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                     Office of the Press Secretary
                        (Little Rock, Arkansas)
For Immediate Release                                      June 23, 1995     
                       REMARKS BY THE PRESIDENT

THE PRESIDENT: Hello, Governor Romer.

GOVERNOR ROMER: Yes, Mr. President. I'm here and also on the line are Howard Dean, Evan Bayh, and Bob Miller and Tom Carper.

THE PRESIDENT: It's nice to hear your voices.

GOVERNOR ROMER: Mel Carnahan would be here, but he's in Korea, Mr. President.

THE PRESIDENT: I'm sorry he can't be here, but I hope he does well on his trip to Korea. And I want to thank him for his support as well. And I want to thank all of you for your letter in support of the budget plan that I have presented.

I know that all of you have experience in balancing budgets and you know that it takes a combination of discipline and compassion and hard choices. And I believe that my budget meets the test that you try to meet every year.

As you know, the Congress yesterday, both Houses of Congress, the Republican majorities, have agreed now to reconcile the differences between their two. I am glad that both the President and the majority in Congress are committed to a balanced budget, and I believe most of the Democrats in Congress are as well. But I still disagree fundamentally with the way in which they propose to balance the budget. And I think it will complicate your lives as governors considerably.

I believe that their plan is still too extreme, runs a significant risk of putting the economy into a recession and raising unemployment. It cuts education at a time we should be increasing it. It cuts Medicare beneficiaries in order to pay for large tax cuts that disproportionately go to the most well-off people in our country who don't really need them. And because the cuts are so severe in some areas I believe they'll be very difficult for you to manage.

Our plan balances the budget over 10 years instead of seven, increases education along with inflation, from Head Start to our investments in college loans and scholarships. It preserves -- while slowing the growth of Medicare and Medicaid, it preserves the integrity of the incomes of people on Medicare, so that these middle and lower-middle income elderly people, who many of whom don't have enough to live on as it is, are not going to have to pay more for their medical benefits or give up a lot of medical care. It is a much more sensible approach to welfare, and the tax cuts are much, much smaller and targeted toward individuals and toward education and child-rearing. So I believe that it's a better plan.

But now that the Senate and House have resolved their differences, we can proceed to what I hope will be an honest, open and civil discussion with the American people about the agreements and the differences in our two plans. And I hope in the end we'll wind up doing a balanced budget in the right way that will grow the economy and that will support you and what you're trying to do at the state level.

And I can't tell you how much I appreciate your support. You may have some questions about what we're doing and I'd like to hear from you now.

GOVERNOR ROMER: Mr. President, this is Roy Romer, Colorado. You know, when we began to talk as Democratic governors after you made your proposal on Tuesday, and thought we ought to send you a letter, it was very interesting that all 19 Democratic governors said right on. And the reason is that your budget protects our ability to continue to educate children. That's really one of the bottom lines.

The Republican proposal makes such deep cuts in Medicaid, for example, that we know we're going to have to pick up for years in advance. And it is really wrong to do that. And I think that the approach you've taken enables the states to assist in reducing the federal budget so that we can do the right kind of balancing, but it still preserves our ability to educate children.

I think my question would be, what can we do to refocus in this debate that's about to occur the nation on if you don't invest in these kids you're not going to have the productivity to continue to support a federal budget?

THE PRESIDENT: Well, I think that's one of the things the governors have to do to help us on. And you have raised a point that has been almost completely absent from this debate in Washington because there's so much focus on the federal investments and the federal programs. The Republican alternative as compared to mine will have a bad effect on education in a direct way and in an indirect way. And I think most of the people covering this debate even have not thought about that.

Directly, it will obviously cut our ability to invest in everything from Head Start to the funds we give to you for Goals 2000 to help promote reforms, to the apprenticeship programs to college loans.

But, indirectly, you've made a very important point. Most of the funding for education in our country comes from the state and local level and, increasingly, states are playing a larger and larger role in school funding and university funding. And if we cut Medicaid as severely as they propose to cut it -- 70 percent of that money goes to the elderly and the disabled -- they will show up in the legislatures all across America. The pressures to avoid severe human hardship will be enormous, and, therefore, the pressures on you to devote money that would otherwise go to education for the state level into nursing home care, into the care of the disabled, will be very, very great indeed. And there's been almost no discussion of this. So this could be a huge indirect cut in education as well.

And I think most Americans know we ought to be increasing our investment in education. In the global economy it's one thing we can do to ensure a good life with a secure income for our people. And I would urge the governors to focus on the indirect impacts of this budget as well as the direct ones, because that's something our citizens will understand if it's explained to them. It's something the press corps will understand and report if it's explained to them. But it's been almost totally absent from the debate so far. And it's a huge factor that has to be considered.

GOVERNOR DEAN: Mr. President, this is Howard Dean. First of all, let me thank you for two things. First of all, thank you very much for the waiver we received yesterday. And your people did a great job -- Alice Rivlin and Donna Shalala and their staff -- so, I thank you. We're going to be able to continue to expand health care coverage, unless Congress passes their version of the budget.

Now, the other thing I wanted to thank you for is I have read most of your proposal and your approach to dealing with Medicaid costs, which everybody acknowledges have to be brought under control, is the right approach. It does not discriminate against high-growth states. It does not transfer all the responsibility to the state taxpayers, causing state tax increases. And I just wanted to thank you and the people who you work with who came up with that approach to cutting Medicaid costs to the tune of $55 billion.

I wondered if your staff had figured out what's going to happen to us if the more extreme Republican version of this goes through -- because we've got a lot of fears. And I certainly wouldn't want to put myself in a position of speaking for Republican governors, but there are a great many moderate Republican governors who are very fearful of what is going on in Congress on Medicaid. And maybe you could make some comments about that.

THE PRESIDENT: Well, I would just make a couple of points. And Governor Miller may want to talk more about this in a moment because he comes from such a high-growth state, but I think two things are going to happen if the Medicare and Medicaid budgets that they advocate actually become law. One is that the reductions in spending are so significant that there's no way that the high-growth states won't be adversely affected. That is, you may be able to take account of inflation and the fact that people as they live longer will use more health services, but there won't be enough to guarantee that the states with fast-growing populations that depend upon Medicare and Medicaid will be taken care of. There just won't be enough.

The second thing is that the cuts are so significant that it will virtually end the ability of states to expand health care coverage to the working poor through the Medicaid program and through a lot of the self-initiated reforms at the state level.

You know, what we tried to do -- Governor Dean just alluded to it -- after the failure of the health care reform effort in Congress last year, we just tried to support states that were finding ways to expand coverage and increase health care security for their people. I think that it will be almost impossible for the states to do that if the Medicare and Medicaid funds are cut this much. In fact, I think you'll be in a position of either dramatically increasing the cost of health care beyond the ability of low-income people to pay it, or cutting back on the services you provide to them. I think if you look at these numbers it's very difficult to imagine how that won't happen in almost every state in the country.

GOVERNOR BAYH: Mr. President, this is Evan Bayh from Indiana. Both Susan and I send you our best regards.


GOVERNOR BAYH: I want to thank you for not only doing what's right for our country, but having the courage to stand up to some of those inside the Beltway in Washington who have criticized you for doing that.

Out here in the heartland, where real people live, I think they know that you stand in favor of balancing the federal budget is the right thing to do, and they applaud you for it. They know that getting this deficit down is important to raising their standards of living and to increasing their job security today.

And most importantly, Mr. President, they know that we have to tackle this deficit problem if we're going to raise our children's standard of living and create good jobs for them tomorrow. So I think out here in middle America, the people in this country are on your side.

At the same time, they know that your approach of taking a balanced approach toward accomplishing that goal is exactly the right thing to do as well. As Roy Romer was mentioning, it doesn't do us much good to balance the budget over the next seven years only to gut public education in this country because that will hurt our economy much more in the long run. And also, it doesn't do us much good if we cut taxes in Washington today only to see taxes increase at the state and local level. That's nothing but a shell game.

And the final thing I would say before asking a very brief question is that it won't do our country much good to cut health care costs and Medicare and Medicaid only to see higher costs shifted on to the vast majority of Americans who don't rely upon the government to pay their health care bills. That wouldn't really cut anything, it would just be a way of asking for consumers in this country to essentially finance the federal deficit.

So I'd like to thank you for your leadership and your courage and your honesty in taking this on, and also your bipartisanship, which leads me to my question, which is topical today and I think will be of great import next year. If we can get our fiscal house in order, if we can balance the budget over the next 10 years while still protecting both the federal and state investments in education, and while keeping the health care costs of being shifted from the government onto consumers, why not do that?

It seems to me you've met the Congress more than halfway. If we can have both fiscal sanity and do it in a more compassionate and sensible way, why not? I think a lot of Americans are looking at Congress and wondering why they won't agree to this approach.

THE PRESIDENT: Well, let me answer your question and then comment on what you said earlier. I think that what I'm hoping will happen is that now there will be a discussion out in the country and a lot of moderate Republicans as well as independents and Democrats will say that, in the interest of economic growth and in the interest of fairness and in the interest of the integrity of the operation of a lot of our common efforts like education and health care, we ought to move more toward the framework that I have outlined.

I think that -- I'm very much hopeful that you'll be able to discuss this budget at some point with the Republican governors and they will at least be able to embrace part of it because we've got now a serious economic study which predicts that the Republican budget would cause a recession. We've got a lot of evidence that it will hurt the states. But on the other hand, they are trying to balance the budget and, I agree with you, that's a goal we all ought to embrace because -- well, let me just give you -- you've all seen how the federal-state partnership has been eroded as we have to devote more and more of our resources to paying interest on the debt. The budget would be balanced today because of our previous deficit reduction efforts in the last two years but for the interest on the debt run up in the 12 years before I became President. That's how bad a problem it is recently. And next year we'll pay more interest on the debt than we will for defense.

So we've got to balance the budget. But I'm hoping what you can do is to help me reach responsible Republican state legislators, state office-holders, governors, and thoughtful independents to say let's do it, but let's do it in the right way.

Let me make just one other comment. Roy Romer pointed out one of the possible indirect impacts of the Republican budget, which was to -- if we cut health care too much here and you have to take up the slack at the state level, you'll invest less in education. So we'll be cutting education at the federal and the state level because of this budget.

You have pointed out two other indirect impacts, which we have already seen over the last 10 years. On health care, if we don't cover the full cost of health care for those who are insured by the government, then hospitals and doctors will simply shift that cost on to private citizens and on to their health insurance bills, which will put more and more pressure on more and more employers to either drop health insurance coverage altogether or to dramatically increase the cost of it. And if we cut taxes too much here in Washington and put you in a bind at the state level or people at the local level, there will be offsetting increases at the state and local level.

Now, we know what happened in the 1980s -- the tax cuts in Washington mostly benefitted upper-income people. The tax increases at the state and local level, because they were concentrated on sales taxes and property taxes, mostly taxed middle-income people. So, again, I think we ought to think about protecting the middle class. Most American wage earners are working harder for the same or lower wages they were making 10 years ago. We don't need to lower their incomes by these budget decisions.

So I would say anything you can do to tell the Democrats and others who aren't for a balanced budget they ought to be for a balanced budget -- I appreciate what you said, Evan, about the Beltway, as opposed to the heartland; I think most Democrats out there in the country are with us -- that's positive. But anything you can do, to go back to Governor Romer's point and your point, to try to help the American people and the press, who communicates to the American people, understand the indirect consequences of this budget -- for education, for health care and for taxes -- I think will be very, very helpful, because there will be significant indirect consequences that ought to be taken into account.

GOVERNOR CARPER: Mr. President, this is Tom Carper in Delaware. Good morning.

THE PRESIDENT: Good morning, Tom.

GOVERNOR CARPER: Two quick things. One, Carol Browner, your head of EPA, is here in southern Delaware today as we dedicate a really -- kick off a partnership to clean up inland bays in Sussex County. She did a great job -- in collaboration. And it was just, just right on the target.

The other thing I would want to mention is with respect to Dr. Foster. I just give you high marks for nominating, for sticking with him. And there is such a great need to highlight teenage pregnancy and bringing it down, and I hope you can find an effective way to use him in your administration.

THE PRESIDENT: Thank you. I'm sure going to try.

GOVERNOR CARPER: I think people know in general --certainly businesses know that the countries that are going to do the best -- the states that will do the best -- are those that do the best job of preparing a work force, a productive work force for today and for tomorrow. We also know it's important to reduce the likelihood of a crowding out in credit markets so that the federal government isn't taking a lion's share of the money that's available to be loaned to people and to businesses in this country.

I think one of the principal achievements of your administration to date has been great progress in reducing the federal deficit. I don't know if you've gotten a lot of credit for it yet, but something you can be proud of, we can be proud of as Democrats and something we need to continue, to remind people of progress that's been made and the progress that you're making in reducing the size of government, the number of government employees.

I'm so pleased that you've decided to continue to provide the leadership that's needed and to come forward with your deficit reduction plan. The last two Presidents talked a good game about deficit reduction; they didn't do so well in delivering, but they talked a good game.

I would say that it's important that you be true to the principles that you've outlined in this administration including work force development, education, training, technology, medical research, and that your funding initiatives continue to underline, reinforce those.

On taxes there is a "theory of holes" that we've probably all heard from time to time, and the theory of holes says that when you find yourself in one, stop digging. And we are in a hole, and the idea of cutting taxes dramatically further at the federal level makes little sense to me. The extent that we're cutting them, as you suggest, to better prepare workers in this country, to help parents prepare their kids for success, that makes some sense. A lot of the other does not.

And I have to say you're right on target, I have no questions. You're on target.


GOVERNOR MILLER: Mr. President, Bob Miller from Nevada.


GOVERNOR MILLER: I appreciate the opportunity you're affording all of us to direct the attention not only on balancing the budget, which I think has absorbed most of the public attention on this issue to the exclusion of the very real effect that these plans have on shifting responsibilities and obligations to the states and, through them, to the American taxpayers, as you outlined before. I don't think the American taxpayers really care if the money that's coming out of their pocket goes to the state taxes or federal taxes, and much of that has been hidden in the congressional proposals and the emphasis placed on balancing the budget alone, both of which are desirable goals.

You alluded -- well, actually spoke to a question that I did want to ask. And as you are aware, Nevada is the fastest growing state, but we're not alone. Most of the western states, most of the southern states and other states in the country are rapidly growing. And the congressional plans to date not only fail to account for inflation, but also totally ignore growth, which would create a disproportionate burden on states like my own.

In addition to lessening the burden by expending the timetable, as you've done in your plan, which is very helpful, are there any other specifics in there that would take into account growth as a factor of federal funding?

THE PRESIDENT: Yes. We maintain the present approach, for example, toward helping states fund welfare. And if you had a huge increase in the number of poor children, under our plan, there would be provisions for funneling more funds there in ways that would enable you to match them and go forward. Under their plan, they're going to cut it so much there's no way they can take account of growth. They try to on welfare for poor kids, but they just can't get there. There's no way, just because the size of the cut.

By the same token, with the medicare programs -- Medicare and Medicaid -- with the size of the cuts that are coming in, they simply -- they won't be able to take account of growth. And they will force states to either reduce medical coverage or try to get some cost out of people that we know are so poor they don't have the money in the first place.

Now, I would say those would be the two biggest areas where the high-growth states will be cut -- in medical coverage and in the care for poor children.


GOVERNOR ROMER: Mr. President, Roy Romer, of Colorado. I just, in closing here, want to say that this conversation is a very helpful one to us. We want to maintain a partnership with the federal government on the way in which we take care of the aged, and this budget of yours does that.

I just want to say once again, it may not be the most popular thing politically for you to have done what you did -- and I know you're getting a lot of criticism of it -- at least there's unanimous opinion about Democratic governors, out here where the rubber hits the road, you're doing the right thing. So we just wanted to share that with you.

THE PRESIDENT: Thank you. Let's just keep talking about it. And let's use this debate. Now there's one alternative and not two, and we can use the debate. And again, I would say, let's try to get -- let's try to go beyond partisanship as much as possible, look at the direct and the indirect impacts of both budget proposals. And we'll get to the end of the road in the right place.

Thank you very, very much.

END 11:44 A.M. CDT