View Header


Office of the Press Secretary

For Immediate Release January 18, 1996
                           PRESS BRIEFING
                    CHIEF OF STAFF, LEON PANETTA,
                            ALICE RIVLIN 

The Briefing Room

11:47 A.M. EST

MR. PANETTA: What we wanted to do was to brief members of the press corps on the offer, the proposal -- the most current proposal that's on the table that the President referred to that was before the negotiators.

As the President has said, we spent more than 50 hours negotiating with Republican and Democratic leaders in an effort to try to reach a balanced budget that is consistent with the values that the President has been expressing, values of the American people. And I think it is fair to say that we've made a great deal with progress, enough so that we really ought to be able to finalize a proposal that, in fact, achieves a balanced budget according to the Congressional Budget Office.

As you can see from the information that we have passed out, the President and congressional leaders have now agreed on close to $740 billion in savings over seven years, when you take, basically, the common ground or the least -- the minimum amount of savings that each side has offered, we are talking about a very significant sum in excess of $700 billion of savings that, again, regardless of these other policy differences, ought to be locked in; if we can't agree on these other policies differences, at least lock in that amount of savings to try to get us to a balanced budget. That's there.

This is easily enough to reach the goals that all of us have said we want to achieve. If the goal is a balanced budget, then we are there. If the goal is a balanced budget in seven years, we are there. If the goal is a balanced budget in seven years as scored by the Congressional Budget Office, we are there. And if the goal is a modest tax cut targeted at middle-class working families, we are there as well.

The President has been determined to reach an agreement. That's because he's been willing to reach his hand out and try to work through these issues with the principals in the Oval Office that we've been able to come this far.

As many of you know, the President put the most recent proposal on the table last week during the negotiations that we had and basically presented this offer on the table. It represented a significant move in a number of key areas from what was the Daschle proposal, the proposal that the President had initially presented to the Hill that was scored by CBO.

Before we talk about it, let me just remind you of the history of the process we've gone through. The Republicans sometimes

suggest that this process began only when the President offered the balanced budget scored by CBO. That was not the starting point for these negotiations.

For the Republicans, the starting point was their conference report on the reconciliation bill. For the President, the starting point was the balanced budget that he proposed in June -- a budget that achieved balance in 10 years using, again, conservative estimates by the Office of Management and Budget, which we thought protected the priorities and values that he cared about.

The Republicans had insisted that it had to be seven years and that it had to be scored by CBO. While the President and all of us had reservations about whether or not we should go that far, the fact is we are there now. We've agreed to go to seven years, and we've agreed to do it according to CBO. To do that, I might add, cost hundreds of billions of dollars of additional spending cuts that were added to our own proposal that we had to then confront because of moving from 10 years to seven years, and moving to CBO assumptions.

Now, the President has taken another good-faith, significant step in an effort to reach agreement. It provides in this proposal a larger tax cut than he had originally proposed. We had proposed initially a tax cut in the vicinity of about $110 billion, $116 billion; we're now at a proposed tax cut of $130 billion. It provides for the $124 billion savings in Medicare. We have always said we would be at about $124 billion. CBO scored our proposal at about $98 billion.

We then embraced the Daschle proposal at $102 billion. We're saying we are prepared to provide $124 billion in savings out of the Medicare program. It also provides additional savings in Medicaid and in welfare reform.

However, it continues to protect the priorities that the President cares about. We do this in a way that fundamentally protects Medicare, the policies in Medicare, Medicaid, education, the environment, and again protects working families from any tax increases.

If you take all of the areas at the beginning of this process, you will see that the President has taken by far the largest step towards trying to find an agreement here. On Medicare, he's gone about $97 billion as scored by CBO to the $124-billion figure. On Medicaid, he's gone from $38 billion -- I'm sorry, he went from $97 billion, which we had in our original Medicare proposal, to $124 billion.

On Medicaid, he's gone from $38 billion to $59 billion. On discretionary spending, we went from about $138 billion to $297 billion. On welfare, we've gone from $38 billion to $41 billion. And on the earned income tax credit, we went from about $2 billion that we thought we could achieve, basically, in savings, to about $5 billion, which is still essentially to focus on anti-fraud and enforcement issues related to the EITC.

             On other mandatory program savings, we've gone from what 
was about a minus-$6 billion                   to now $67 billion in 

savings in other mandatory areas. So this is a grand total of about $284 billion in movement, far more than what the Republicans have done in terms of these negotiations.

Even with all of this movement, the President continues not only to offer that we continue to negotiate, but he's doing it on the basis that we believe protects the priorities that he cares about.

So what divides us? Let me just mention this. What divides us? I think the fundamental difference at this point really is what the President identified. The Republicans are asking for a much larger tax cut. When you look at the gross number of tax cuts they're talking about, even though they say they want a net of about $177 billion, net means that when you add back the reforms that they've included, we're looking at over a $200 billion tax cut that they continue to insist on.

If you're going to have that size tax cut in order to pay for it, you've got to get additional cuts, and these cuts have to come out of Medicare, out of Medicaid, out of education, the environment and out of other areas that we say are -- that we insist need to be protected; we insist have to be decided on a policy basis, not to become a cash cow for an even larger tax cut.

In addition, there are some policy differences that we still are obviously working our way through that the President has also identified. In Medicare, with regards to their proposals as to Medicare restructuring that we have serious concerns about; on Medicaid, they continue to insist on a block grant instead of an entitlement. They insist on virtually ending direct student lending. We have some concerns with their pension proposals, their increase in taxes on working families and others. These are still issues that obviously we have major differences on. But we think the bottom line is that we've reached enough savings to achieve a balanced budget.

Let me just quote, if I can, the quotes that members of the Republican Party themselves have said is the fundamental goal here in these budget decisions.

Senator Domenici, this is December 15th, and I quote: "You will find, Mr. President, you will find that we have only one goal in mind. Everything else is on the table, Mr. President, but not the one thing that is sacred to our commitment, and that's a balanced budget in seven years using the Congressional Budget Office."

Representative Gingrich: "They owe the country a CBO-scored, seven-year balanced budget," -- December 13th.

Kasich -- Representative Kasich: "Frankly, we don't ask a lot. We ask for nothing more than a commitment to do this in a seven-year period. The priorities within that seven-year plan are negotiable."

And lastly, Representative Lindsey Graham, a Republican from South Carolina: "It would be great if the President would put a balanced budget, CBO-scored, that balances in seven years. I'm not telling the President how much to spend on Medicare and Medicaid. That's never been part of this deal. He can construct that budget any way he wants as long as it balances in seven years. He can allocate the money wherever he sees the priorities to be."

If that is the fundamental goal -- getting a balanced budget scored by CBO, then we are there. So we ask the Speaker and Senator Dole to come back to the negotiating table. They should not sacrifice a balanced budget and a tax cut on the alter of ideological goals beyond the goal that we have set for the country, which is a balanced budget. And I think as leaders, they should join the President in an historic moment to try to get this done for the American people.

Let me, before that, ask Alice and Bob Rubin --

DIRECTOR RIVLIN: Let me just emphasize a few points. As Leon says, this is a budget that balances in seven years by CBO scoring, and it leaves room for moderate tax relief for the people who need it most -- young families with children and people who want to pay for education beyond high school. It reduces future government spending very substantially and in a balanced way. There are almost $300 billion in cuts in discretionary spending over seven years, and there are almost $300 billion in mandatory or entitlement cuts over seven years.

The discretionary cuts are deep, but we believe that they preserve the government services that we need to grow the economy, our commitment to education and training and technology. In addition, we enhance education opportunities by making tax deductible education expenses.

We believe that the cuts in Medicare are reasonable. They are provider cuts that reduce the payments to providers over a period of years, but not so deeply that we will damage the health system or make Medicare a second-class system. We do not raise premiums on people. We keep them at the 25 percent of the cost of Part B. And as the President emphasized, we give more choice to seniors, but not choice of moving to plans that will pull the healthiest and wealthiest out of the system, leaving others in Medicare or that will pull providers out of Medicare because they can do balanced billing. We are opposed to both.

We made cuts in the rate of growth in Medicaid spending, but hold fast that while there must be a great deal more flexibility for governors to use the funds in the best way possible, we must preserve the guarantee to the most vulnerable people, the young families with children and low incomes and the disabled.

We reduce spending for Medicare by imposing a per-capita cap, a cap that rises with the number of poor people or people needing Medicare services in the state -- Medicaid services, sorry, in the state. But we preserve the federal match so that the money flows where the need is greatest.

In both Medicare and Medicaid, the rates of growth per capita over the seven-year period would be restrained below the level that we expect the private sector spending to go up per capita, but not so much that it damages the system.

We make cuts in welfare programs, but we believe that we preserve the right kind of welfare reform with enough money for work and child care so that we can move people off welfare. It is time-limited welfare, but it is not destructive of the safety net for low-income families and the disabled. We make other cuts in a whole variety of programs, but not in the ones we think are most important to the American people.

And the result, as the President and Leon have said, is a deficit path that gets to balance in seven years. And because we do not have a large tax cut, we have a deficit track that goes down much more credibly and much sooner. The Republican plan would increase deficits substantially in the near term and then get to balance. That's because they're financing a much larger tax cut. If the objective, as the leaders have said, as quoted by Mr. Panetta, is to get to balance, we have a way of doing that more quickly.

Let me turn to Bob.

MR. PANETTA: Bob, on the tax cut.

Q Is there anything new here today at all, anything?

MR. PANETTA: Just listen --

SECRETARY RUBIN: I think, Brit, there's a lot new.

MR. PANETTA: This is good stuff.

Q Do you have any kind -- any new proposals, any new numbers, anything?

SECRETARY RUBIN: Let me finish my comments. We'd delighted to respond to your questions, if that's a question.

Q It was a question.

SECRETARY RUBIN: It sounded like it might be a comment, but in any event. On the tax side, the President has said consistently he advocates and has proposed a middle class tax cut. Three of the pieces you're familiar with, and then there's some additional pieces that we've included in the $130 billion. One is a child tax credit, which is the one he's had all along, that applies to children 12 years and under and has income levels that are consistent with -- income test that are consistent with this being directed toward the middle class. Secondly, an education tax credit of $10,000, phasing up from $5,000. Again, with income limits that are consistent with this being targeted toward the middle class. And thirdly, an increase in the levels of income, which enable you to use an IRA and a restructured IRA, which is both front-loaded and back-loaded and has far greater flexibility with respect to use of funds.

In addition, with the $130 billion, we would increase small -- the small business expensing from $17,000 to $25,000, which you may remember in 1993 was the President's original proposal and has bipartisan support. Secondly, we would have pension simplification, which again is a bipartisan proposal. And thirdly, we would provide relief for small, family-owned businesses and farms with respect to estate tax by enabling the inheritors of such property to defer taxes for many years with preferential interest rates.

Thank you.

Q Mr. Panetta, didn't in the setting out of the terms of the negotiation and even in the language of the CR, you specify that nothing was agreed to until everything was agreed to?

MR. PANETTA: That's correct.

Q Well, based on that, how can you stand here and say you're already there on all these things, and all these things have been agreed to? They haven't, have they?

MR. PANETTA: Well, the fundamental -- I'm going back to the fundamental goal, the fundamental goal that we agreed to was the fundamental goal of balancing the budget in seven years.

Q I know, but I'm talking -- the question is about the specifics, and you keep insisting that in specific areas -- taxes, Medicare and so on -- that things have been agreed to, when in fact by the terms that the White House insisted on, nothing is agreed to until everything is agreed to. Is that not correct?

MR. PANETTA: The fundamental goal was balancing the budget in seven years. We have enough savings on the table that both sides have put down. If you take the minimum offered by both sides, you've got enough to balance the budget. That's the main point. Yes, there are policy differences. Yes, there are differences whether we go further on Medicare and Medicaid and other areas. But the fundamental point -- if the fundamental goal was to achieve a balanced budget, do it according to CBO, and do it in seven years, we have that here in terms of the savings agreed to. That is important.

Q And did you really imagine that that meant that when the President finally put an offer on the table that met those terms, that that would be accepted immediately?

MR. PANETTA: But this is beyond that. What we're saying here today is the President has also taken an additional step beyond the proposal that was scored by CBO, which was the Daschle budget.

Q -- specifically, which is that?

MR. PANETTA: The proposal that is before you that has been passed out is a movement from the Daschle budget in several key areas. One: Medicare. The Daschle budget was $102 billion. We're at $124 billion. On Medicaid, the Daschle budget was at $38 billion. We're at $52 billion.

DIRECTOR RIVLIN: Fifty-nine billion.

MR. PANETTA: Fifty-nine billion. On the EITC, we were initially at zero, went to $2 billion, and now we're at $5 billion in terms of additional savings. And on the tax cut, we were originally at around $110 billion, $116 billion; we're now at $130 billion in terms of the offer.

We keep hearing that there are no serious offers on the table. Very frankly, this is in response to the Republicans so that it's very clear to them that there are serious offers on the table, and even beyond that, if the goal here is to get to the common savings that achieve CBO balanced budget in seven years, we are there.

Ultimately, let me also say this -- there is some comment about the backloading in these proposals. If you take our proposals, they are not backloaded the way the Republican proposals are. They provide for a better transition on deficit reduction. And I think Alice's chart basically points that out. We can get to a balance with these numbers that we've proposed in a way that provides a very good transition in terms of deficit reduction, and that responds to the criticisms that we would have of their proposals, which are backloaded because of the huge tax cut.

Q As far as I can tell right now, on the Medicare savings, your proposal is $124 billion over seven years; the Republican proposal $168 billion over seven years, which is a difference of about $44 billion over seven years, which comes to maybe $6 billion or $7 billion a year in a program that's hundreds of billions of dollars. So it's no longer fair to characterize the Republican position on Medicare as extreme, since the two sides are virtually eyeball to eyeball on Medicare.

MR. PANETTA: Well, again, Wolf, it's very important that in an area like Medicare, this is not just slicing the numbers. I mean, they started, don't forget, at $270 billion; admittedly, they've come to $168 billion. We are now at $124 billion. But what are the fundamental differences? The fundamental differences still relate to, one, the fact that they increase premiums on people who are on Medicare beyond what we have proposed significantly; secondly, the structural changes that they are recommending in Medicare -- the use of the medical savings accounts, the use of their fee-for-service approach, again provide incentives to the healthiest and the wealthiest to get off of Medicare, then cut the amount of funding that goes into Medicare below the level of growth that would even maintain the private sector level of growth. They cut it below that. So that what they do is essentially make it wither on the vine. They begin to drain Medicare down so it becomes very much a second-class system.

Now, those are the fundamental debates that have gone on, both in the Oval Office and in the negotiations that we had in the Cabinet Room. There are some very fundamental differences in terms of the policies.

Now, can they be bridged? The President has suggested, let's take some of your ideas; let's do demonstrations with those ideas in a controlled and limited way so we can determine whether or not our fears are justified about their proposals. So there is a way to bridge this. But if they're saying, we want our restructuring and we want to have the premium increases, then we have some significant differences.

Q When you count the $600 billion that you say that both sides have agreed to, you're counting savings from your proposals on Medicare and Medicaid, but they never agreed to your proposal, so how can you say they agreed to that?

MR. PANETTA: What we're saying is that when you take the level of savings we have put on the table, compared with the level of savings they had put on the table, if you just take the minimum both sides have put down, we have enough to balance the budget.

Q What kind of a tax cut would that give you if you took that minimum? You don't have that in that chart. Does that leave any room for a tax cut of any sort?

MR. PANETTA: I think our position has always been that on a tax cut, if you keep the tax cut in the vicinity we're talking about, if you do corporate welfare, which we have about $46 billion on, if you trigger off the tax cut, as we have proposed doing, we think we've got sufficient room to do a modest tax cut.

Q Mr. Panetta you are basically accusing -- you're basically them of trying to pull a fast one on the American people by destroying Medicare. What's in it for them to do that?

MR. PANETTA: No, I think the fast one they're trying to pull on the American people is that while they argued that this was all about balancing the budget in seven years, it's really about more than that. It's about fundamentally restructuring Medicare; it's about a huge tax cut of over $200 billion that now has to be funded by cuts Medicare and Medicaid and these other areas. It is more about the other elements of their Contract and getting those implemented than in fact balancing the budget in seven years. If the goal here, according to their own quotes, is to balance the budget in seven years according to CBO, then let's get on with it. We're there. Let's get that done. That's the key.

Q And what's their motive for destroying Medicare? I mean, for what reason? Why would it possibly help them politically to destroy such a popular program?

MR. PANETTA: Well, you've got to ask them the question because --

Q They say they're trying to save it.

MR. PANETTA: Well, I think the problem we have is a very big difference about how they're trying to save it, because if you look at the restructuring that they would put in place, we think it drains Medicare of the resources that Medicare needs in order to continue to be a secure system for the elderly in this country.

It, first of all, cuts the amount of resources down and sets a growth level in terms of cost of living that doesn't keep up even with the private sector growth in health care. It goes below that by about 20 percent. Then they provide incentives for people who are wealthy and healthy to get off of the system, to basically go into these other programs, which then makes the remaining Medicare program have to serve a constituency that is poorer and sicker, which means that it's going to become that much more costly. And eventually it drains the Medicare system so that it becomes a second-class system. I mean, those are the fundamental concerns that we have.

Now, they have some ideas. They're saying what we trying to do is promote choice. We respect the fact that that's what they're trying to achieve. But our point is, let's test those ideas. Because when you compare them to the Speaker's comments that he's trying to make Medicare wither on the vine, it concerns us that the goal here is not just trying to strengthen Medicare, it's basically to weaken it.

Q What's the bottom line, here, Leon? -- both sides are -- (inaudible) -- benefits of their -- both sides are spinning their positions. What's the bottom line to the American people? Are you going to talk again? Are you going to make a new proposal as the Republicans want, or are the talks dead?

MR. PANETTA: I think the fundamental point here is the President believes that these negotiations have in fact made progress. We have in fact now put on the table sufficient savings to achieve a balanced budget. We are close if the goal is to get a balanced budget agreement in seven years scored by CBO and a modest tax cut. We think we can get there.

If the goal is beyond that, then obviously we are in a difficult position, and the President and the Republicans will have to take these issues to the American people. But our hope is we won't have to do that. These negotiations have in fact, I believe, produced progress.

Q But what happens now?

Q How do you push them off the --

Q -- where do you go from here?

MR. PANETTA: I think in the end the only way you're going to get progress is when they sit down and continue negotiating. If they stay away from the negotiations; if they don't even want to talk, then obviously it makes it difficult to try to arrive at an agreement.

But they ought to come down here. They ought to continue these negotiations. There shouldn't be any conditions attached to it. Let's just sit down and talk about it. We're prepared, as we have been, to continue to discuss and to try to modify and try to move towards an agreement. They ought to be prepared to do the same thing.

Q On a near-term practical point --

Q -- appropriations, how does that -- how can you --what happens, sir, if they start sending you all these targeted appropriations they talk about? And doesn't that put the President in an awful bind of facing the choice of vetoing spending he essentially agrees with because it doesn't include other spending he wants?

MR. PANETTA: Well, as I said, first of all, I think what the Republicans have got to stop doing is using threats. They've got to stop using the taking of hostages on their proposals. They've got to stop using the challenge of either using the debt ceiling or the CR as a vehicle to try to get their way on their agenda. That has not proven very effective on their part. I think in essence that strategy has blown up. Now, if they continue to kind of use Rube Goldberg kind of approaches to appropriations bills, where they basically say these are the areas we're prepared to fund, but there are other areas that we are not prepared to fund, then obviously the President is going look at those one by one. If they, in fact, undercut his priority programs, then he will continue to oppose those proposals. That, as I said on Sunday, if there are proposals that again try to hold his priorities hostage in exchange for keeping the government running, as we have shown in the past, we are not gong to accept that kind of blackmail in trying to do the business of the country. I think they've learned their lesson. Hopefully they have, and we can negotiate our differences out and try to keep the government running.

Q But doesn't that effectively put the onus back on the President? If in fact they fund parts of the government, wouldn't he be, in fact, shutting down the works of the government?

MR. PANETTA: Look, we are now about three and a half, almost four months beyond where this Congress should have been in completing the business of the country. They should have had all the appropriations bills done by October 1. That hasn't happened. That's what produced the problem with the continuing resolution. We are now in a year where they ought to be focusing on the '97 budget; and we still haven't completed the '96 budget. I think the time has come for the Congress to understand why the American people elect people to office, which is to run the country, not to try to threaten it, not try to hurt people in this country, but to run the country.

So let's dispose of the '96 issues. We can either do a CR or we can work through the differences on these appropriations bills. We're prepared to do that. But let's now get on with the issues in '97. We are already in the year when we ought to be looking at the '97 budget. Too much time, frankly, has gone by for us to focus on the problems that confront this country. We can't operate in this fashion.

Q Leon, basically, you've ruled out offering a new plan in response to the latest Republican demand.

MR. PANETTA: What we're saying essentially is we have a new proposal on the table. This is the proposal we presented to them in the Oval Office. For them to continue to state we're waiting for an additional offer doesn't make sense because we've already given them an offer. The President has made suggestions beyond that that they ought to consider. The fact is, if they don't come down here and talk, it is they who are not taking advantage of the opportunity to give this country a balanced budget.

Q What suggestions beyond this? You're saying he has made suggestions beyond this?

MR. PANETTA: He is always prepared to discuss new ideas. This President is always prepared to discuss new thoughts and new ideas. But you can't discuss them when one party doesn't even want to sit down and negotiate.

Q So is there a deadline when you'll get up from the table, Mr. Panetta?

MR. PANETTA: We'll still be there.

THE PRESS: Thank you.

END 12:15 P.M. EST