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Office of the Press Secretary

For Immediate Release October 7, 1995
                             PRESS BRIEFING
                     BY CHIEF OF STAFF LEON PANETTA 

The Briefing Room

3:19 P.M. EDT

MR. MCCURRY: As I mentioned earlier, for your convenience tomorrow, since we wanted to have a briefing in connection with the President's radio address, we are doing that now on an embargoed basis. You will see a piece of paper that looks as such, which says at the top, "Republican Tax Increases on Working Families." This piece of paper is also embargoed. And we have a lot of dutiful little aides writing "embargoed" on it. This paper, this briefing and the words of Mr. Panetta are embargoed to coincide with the President's radio address tomorrow. But we're doing this, again, for your convenience.

And with that, we welcome the Chief of Staff to the briefing room.

Q You will do the paper today, though?

MR. MCCURRY: Yes. We will give this to you.

Q Are you going to deliver in this in the dark, or would you like the gridiron or would you like to have the light on? (Laughter.)

Q Was this given to economic reporters earlier for immediate release?

MR. PANETTA: No. It's all embargoed. They are getting the backup documents, and they'll be provided. They have to make sure that we have the words "embargoed" on those documents.

As you know, the President and the Congress both understand the need to balance the budget and to develop a balanced budget for this country. But the President has stressed time and time again that a balanced budget approach must take into consideration the fundamental values of the American people in terms of work and family and responsibility and community. And the concern that the President has stated time and time again is that the Republican budget does not reflect those kinds of values.

One of the concerns we have had with regard to their budget is that despite the continuing comments that we have received from Republicans that they would not raise taxes on the American people, that, in fact, they have done just the opposite in their budget. Bill Archer, for example, Chairman of the House, Ways and Means Committee, soon after the 1994 election said -- and I quote -- "We are not going to increase taxes on the American public. We are committed to that." Senator Bob Dole said earlier this year -- and I quote -- "There will not be any new taxes as long as Republicans are in control."

So, clearly, Republicans love to pledge not to raise taxes. But the fact is that in this budget, while they have provided tax cuts for those that don't need them, they have at the same time, for everyone else, for working families, for the elderly, for students, for parents, for GIs, for single parents, have raised taxes on those individuals.

If you look at the budgets of both the House and the Senate, they are loaded with tax increases, pursuant to how Republicans would have defined tax increases and as they have used their -- as they have used the standard of what is a tax increase, I guess I recall best the comments of Dick Darman at OMB who used to say that if it talked like a duck and walked like a duck and looked like a duck, then it must be a duck. Well, there are lots of ducks in this budget proposal that is working its way through the Congress. And, essentially, what we're talking about are not only taxes, but out-of-pocket costs that come out of America's working families as well as the elderly.

We have counted about $148 billion, almost $150 billion, in taxes and other costs largely for working families. When you look at these choices, particularly when you keep in mind that many of the other provisions that are within their budget, it casts what we think is a very harsh light in terms of their priorities, and certainly, in terms of the values of the American people.

The chart that we are presenting has 15 specific increases in taxes and out-of-pocket costs that are presented in the House and Senate budgets that are moving through the Congress. And they would impose that cost over a seven-year period. Let me just walk through each of the provisions quickly.

First is the reduction in the Earned Income Tax Credit. We have spoken to this. It's about a $42 billion increase in taxes hitting working families in this country -- those who are earning $28,000 and below. Almost 17 million low-income, working families are going to have their taxes increased as a result of the proposals, particularly on the Senate side. This is the Senate proposal for $42 billion. The House side is about $23 billion.

If you look at a family with two kids making $15,000 a year, they would pay about $350 in higher taxes in 1996 alone, and, obviously, higher amounts in later years. We have always had a bipartisan commitment to the provision of the Earned Income Tax Credit that rewards work. And Republicans who have talked about the fact that there's waste and fraud here, frankly, that constitutes about five percent of their cuts. And they basically adopted the President's reforms with regards to trying to ensure that there would not be any waste and fraud. But the bulk of their proposals go right to the heart and soul of the Earned Income Tax Credit. And, as I said, it impacts on working families. The whole goal here was to pull working families out of poverty so that the incentive would be to work rather than to fall into poverty. What this provision does is it essentially taxes people right back into poverty.

Secondly, the new student loan fees on colleges. This is about a $2 billion proposal. And what they have proposed is an annual tax on colleges and other schools of .85 percent of their total federal loan volume. Obviously, those increases and costs would be passed on to students and their parents. And the estimate there is that the costs could be as much as $100 a year for a student as a result of the increase in costs.

Thirdly is the increase in student loan interest rates on parents. There is a program that's called The Plus Parent Loan Program that allows parents to borrow for providing for the education of their children. They increase the interest rate by three-fourths of one percent. That could cost parents as much as $5,000 per student in additional costs.

Fourthly, the elimination of the student loan grace period. That's about a $3 billion hit. The House and Senate both would eliminate or cut back on the six-month grace period that we currently give students in order to begin to pay back their loans. This was essential because the feeling was once a student got out, had to get located, get into a job in order to make the transition to then being able to pay back their loans. They have gotten rid of that grace period. As a consequence, we are looking at what could be an increase of almost $200 a year per student by virtue of the student loan grace period.

Fifthly, the child support enforcement collection fees. This is about a $4 billion hit. This would require states to collect a 10 percent tax on collections that essentially imposes about a $3.8 billion tax on single-family parents, most of them, obviously, low and moderate income, over seven years. This is particularly outrageous because it's the kids that you're really taxing here because the purpose of getting the child support is to be able to provide, obviously, for the children of single parents. So that would certainly be a burden in terms of the mothers or the single parents that are trying to support their kids.

Sixthly, the increase in Medicare deductibles. This is something you know that has been debated. These are the Part B deductibles for seniors. It results in about a doubling from about $100 to $210 on the deductible. And that will cost seniors some $10 billion so that when you go to a doctor, you've got to put up $210 on the deductible.

Seventhly, increasing Medicare premiums. This is another one that has already been debated. It's about a $44 billion hit. It obviously would increase the premiums that are paid into Medicare and could result on costing recipients somewhere over $1,000 over the seven-year period. That is, obviously, one that we think is particularly egregious for the elderly.

Eighth, means testing of Medicare premiums. The Senate Finance Committee would charge Part B premiums based on income that would result in about a $9 billion hit for those, I think, roughly over $50,000 and $75,000 for couples.

Ninth, the requirement that state and local employees pay into Medicare. This is about a $10 billion hit affecting those states that are not currently covered by the Medicare program that have opted out of that provision. And this would require, obviously, state and local employees and employers to pay in. And this is clearly a tax increase that would impact on those employees.

We haven't put it here, but I should mention too, that there is the proposal to raise the age of eligibility in Medicare from 65 to 67. And while we haven't put it on the chart because it doesn't take affect until 2002, the reality is that you're age 54, and you're looking forward to Medicare benefits, you are ultimately going to have to cover your own health care costs at that period of time. So those are going to be clearly out-of-pocket costs that are going to impact on individuals as a result of that provision taking affect.

The tenth provision is a repeal of the Medicaid payments of Medicare premiums, deductibles and co-payments -- it's about $10 billion. Currently, what you can do is get Medicaid to pay for premiums and deductibles and co-payments for low income seniors that don't specifically qualify for Medicaid. Medicaid can help pick up those benefits and they maintain their Medicare coverage. So if you're elderly, sick or poor, they are essentially saying that those people are going to have to cover it themselves.

The eleventh provision -- the spousal impoverishment requirement -- has also gotten some attention. This again, is a provision -- a protection really -- that both the Congress -- President Reagan signed into law about eight years ago. And, essentially, what this now would require is that the spouse of an individual who's under Medicaid, in a nursing home, would have to give up their home, their car, and virtually everything that they've worked for all of their lives. And therefore, what you're basically asking them to do is to assume the costs of the nursing home care for their spouse, which could range, incidentally, as much as $37,000 a year.

Twelfth. Increase on federal employee costs for pensions. This is about a $4 billion hit. It would require federal employees to increase their contribution level to their pension plans. It's about a $200 a year increase with no increase in benefits.

Thirteen. The rent increase for low income renters. This is particularly egregious. We're talking about raising rental payments of HUD-assisted tenants, low income families that are using the Section 8 program. They would increase their payments by 6.7 percent. This means that you could have an increase in rents for low income individuals of as much as $600 per year for some of the poorest households -- they are the ones that they're looking to for taxing.

Fourteen. Sunset of low income housing credit. They have gotten rid of the low income housing credit. This is about a $4 billion hit because what you're essentially doing is diminishing the supply of affordable housing and you're obviously going -- that's going to result in significantly increasing the cost of available housing for low income families.

And lastly, the increase in costs for the G.I. Bill education benefits. It's about $1 billion hit. The Senate Veterans Committee is proposing to increase out-of-pocket costs for the GI benefits by one-third -- from $100 to $135 for active duty military. That means that they're going to have to pay about $420 more per year for G.I. Bill benefits.

The total, as I said, is about $148 billion.

I think the main point is this: That what you see in the budget proposals that the Republicans have advanced is that they're prepared to increase taxes on the elderly, on working families, on students, on GIs, on single parents, at the same time that they are providing a tax break of almost $18,000 to those in incomes of the top one percent. They're telling the biggest corporations that they don't have to pay any taxes at all and they're allowing businesses to essentially raid workers' pensions plans.

That says more about the values in the Republican budget than almost anything else. It turns values that we have considered important to American working families upside down.

And what we need to do is to work on a family that is obviously much fairer, without imposing unfair, unjustified or unnecessary new taxes on working families and the elderly. That's what the American people want and that's ultimately what the President wants to work towards, hopefully, within these next few weeks.

Q What does this list say about the President's position on each one individually? Are you trying to say that the President opposes each one of these and will oppose them?

MR. PANETTA: None of these are in the President's balanced budget proposal. It's not to say that the President would not consider these as we work towards a resolution that reverses the priorities in the budget plan, however.

But to do this -- to do all of these increases -- at the same time that you're cutting Medicare by $270 billion, Medicaid by $180 billion, cutting back on education, cutting back on crime, cutting back on funding for the environment -- these increases are intolerable in that context.

Q Mr. Panetta, could you give us an update as to how things are going as you works towards a solution and what the nature of your conversations are?

MR. PANETTA: Well, we have some pleasant conversations but having negotiated a number of times with regards to budget proposals of one kind or another, I can tell you that we are not negotiating.

Q What do you think's going to happen?

MR. PANETTA: We hope that we can ultimately arrive at a balanced budget agreement. I think that's in the interest and the country and that's what the President wants to do. But, obviously, it has to be one that moves towards the values that the President thinks are important and that are reflected in our balanced budget proposal. We are not going to be blackmailed into accepting these kinds of priorities. And so, obviously, our hope is that we can work through it. I think the worst consequence of all would be to have chaos and gridlock at the end of the road in which we do not achieve a balanced budget approach. But whether or not we get there, very frankly, will be determined by the House leadership and the Senate leadership.

Q Do you still feel that the Republicans are going to have to send a -- vote on a reconciliation bill, send it to the President, have it vetoed, before this is going to get resolved, or do you see the possibility for some kind of negotiations in advance of that kind of vote?

MR. PANETTA: Timing is the fundamental question here and I don't know the answer to that because it really depends on whether or not the cracks that are appearing the Republican phalanx will be viewed as an opportunity by their leadership to try to work towards the President's priorities. If they do that, then I think we can do this sooner than later. If, on the other hand, their feeling is that the only way they'll compromise is if the President accepts their set of priorities, then we're clearly headed towards a veto.

Q That's not what I'm asking you. Do you think it's better for the President or not that he vetoes a reconciliation bill? Do you want to avoid that?

MR. PANETTA: Well, look, nobody -- I don't think -- I think the President want to be able to achieve a balanced budget agreement for the nation. Obviously, it's better if we don't have to go through the conflict and the chaos and the bloodshed that would be involved in their pursuing their goals and not being willing to compromise. I think it would be better for all concerned.

On the other hand, if the President is forced to veto it, I think he'll have the support of the American people behind that veto.

Q When the President talks about targeted relief on capital gains, is he open to the possibility of this not just being targeted to say, small businesses, but possibly to long-term investments regardless of the income or the size of the company involved?

MR. PANETTA: I think -- the President's standard has been that he basically -- any consideration of the capital gains break has to be one that promotes job growth, has to be one that promotes jobs, has to be one that strengthens the economy, and that's targeted towards the middle class. Now, those are the kinds of standards. You can design different approaches within those standards, but that's the test that he will apply to that kind of approach.

Q Could you give us an update on the CPI? White House officials have said they want to let the science drive it, but might the science drive it in time that it would help with a settlement here?

MR. PANETTA: We want science to go to work on this one. We think that's a better approach, frankly.

Q -- a tax on the working families as well, though?

MR. PANETTA: I mean, look, as the economists -- I'll just tell you what our economists say, and I think that's where we're at, which is that any consideration with regards to this area ought to be done on the basis of accuracy relating to the CPI. It ought not to become just simply a cash cow in budget negotiations; it ought to be done as a legitimate and accurate reflection of what's happening with regards to the CPI. And to have that happen really requires those that have the expertise in this issue to make their recommendation, not for a group of politicians to decide, pulling a number out of the air what it should be.

Q But if it turns out to be wrong, sir, it might provide a fair amount of money. Do you think that you'll hear from these experts in the time frame that these negotiations are going on?

MR. PANETTA: Well, we continue to speak to our experts.

Q Mr. Panetta, if I understood what you were saying just a couple of moments ago, your objection is not to these items per se, but only in the context of the $245 billion tax cut, were that to be eliminated, would a number of these things be acceptable to the President then?

MR. PANETTA: Well, I don't want to go that far. I think, obviously, there are some of these that -- I don't want to tell you that we would not consider, under any circumstances, any of these proposals. But the fundamental point is this, that we are not about to consider any of these proposals in the context of a budget that provides $18,000 in a tax cut to the upper one percent, that provides no taxes for corporations, that provides the ability to raid pension funds, and that makes the kind of cuts that the President believes simply are not in the interests of America's working families.

I mean, this is an issue of fundamental priorities. If you want to know why the Republicans' budget is screwed up, it's because of this chart, that they are willing to tax working families and the elderly and students, and GIs in order to provide these huge tax breaks to those that don't need it. That is a fundamental distortion in what this country is all about when it comes to values.

Q What you're saying is that it's all right to do that if you aren't taking the money and spending it on $18,000 in tax cuts for the wealthy.

MR. PANETTA: I'm saying that some of these might -- might be considered in the context of developing a compromise with the Congress, but I also have to tell you that none of these appear in the President's balanced budget proposal. We hve achieved a balanced budget, it does not cut Medicare to the extent that the Republicans do it, does not cut Medicaid deeply, it establishes our investments and it targets a tax cut to the middle class, and at no time do we have to tax working families or the elderly, or students in order to get there.

That, I think, should be the standard that we look to.

Q To change the subject briefly, on this computer announcement that was made today, a lot of critics are lining up saying that the technology is not exclusive to the United States and it's, at the very least -- if it's not a national security risk at the very least, it's an obvious political plum to the Silicon Valley which is going to reap $1 or $2 billion off this deal. How much consulting did you do with the folks in Silicon Valley and the computer industry before you made this deal?

MR. PANETTA: As far as I know, the primary consulting was done with the Department of Defense, the Department of Energy and those other departments and agencies that are involved in determining whether or not national security is involved in these issues.

Q So you don't deny that it is a political benefit to have that kind of money going out to --

MR. PANETTA: Obviously, as the decisions before, it's going -- it will provide economic opportunity for those kinds of companies and corporations, but that's what this country is all about, and that's what the President wants to do. It's a part of our effort at trade, expanding trade opportunities. And this is just increasing their opportunities to be able to sell abroad. That's good for American workers.

Q So it is something during the campaign or even when he makes his next few trips to California -- we had that nice list of things the President has done for California -- those might show up on that list next time around?

MR. PANETTA: You can answer that question yourself. (Laughter.)

Q One more question about the budget. In your present conversations, have you talked at all about economic assumptions. When the President used OMB economic assumptions in June, the Republicans were very critical. Since then some outside experts have had nice things to say. Little changes in those make big differences way out. Have the Republicans suggested that that might be an area for discussion?

MR. PANETTA: I think what is happening is that both sides are looking at what, in fact, justified the assumptions that were included in the budget. We think we've got very strong justification for the assumptions that were built in. We're more conservative than the blue chip estimates with regards to growth. We think our health care estimates are right on point. And for that reason, I think we've got very strong justification for assumptions. And so we're prepared to present that kind of justification if they're interested.

THE PRESS: Thank you.

END 3:44 P.M. EDT