time.

As has been the case in previous administration forecasts, the new forecast expects the pace of economic expansion to moderate in 1995 as the effects of interest rate increases in 1994 to date spread more broadly throughout the economy.

The actual growth rate in the forecast is predicted to approach what economists sometimes refer to as the growth rate of potential output, the rate of growth that the economy is capable of, once the margins of slack in labor and product markets have largely disappeared. That growth rate, the growth rate of potential output, depends primarily on two factors: the growth rate of hours worked by American people, and the growth of output per hour work, or labor productivity.

Based on current information and the economy's recent historical experience, most economists, including administration economists, believe that the economy's growth potential is in the neighborhood of 2.5 percent, and so when you look at the forecast, what you will see is the administration predicting real GDP growth will moderate to the range of 2.4 percent, 2.5 percent, going to 2.4 percent in 1995 and then basically staying at 2.5 percent in the years 1996 through 2000. This forecast embodies what economists refer to as a soft landing, whereby the economy glides from its current growth rate, which is in excess of what is widely viewed to be its potential, to its potential growth rate.

As in previous forecasts, the new forecast in the administration predicts a slight uptick in the inflation rate in 1995. But the inflation rate remains below the peak of 3.4 percent in our previous forecast, peaking instead at 3.2 percent in the 1995 to '98 period, and falling to 3.1 percent thereafter. So this is a very moderate inflation forecast.

In keeping with the forecasts that are out there in the private sector, we have had a very good performance on inflation this year. The CPI minus food and energy just had an inflation rate in 1994, which is at a 30-year low. And that has brought forecasts of future inflation down.

The new administration forecast predicts that the unemployment rate will average about 5.8 percent in each year between 1995 and 2000. Now, that forecast was made at the end of November. More has been learned about the behavior of the actual unemployment rate and in the upcoming economic report of the President, the administration actually presents a forecast range for the unemployment rate -- the range of 5.5 percent to 5.8 percent -- to reveal each year between 1995 and 2000.

We forecast a range rather than a single point estimate because we have a relatively short experience with the new unemployment rate survey. So we don't know that much about its quarter-to-quarter behavior; and also, because there were some signs of structural change in the labor market in some of the 1994 numbers. So we've decided to use a range of 5.5 percent to 5.8 percent for the forecast of the unemployment rate from 1995 to 2000. It's important to point out the budget itself was done with a forecast of 5.8 percent on the unemployment rate in keeping with our tendency to go for conservative estimates for budgeting purposes.

The important thing to note about our employment forecast is that the economic growth we are predicting is enough in the period 1995 to 2000 to absorb all of the new entrants into the labor force. So we anticipate little sustained increase or change, really, in the unemployment rate during this period.

Finally, on interest rates, the new administration forecast, like the previous one, does anticipate an increase in the average for short-term interest rates in 1995. The increase in the new forecast is considerably larger than the increase predicted in our midsession review forecast, and that's because since the midsession review forecast, there have been actual increases in short-term interest rates which are incorporated into the new forecast. And in addition, the new forecast did allow for a 50 basis point increase in short-term interest rates in 1995, which has already occurred, as you know.

The new forecast then anticipates a slight easing of short-term interest rates, from an average of 5.88 percent in 1995, to 5.50 percent thereafter. In each of the forecast years, 1995 to 2000, the predicted levels of short-term interest rates is higher than in our previous forecast.

And finally, long-term interest rates -- always an interesting variable to predict. The new administration forecast also revises upward its prediction for average long-term interest rates for 1995. That average for the year, our prediction is 7.9 percent; the previous forecast had 7.1 percent for 1995. Thereafter, our new forecast does predict a decline in long-term interest rates to an average of 7.0 percent between 1997 and 2000. Embedded in that prediction is a prediction that the spread between long-term interest rates and short-term interest rates will return to a more normal range than the one experienced in 1994, as the inflation and risk premiums built into long-term interest rates in 1994 gradually disappear.

Let me end with two points. There are always risks to any forecast. I could give you risks on both the upside and the downside; that is, it's possible the economy will certainly perform at a higher rate of growth in 1995, that the interest rate effects coming into play will not be as strong as anticipated. On the other hand, it's possible that the interest rate effects will be stronger than anticipated.

In addition, we've predicted, as everyone has predicted, that the pace of economic growth in the rest of the world will be better in 1995 than it was in 1994. To the extent that that turns out not to be true, that would present some downside risk to the forecast.

The most important thing to emphasize for today's discussion is that we believe that our forecast is a conservative and cautious one. It is quite comparable to those issued by the Congressional Budget Office and the Blue Chip Consensus Forecast, and we believe that it provides a reasonable, cautious basis on which to make budget projections.

Thank you.

DIRECTOR RIVLIN: Thank you, Laura.

We're eager to get to your questions, so I will be very brief. This is a good budget. It is full of specifics, and it reflects some very hard choices made by the President. Like all budgets, it is the start of a dialogue, with the Congress and with the public. We are assured by the leaders of Congress that they are eager to see our budget. They are eager, especially, to look at our cuts because they're trying to find some. It will definitely not be dead on arrival.

This budget reemphasizes several of the continuing goals of the Clinton administration. One the President has talked about -- raising living standards for average Americans -- was a goal which animated the original Clinton economic plan, and it is reflected very strongly in this budget.

In the tax relief for families with children, in the education and training emphasis that pervades the budget, both on the tax side and on the spending side, especially the G.I. Bill for American Workers. It is reflected in our continuing investments in lifelong learning in science and technology, things that raise productivity and future wages.

This budget also maintains fiscal discipline and keeps the deficit under control. When we got here, the deficit was out of control. It was nearly $300 billion, and headed up -- confidently predicted to go over $400 billion by the end of the decade. We had to get the deficit under control, and we did. It is now under $200 billion, $100 billion lower than in 1992. And this budget keeps that control and keeps the budget headed down as a percent of gross domestic product. It was 4.9 percent in 1992; it is 2.7 percent of GDP now; it will be 2.1 percent, or less than half of what it was in 1992 by the end of the decade.

Republicans are saying we took a walk on the deficit, but none of them voted for the President's plan that got us where we are, and we will see, as time unfolds, what they intend to do to bring the deficit down. We haven't seen anything yet.

A second continuing theme is the one emphasized by the Vice President -- making government work, restructuring, terminating, consolidating. I think the most significant thing here is the 271 programs that we are consolidating into 27 performance partnerships. Performance partnerships aren't just block grants, and we are not doing block-and-cut here. Performance partnerships really means performance -- measured results and partnership. We are giving more flexibility to state and local governments, but we want to work with them on how to measure the results.

And it continues the theme of American world leadership, a strong, leaner defense. We are completing the post-Cold War downsizing. But as the President emphasized, we have added to defense; we are emphasizing readiness and the quality of life. And the defense budget will go back up again toward the end of the decade as we pay for the needed modernization of this leaner force.

This is a budget that makes choices and continues fiscal discipline. The tax cut for people who need it most and the education emphasis and many more cuts, which we'll be describing in all their gory detail - - $144 billion worth of them. And finally, something that I personally take pride in -- I think it's a readable budget; not just the citizens' guide, which is an innovation under which we'd like some feedback from the press, if you find it useful; if you think other people find it useful; how do we make it better; but also the budget itself. We have tried to make it useful and readable, and again, we'd appreciate feedback on that.

We are now all available to answer your questions.

Q Did you argue for larger cuts, and are you disappointed that your arguments weren't taken more seriously inside the administration?

DIRECTOR RIVLIN: Nobody talks about what they argued for. The President is terrific; he wants to hear everybody's views and then make the choices. I think we're all disappointed that the deficit isn't going down faster, including the President. But we had to make choices here. It was very important for average families to share in this extraordinary recovery that we've had. And the tax cut furthers that goal, both immediately, and in the future, through emphasizing education.

Q Director Rivlin, can you explain why sustained budget deficits of mere $200 billion are now acceptable over the long-term?

DIRECTOR RIVLIN: I didn't use the word acceptable, I said under control. I think if you look at this chart, you see how much we've done and that the deficit is now, in relation to the economy, coming down and is under control. We'd all like to do more than that. The best way, or the most obvious way to do additional deficit reduction is the one that we talked so much about last year, namely, controlling the out-year costs of health care. Medicare and Medicaid, though they're rising somewhat less rapidly than they were, are still dominating the growth in the budget as we look forward.

The President has emphasized that we want to come back to health care reform. We didn't put it in this budget because tactically we wanted to work with the Congress on a health care reform that will take the next step toward protecting all Americans, and controlling the costs not just in the federal budget, but everywhere.

Q Well, perhaps I should have said, why are, in the long-term economically, are these $200 billion deficits tolerable?

DIRECTOR RIVLIN: Well, a deficit is intolerable if it's out of control, if it's headed up, if it's growing faster than the economy. A deficit that is not growing as fast as the economy is more tolerable. That doesn't mean that it's desirable. We all would like lower deficits.

Q Since entitlements are such a big reason why the deficit continues to stay high, why do you have nothing in your budget about how you would reform entitlements?

DIRECTOR RIVLIN: Well, the most important set of entitlements to reform, from the point of view of the budget, is, as I said, the health care set. And we want to work on health care reform, and we have signaled our willingness to do that. And that is something we are definitely not walking away from.

Q Isn't the President absolutely drawing the line against cuts in Medicare?

DIRECTOR RIVLIN: The President is drawing the line. We have not financed -- there are no Medicare cuts in this budget. We have not used Medicare to finance our tax cut. Our tax cut is financed by cuts in discretionary spending. And we believe that Medicare should not be used to finance tax cuts. And we believe that the Congress should not use it that way, either.

Q How about Medicare being used to finance deficit reduction? Is that acceptable?

DIRECTOR RIVLIN: We want to come back to that question in the context of health care reform. It is a question of not being able to look at Medicare and Medicaid in isolation. As we made very clear last year, controlling the out-year costs of Medicare and Medicaid should be thought of as we look at the whole health system.

Q There's a political case for tax cutting. But given that you say that deficits are not a good idea in general, can you make an economic case for the President's tax cut?

DIRECTOR RIVLIN: I think the economic case has to do with the groups in the population that have not shared in this recovery. We've had an extraordinary recovery, but it has not benefitted those, especially with less education and average families. Our hope here is that those families will benefit not only from the near- term tax reduction if they have children, but from the tax reductions and other things in our budget that encourage long-term education.

Q That's a social goal. Can you say that the economy is going to be better off because of the tax cuts, or would you be better off putting that money to deficit reduction?

DIRECTOR RIVLIN: I don't think you can answer that question. There's no magic amount of deficit reduction that you need. We now have a deficit that's under control and coming down in relation to the size of the economy.

I want to get my colleagues to answer as well. Never saw them silent for this long.

SECRETARY RUBIN: You were so good, Alice -- (laughter) -- I wouldn't call those social goals, Todd. I would say that when you encourage education, you encourage saving, and you encourage investment in children, while you might, in one case, say they're social goals, I would say without question those are economic objectives which will have real economic effects over time.

Q Another question about Medicare. Certainly, the Republicans are planning to use Medicare cuts to finance deficit reduction. Would you argue that that's a bad thing to do?

DIRECTOR RIVLIN: In the first place, we haven't seen their plans, and we certainly would argue that, to use Medicare cuts to finance tax cuts, especially tax cuts for upper-income people, is a very bad thing. And we want to see Medicare reform -- and there's a lot of talk about reform now -- as part of the health reform discussion.

Q What about the use of -- and deficit cuts?

DIRECTOR RIVLIN: I can't answer that in the abstract. We have always believed that the way to get deficit reduction in health care, or from the health care programs is to look at them in the reform context.

Q What is so great about privatization -- for example, the Reaganesque idea for the Weather Bureau to be privatized? Haven't we had enough experience with that? (Laughter.)

DIRECTOR RIVLIN: No, I don't think so. What we want to do is to look very carefully at what the federal government does, and when there are things that could be done more effectively by the private sector as with some aspects of weather information and its distribution, we think that should be done by the private sector, if it demonstratively can be done more effectively.

Q How do you know that?

DIRECTOR RIVLIN: Well, we've done studies of it and we think this is a good candidate. It was part of the National Performance Review. And we think -- and NOAH thinks this is a good candidate for privatization.

Q You're pointing out that you would finance your tax cuts not through cuts in entitlement spending, but through cuts in discretionary programs. Can you do that under existing budget rules? Will you have to seek some amendment there?

DIRECTOR RIVLIN: Yes. What we have to do is seek a reduction in the caps. We will take down the discretionary spending, reduce the caps and transfer that to the pay-bill account to offset the tax cuts.

Q Could I ask a question of Dr. Tyson, please? Would there be a risk of aborting the recovery if you have substantially more deficit reduction at a time when the Fed is supplying the monetary breaks? In other words, would you be applying too much of the fiscal breaks and not make the soft landing that you described earlier?

DR. TYSON: Well, I do think it's important in these discussions of the economic effects of deficit reduction to keep in mind something which is regularly lost, which is that the immediate effect of deficit reduction, whether it takes the form of a spending cut or a tax increase -- and right now everybody's talking about spending cuts -- is contractionary; that is contractionary fiscal policy.

Now, we have had an economy which has moved forward at a very remarkable clip with a contractionary fiscal policy which took bite in 1994. We started from very low short-term and long-term interest rates. There have been considerable increases in those interest rates. And I think, right now, if you look at forecasts, forecasters are predicting that the economy is going to be moderating quite substantially, relative to the rate of growth that was achieved in 1994.

Now, I think in thinking about any sustainable course of deficit reduction, it is important to think about the amount and the pace of deficit reduction that is best for the macroperformance of the economy. It is simply not the case that a dollar of deficit reduction is always the best macroeconomic tool for the economy at a particular moment in time.

Q But if you look specifically at the Republican prescription of having a glide path to zero deficit by the year 2002, which would require you to chop perhaps another $30 billion to $40 billion out of your '96 budget, would that come within the troublesome area which you're alluding to?

DR. TYSON: I would rather not -- again, I would rather not speculate on the glide path until I saw the glide path. I don't believe that there is a glide path before us, and I think that our deficit path is a sound deficit path, both for the macroperformance in the economy in the near-term and the macroperformance of the economy over the forecast horizon which we're dealing with. So I think that we have it under control.

And the other thing I'll say about the economic effects here is that deficit reduction should be understood as a means to the end. The end is higher living standards. Deficit reduction reduces government dissaving, and that should increase investment. But we also have ways to try to directly work on changing the composition of government spending to invest more, and that's why we're doing things like investing in training and education programs; that's why we're increasing certain parts of our 1996 budget to spend more on investment in the future. And that's the rationale for the tax cuts.

Q What would be the effect if we did balance the budget by 2002 on the economy, and what would it take to do that?

DR. TYSON: Well the problem with answering that question is that in order to answer that question any macromodeler in the world will have to make an assumption about what happens to the course of long-term and short- term interest rates. Deficit reduction -- if you try to balance the budget by the year 2002, except, as a promise, there is no plan to do that we've seen, but let's assume that some plan develops, if you try to do it, then what happens to the course of growth in the economy depends very much on what happens to the course of interest rates.

Q -- the 5.9 percent interest rate projection, does that mean that you don't think that the Fed will be increasing rates this year anymore?

DR. TYSON: The which?

Q The 5.9 percent push --

DR. TYSON: Well, as I said, our interest rate projection for 1995 assumed a 50 basis point increase, which, in fact, has occurred.

Q Dr. Rivlin, both the President and all of you have made a great deal of the consolidations and the terminations. Do I read these figures correctly to say that the consolidations are costly -- $1 billion more in - - and the terminations won't save you even half of what you need to pay for the extra $1 billion. Is that right?

DIRECTOR RIVLIN: No. The consolidations are net savers. I don't know the exact number here. It is not huge, and let me tell you why not. We are not, as I said, doing block-and-cut here. What is saved is the administrative expenses of the federal government; those are considerable. We had, for example, the savings from the blocking of those funds, administrative savings, are as I remember, $800 million over five years. In DOT they are considerable. But although the consolidations save, they are not primarily done for that reason. They are done primarily to get more flexibility for state and local governments, and more accountability for both the federal and the state taxpayers for the results of this spending. The terminations are mostly of small programs, and they save about $2 billion.

Q Director Rivlin, how many jobs will actually be lost to all of this in the federal government? And can you tell us about whether people will actually be fired, or whether they'll just be lost through attrition?

DIRECTOR RIVLIN: The chart over here, which is one of our favorites, does show the reductions. The reduction in the total work force will be as we have advertised, by the end of the decade, 272 -- now, how many jobs are actually lost? Most of that will be from attrition. We have tried to do this so that there are very limited numbers of riffs, occasionally that may happen.

Q How many do you expect will be fired?

Q Did the President not advocate --

Q Could you just answer the question about firing?

DIRECTOR RIVLIN: Right. I just did. I said we are --

Q You haven't given a number.

DIRECTOR RIVLIN: No, I haven't given a number, because I don't know what the number is. We are trying to do this without firing people. That's what RIFs mean. And we are doing it by attrition, by finding people other jobs in the government, but we can't say absolutely that nobody will be fired.

Q Does the President not support extending the R&D tax credit, and if not, why?

DIRECTOR RIVLIN: Good question. The President does support it, we are treating the R&D tax credit and some other things that we support as things that we clearly support. We will work with the Congress on how to pay for them. This is the model that we used on GATT, where there's bipartisan support. It isn't in the budget, but we are for it, and we will work with the Congress on how to pay for it when we get a legislative proposal up there.

Q Dr. Tyson, was the administration's proposed increase in the minimum wage factored into your revision on the unemployment rate --

DIRECTOR RIVLIN: No, we would never -- since we are firmly convinced by the existing research that a minimum wage increase in the magnitude that we have proposed would have no discernible effect on the unemployment rate, we would never adjust the unemployment rate, it would be inconsistent with our evidence. So the unemployment rate forecast remains what it is before and after our minimum wage proposal.

By the way, for those of you who might be interested, I have a piece of paper up here which compare's the administration's new forecast with its midsession review forecast and the CBO and Blue Chip forecast. So, those of you who would like that comparison can come --

DIRECTOR RIVLIN: Thank you all. I know there are other questions. Larry will stay -- Larry Haas, and if you need to reach me later in the day, please feel free to try to do so.

THE PRESS: Thank you.