THE WHITE HOUSE
Office of the Press Secretary
(Princeton, New Jersey)
PRESS BRIEFING
BY
MIKE MCCURRY, GENE SPERLING
BRUCE REED, AND GOVERNOR ZELL MILLER
Princeton University
Princeton, New Jersey
10:10 A.M. EDT
MR. MCCURRY: Good morning, everybody. It's a pleasure to welcome you to the Chancellor Green Association where many, many, many nights I poured a beer right at that bar, back in the drinking days. What I'd like to do is have Gene Sperling and Bruce Reed, who you know well, tell you a little bit about the President's scholarship program. And then we're delighted to have with us Governor Zell Miller. The President invited Governor Miller to come with us today, given the importance that the Georgia HOPE Scholarship program played as an inspiration to the President's policymakers as we crafted the proposal that the President will announce today. He can tell you a little bit about the Georgia experience. Gene and Bruce can tell you more specifically about the proposal the President will make in his remarks this morning.
Gene, you want to start? We have the dynamic duo, and then the Governor.
MR. SPERLING: This was an idea that we started working on in October-November of '95. As we went into the balanced budget negotiations, we put it off for a while, obviously, to focus on the negotiations. But it's something that the President has wanted to do for a while.
The goal is that as we have now come to have a universal standard that every American should seek K through 12, 12 years of education, we wanted to stress the notion that 14 years of education, two years of college, should be considered the universal norm -- the minimum that people need in order to do well in the new economy. And so what we did was add to the President's $10,000 education deduction a $1,500 refundable tax credit for families up to $100,000.
The $1,500 refundable tax credit is available to any student in their first year, and then, in order to get it in your second year, the student has to have received a B average in their first year. If they're a part-time student or half-time student, then whatever point the hit one year they would need to show that they have maintained a B average. That would be technically probably a B-minus average; it was scored at 2.75.
So that is the core proposal. It does -- the way that it -- I think that we tried to put the cost of it fairly clear there. The credit ends up being $25.1 billion, but just to give you a very quick walk-through, just because I know it gets confusing -- our $10,000 deduction, the number you've seen before, was $41.2 billion. That was the seven-year number, from Fiscal Year '96 to 2002.
Obviously, Fiscal Year '96 is practically gone, so now all of the budget issues are being -- by both us and the Republicans -- are being scored from Fiscal Year '97 to 2002.
So our costs over six years would have been $35 billion for the $10,000 education deduction. By adding the -- by limiting the income cap from $120,000 to $100,000, that saved $6.5 billion. And then there is another $10.7 billion that is saved just because the credit is more attractive, so families with kids in their first two years will choose -- most families will choose the credit over the deduction. That still left the total costing $43 billion over six, or $42.9 billion over six, or $7.9 billion more than was in our balanced budget.
And so the savings you see on the foreign source sale income, the radio auction and the international departure fee are the three paid-fors that come to $7.9 billion. This was absolutely critical to us that anything that we put forward have specific paid-fors so that we stay within the balanced budget context for the year -- by the year 2002.
MR. REED: Before we take any questions, why don't we give Governor Miller a chance to speak, because he needs to go out to the ceremony.
GOVERNOR MILLER: I'll only take a minute, but I'm very pleased to be here as the President announces this very bold and this very far-reaching program. And I'm here to tell you that such a program will work because I have seen it work in a remarkable way in the state of Georgia where we have a HOPE Scholarship plan of our own. I think it's only fair since I borrowed the President's name of his birthplace for my program that now he is being able to take it back.
You know, we live in a time where it is more important for
our students to get a college education than ever before. But we also
live in a time where it's never been harder for families to pay for that
education. Georgia parents, like parents all over this country, wanted
their children to be able to go to college, but they could not afford it
until we had a HOPE
Scholarship.
Now, in Georgia, to give you an idea, Georgia is the 10th largest state in the United States, but our university system is the fourth largest university system in the United States. We have record enrollments in our public colleges and record enrollments in our private colleges. We are being able because of this kind of scholarship to provide a skill and an educated work force. And that's what needed in these days and what will be needed for the 21st century.
I think it's a great program, and I applaud the President. And I applaud Gene and Bruce and all of those who worked on it because it is something, ladies and gentlemen, that will work. It's something that can make a difference in the lives of our citizen all over this country. I've seen it work in Georgia. I've seen more than -- soon we will have 200,000 students who have received the HOPE Scholarship. Many of those could not have gone to college without it.
Q Governor, could you tell us how long the program has been in effect there?
GOVERNOR MILLER: In Georgia it has been in effect since 1993. We have had three full school years.
Q How much, Governor, did it increase college attendance?
GOVERNOR MILLER: It almost doubled it in some places. In some places it tripled it. In south Georgia, only about nine percent of our high school graduates were going on to college. Now, in south Georgia, an area that's as big as a lot of states, nearly 25 percent are going on to the next two years or more of higher education.
Q How did you pay for it?
GOVERNOR MILLER: How did we pay for it? In Georgia we paid for it with a lottery. We put in a lottery and used the lottery proceeds to fund three programs: a pre-kindergarten program for four-year olds, this HOPE Scholarship program that The LA Times has called the most far-reaching in the nation, and then the third thing that we used lottery money for is technology in the classroom.
Q So you didn't have to -- (inaudible.)
GOVERNOR MILLER: No, we did not.
Another thing that it has done, it's enabled us to keep in Georgia our students. Instead of them going off to college somewhere else, they're staying in Georgia.
Q How much is the scholarship?
GOVERNOR MILLER: In Georgia it is the cost of tuition, plus a book allowance, plus the fees.
Q At a Georgia school?
GOVERNOR MILLER: At a Georgia public school, at a Georgia public college. If they decide to go to a private college, then we give them $3,000 on their --
Q Governor, was this also an election-year proposal in Georgia?
GOVERNOR MILLER: What?
Q Was it an election-year proposal in Georgia?
GOVERNOR MILLER: Yes, it was.
Q -- at national level will you be glad to have the federal government take this over for you?
GOVERNOR MILLER: I am delighted that President Clinton wants to make this national in scope. I couldn't be more pleased.
Q What happens to your program, does it fade out or what?
GOVERNOR MILLER: No, it won't fade out, it will just enabled some Georgia students who cannot now take the benefit of our HOPE Scholarship program because they don't have a B average when they finish high school to be able to go the first year of college and show that they can get a B average the freshman year in college.
Q Could Georgia students get both benefits?
GOVERNOR MILLER: Possibly, yes.
Q You said in some areas nine percent attendance went up to 25 percent.
GOVERNOR MILLER: Went up to about 23.5 percent.
Q I thought you had said --
GOVERNOR MILLER: Well, in north Georgia, which includes the Atlanta area and our more populated area, there was a tremendous increase, I think about a 40 percent increase.
Q What I mean is, what about the 76 percent who still are not going on? I mean, is your goal, is it President Clinton's goal to get everybody to do two more years?
GOVERNOR MILLER: I think that would be the goal because I think all the studies show that the jobs that are going to be created in the future are going to require two years beyond high school in some kind of higher education. I applaud it. It's a very bold and far-reaching move.
Q Why did the materials that you handed out not have the income cap on it? It doesn't have anything about $100,000 ceiling.
MR. SPERLING: My mistake. I mean, we just were --
Q -- you didn't just decide that for this morning?
MR. SPERLING: Yes. We were explicitly mentioning the
$100,000 lowering on the deduction because we were trying to explain -- make very clear to explain the savings. But this harmonizes the IRA and the deduction and the credit; they all phase out at $100,000 -- $50,000 to $70,000 for an individual filer.
I just wanted to make a couple of things clear. The $1,500 is applied towards any school you go your first two years, so it -- somebody at Princeton could apply; somebody at a community college. What we wanted to do is the national average for community colleges is $1,200; at $1,500, that's $300 over, you're essentially saying to every state -- what we'd like to do is challenge every state to do what George has done, which is to use this to help them do something as bold as what George has done. But it at least says to every state, if you provide your tuition within $300 of the national average, you could say to every person in your state that they can go to their first year of community college for free, tuition-wise free, and free for the second year if they maintain a B average in the first year.
So it can be applied towards public -- first-year, four-year public school, but we wanted to set a minimum that you're guaranteed at an average community college of having that tuition. And part of the reason it's important for families, as one of the charts we have in there show that the cost of college for a family has gone from nine percent in 1979 to 14 percent, '94. So it's becoming an increasing burden on families.
Our goal is the hope that states would supplement it and would use this extra help. In terms of the question to Governor Miller, the limit is on what you get from the federal government. We'd like states to supplement it and make their programs more ambitious.
Q Do all of these three payment methods -- the Spectrum sales, the sale source benefits and the -- those all require legislation, right?
MR. SPERLING: Oh, yes. These are new proposals that are not in our current balanced budget proposal. So we're not double dipping or double counting.
Q What is the auction -- who pays that money?
MR. SPERLING: I'm going to have to a little later get back -- I have OMB right now getting us more details on that. I apologize, I am not a particular expert on the details of auction, Spectrum auctions.
Q Is there a tax on cell phones or anything like that?
MR. SPERLING: We've got a lot here. Why don't I get some paper from OMB for you.
Q On the new tax for departure -- on the new departure tax, why should travelers have to pay new tax to support community college education?
MR. SPERLING: If you're serious about a balanced budget, if you're serious about keeping kind of fiscal integrity, you have to make priority choices. You have to -- there is no gain without a little pain somewhere.
Now, this is a kind of classic user fee. Right now people are able to use our public airports. These are people who are traveling abroad. They tend -- as Bruce is saying, it's below the international average. It tends to be higher income. So I think when you're making these types of choices, you want to be serious. You never like to do any of these things. You do them so that you can do more important things like promote education and still be in balance.
Q That these can conventionally -- that these airport departure fees have been used to pay for airports and runway upkeep and maintenance and unrelated measures?
MR. REED: It's general revenue.
MR. SPERLING: Money is fungible. You can --
Q The question was whether in the history of the United States airline departure fees, they're generally used for a related purpose. And it's an answerable question.
MR. SPERLING: That is true, but when you are -- but, Todd,
when you are talking about balancing the budget, the funds that come in
-- it is not -- you appropriate money from appropriations. So I am
saying that the money is fungible. I will get you the -- I will try to
get exact background on whether there has ever been, but I do want to
say, money is fungible and
--
Q -- restoration of the sales tax -- I mean, the departure tax that has now expired?
MR. SPERLING: It's a restoration, but -- no -- but this then increases for international from six to 16.
Q The three measures that you have listed only deal with the extra, what, $7-point-something billion necessary to cover this. Were there other measures for the remaining $35-plus for any --
MR. SPERLING: Yes, let me just try -- I was trying to explain it before. The $35 billion was part of the balanced budget plan that was scored by CBO. So when we added this program -- one of the reasons why we were held up last night was it's the -- the complicated thing was Treasury figuring out what the interactions were going to be.
So the big question was, how much was this going to lower the deduction. Because for the average family making $50,000 and sending their kid to school at $3,000 average tuition, the $1,500 tax credit is by three or four times more generous than the tax deduction. So as all those families choose the tax credit, they aren't using the tax deduction. So the cost of our tax deduction went down by $10.7 billion. Then we lowered the income cap from $120,000 to $100,000. That was $6.6 billion -- or $6.5 billion. So when you add those together, you get about $17.2 billion. Then you add -- that leaves you $7.9 billion under budget. So we had to come up with that to stay in balance.
Q Are there other identifiable -- easily identifiable offsets for the original tax deduction?
MR. SPERLING: No. I mean, it's just part of the overall balance. It was just a part of the overall balanced budget plan that CBO scored.
Q There's a report in the Wall Street Journal today that as of last night there was still a bitter fight in the White House over this proposal and that there was --
MR. SPERLING: We are so good -- we put this whole thing together at 2:00 a.m. No, we -- this was a proposal we were doing, everybody had agreed on. There was some uncertainty because we wanted to be very committed to making sure we had enough to pay for. You know, there was some -- as we were running the numbers, we had to figure out exactly which paid- fors that we wanted to use. But everybody was very, very committed to the idea that we would pay for anything --
MR. REED: Gene was going to be up late anyway. (Laughter.)
Q Gene, is the tax credit limited to the amount of the tuition? Suppose you live in California, you only get $363, is that right?
MR. SPERLING: It's limited to the amount of the tuition. But that's for community college. For the people at UCLA, at Southern Cal, all of them would get the full $1,500. It's what -- it covers up to the amount of tuition for that year, but not more than tuition.
Q How come you define drug-free in here as freedom from felony drug convictions?
MR. REED: That's the standard that's applied for other federal financial aid. It's also the standard in the Georgia program and the Arkansas program.
Q Do you have any evidence that tuition costs are an impediment to people going to community college?
MR. SPERLING: Well, I mean, there's no question that anything that has a price that's higher is going to be -- there's going to be some price sensitivity to that. I think that you see this in several ways. One, we want to lower the burden on families for doing the right thing, sending their kids to school. As we said, it's now 14 percent of their income. Secondly, I think the cost of tuition, what it does for a lot of people is it makes it difficult to engage in a full-time study or a half-time study. So I think there is a lot of evidence to say that as the costs are high, people have to work more, and it's harder for them to focus on their study.
When we did the $10,000 deduction, we found that there was some number of several hundred thousand more who would come. But it's always difficult because, unlike people buying a car, this is something they buy a little bit at a time. But there's certainly reason to believe -- but what there is a lot of evidence on is that a lot of times people don't even understand the current financial aid structure. And what Gary Orr feels -- he's at Harvard now, he used to be at University of Chicago -- said was that people's misperceptions about the burdens of college was as much a -- their misperceptions about how much it was going to cost them or financial aid was a big obstacle.
So one of the important things about having the President of the United States go out and say this is not only the tax credit, but when you give the message that there's guaranteed access and you communicate that message, that itself, based on a lot of the literature, would do a lot of good in getting people to go to college.
Q Why wouldn't this cause a lot of states to raise their tuition -- I mean, their average tuition of a community college to $1,500 since you're going to -- that's the cap?
MR. SPERLING: There's a theory -- since one for a public school -- the public schools are usually over $1,500. A lot of the community colleges are right around that amount. A lot of the community colleges have a large number of part-time students, so they have a whole group of consumers who would not necessarily be getting this credit who would be watching the cost.
Also, our hope is that as we publicize the state-by -state charts and people see that the average cost is $1,200 that there might be a certain public pressure the other way on citizens ask why a community college in their state is so much above the national norm. For 33 states the students there would have the tuition free, essentially free. And I think our hope is that the citizens of the other states will ask why they're not closer to the national average as well.
Q Was there any thought given or look at the effect that this corporate tax increase or the removal of this exemption on corporations would have on exports? Because as I read the fact sheet, it looks like this tax break was given to companies to encourage exports. And now you're taking it away from them.
MR. SPERLING: Well, it was both Larry Summers and Les Samuels' strong feeling that this was much more in the area of an inappropriate loophole or a shelter. There is still -- it does not get rid of the whole benefit, it lowers it to half. And their feeling was that there was inappropriate use of the foreign tax credits to not pay U.S. income. So this was something that, as I said, both Larry Summers and Les Samuels thought was very good policy. Both of them are enormously sensitive to the issues of tax incentives for exports.
Q Could you explain that procedure, how that works --
Q In addition to the whole program together, all of these tax initiatives equal about $107.6 billion, is that right? If you take everything that is in his balanced budget proposal plus what he's offering here?
MR. SPERLING: My memory is that because we'd added a few things in the last proposal, such as the expensing, that the gross number was $117 billion. This would be adding about $8 billion to that. So I'd say the overall gross total over seven years would be $125 billion now.
The Middle Class Bill of Rights, however, the three core ones were $107 billion under our scoring and a little less under CBO. That was under seven years -- and I'm sorry, we're all going through the same thing you are, trying to change all the numbers to six years. It's not easy.
Q Gene, at what point would it become more advantageous for a family -- at what income level, to take the deduction instead of the credit?
MR. SPERLING: The circumstances -- it's not as clear of an issue because the thing -- this is an interesting point. The $10,000 deduction, that's the family limit for the deduction. But the credit if you have three children who are all in their first year or doing -- you can get at the same time. So a family, even an upper-income family -- let me just give you an example. If you have a child that was at $10,000 and you were in the 28 percent bracket, you might say this doesn't matter to me. But if you had one child who was at Princeton and borrowing all $10,000, and your next child starts their first year, you can't deduct that. You've already maxed out at that $10,000. But if your child would get $1,500, if they've got a B average, they'd get the $1,500. So even for the families in the $70,000, $80,000 range that have two children, it could benefit.
But the general question is, if you had just one child, it would be a family that was making between -- depending on their deductions -- but $60,000 and $90,000 that had around $6,000 of tuition might generally prefer the deduction. So pretty much somebody sending their kid to private school probably, near the upper cap, would prefer the deduction.
Q Could you double-check on initial participation, the only requirement is being accepted at an accredited college?
MR. SPERLING: We had a lot of discussion about this and I'll tell you why the President decided this. The President felt that if you were saying that for the country as a whole it is good for economic growth for everybody to go 13th and 14th year, that you don't -- that while you can understand in Georgia where you are offering such a generous benefit, four years tuition, why they have to have some limitations, but what he wanted to say is part -- when you go from -- when the country went from 10th grade to 12th grade they were saying to everybody, no matter what kind of a student you are, no matter who you are, you should go to 12th grade. So the President wanted to say to everybody, you should try a year of college.
But because he wanted to have the responsibility message in there, he wanted to be, while we give everybody a chance, everybody gets a chance, he felt that the second year you would have to earn. Now, somebody who doesn't earn it still gets the tax deduction, they're still eligible for Pell Grants. But for this specific credit it was an incentive to get everybody to go that first year, but also an incentive to perform.
That really goes, I think, to the heart of the speech a lot. The President is laying out his alternative, his growth strategy. He is saying this is what his strategy for growing the economy is, this is what he would like to do in the future. And he is saying that going to 13th and 14th grade, making that a minimum, is not just good for a personal family's fortunes, it is good for the economic growth of the country, and that the combination of maintaining a deficit reduction and a balanced budget path and a serious effort to get more people having the higher skills -- because when the country as a whole has more collective skills, that means that companies that have higher value-added production are more likely to locate here because they can find the workers they need. So it's not only good for families, it's good for growth for the whole country.
Q You may have already answered this, but after the Middle Class Bill of Rights, what happened to actual legislation of the $10,000 tax deduction?
MR. SPERLING: We sent that up, it has been included in our balanced budget that was voted on. It also was included in the -- when Daschle had their own version it was also included.
Q At the time of the Middle Class Bill of Rights were there actual legislation sent to the Hill?
MR. SPERLING: The President first proposed, as you remember, on December 15, 1994, in an Oval Office address. Shortly after that, my recollection was that Senator Daschle and Congressman Gephardt did put up legislation on it, and then they repeated that legislation in their balanced budget proposals, as well as ours that was voted on in the Senate.
That, by the way, I believe -- when they proposed it I believe it did have the $100,000 cap. So while we're changing ours from $120,000 to $100,000, we're being consistent with how the congressional Democrats had proposed our --
Q Is there any evidence that one or two years of additional college raises incomes?
MR. SPERLING: I think that's a very important part of this speech. There's a chart from the Census Bureau in your packet, on page 13 and 14, which spells out exactly how much of a difference this makes. And just so you know, the Census Bureau estimated that for a high school graduate, average lifetime incomes are about $800,000. For someone who goes on and gets some college, it's upwards of $1 million. For a college graduate it's even more than that.
So we think this is very important to raising incomes over the long-term.
I just wanted to say, in addition to the Census, right behind that are the citations from the academic studies that show five to 15 percent per year, even for community college in the increase in earnings for higher education.
Q -- talk about community college, this credit is eligible for any tuition? It could be private or anything?
MR. SPERLING: Yes. Absolutely, it is for everybody. It was priced, though, to ensure a minimum.
Q You talk about wanting to lower the burden on families that are doing the right thing. Why not provide this type of tax cut to families who send their kids to K through 12 who are trying to prepare to go on? And the second thing, why shouldn't the Republicans view this as just an election-year gimmick?
MR. SPERLING: Well, the President has been devoted to education his whole life. And the other thing that you can see is that he had a program very similar to this in Arkansas that is described. So I think his bona fides and credentials on dedication to this are really without question. And the fact is we would have proposed this probably in the fall of '95 had we not gotten into the balanced budget negotiations.
What was your first question?
Q -- try to help middle income families put their kids through school, why not help parents who have kids K through 12?
MR. SPERLING: It's pretty rare that you hear a tax cut proposal that doesn't sound nice. All these things would be good. It's just like why not buy --
MR. REED: That's not the question he's asking.
Q Why grades 13 and 14 and not K through 12?
MR. SPERLING: Why do we not provide a federal tax incentive for K through 12? The President feels that from the federal level, using the tax code to encourage higher education, that is where the evidence -- that is where the dramatic evidence is that there is higher earnings for the country, higher earnings for families. And when you're -- we inherited a bad situation and we have to be very targeted and very limited in the tax incentives that we give because we have to pay for everyone. And I'll tell you, it was not easy coming up even with the extra $8 billion when things are as tight as they are now.
So it's just a matter of prioritization. The President is making higher education a key priority in his economic growth agenda.
Q Why shouldn't we believe that all of this is simply the result of all the talk among Dole's advisors that he's going to come forward with another tax cut and that Clinton is simply trying to preempt Dole?
MR. MCCURRY: Because the White House has absolutely no idea what proposals, if any, Senator Dole will make. We remain committed to expanding college opportunities. We've been working on this for some time, as you just heard from your briefers. And the President believes this is a good idea.
The last question.
Q I just wanted to clarify the definition of refundable tax credit. That is a deduction from taxes owed, right, so that if you owe less than $1,500, you get back the remainder?
MR. SPERLING: I mean, that's right. I mean, just generally, a deduction -- you get to deduct $2,000 from the amount of income that is subject. So if you were going to have $30,000 taxed at 15 percent and you had a $2,000 deduction, you'd have $28,000. So you'd save $300. But when you have a $1,500 credit, you actually take $1,500 -- you figure your tax bill an then you just minus $1,500. If you only owed $1,000 in taxes and you had a $1,500 refundable credit, just like you get a refund or -- I just got a refund from the IRS -- you would get a $500 refund on that credit.
MR. MCCURRY: Okay, I need to let these guys go. Do yo have any other subjects?
Q Even though we don't know exactly what Dole's going to propose, assuming that perhaps he proposes an across-the- board rate cut, why is this targeted approach, in your minds, superior to that? Are there other investments people could make, particularly if they had money back in their pockets?
MR. SPERLING: I think it goes back to prioritization. Anything we do has to be paid for, it has to be paid for. We already have $175 billion in Medicare and Medicaid saving. We have serious welfare savings. We have a very serious discretionary savings. We have pushed very hard. Anything we do comes with some pain in terms of spending cuts or raising revenues. So if you're committed to balancing the budget, you've got to make those tough choices. And so, for us, this is the choice that the President made. Higher education is key to economic growth, and that's worth the priority. And that's where he's coming down.
MR. MCCURRY: The other obvious point is that an across-the-board tax cut would cost hundreds of billions of dollars. The only way to pay for that -- because the President believes you have to pay for these proposals as you go -- would be huge cuts in Medicare and other social insurance programs that are necessary for the American people.
If Senator Dole is coming forward now in favor of across-the-board tax cut that could cost hundreds of billions of dollars, he will most likely also have to propose devastating cuts in Medicare and other programs, or diviserating our national defense, because we would assume that he would be consistent with his solid record of supporting pay-as-you-go tax cuts.
Q Can you explain these high-paying programs?
MR. MCCURRY: If we can get some additional information on that.
Is there any other subjects that we need to cover this morning?
Q Can you say a few words about the Japanese destroyer?
MR. MCCURRY: The President overnight got a written report on the incident involving the shootdown of the A-6. He was gratified to hear that the pilots were safely returned to the Intrepid and he accepts the gracious expression of regret by the Japanese government.
Q Wasn't it the Independence?
MR. MCCURRY: Oh, I'm sorry -- the Independence. The Intrepid was involved in the last encounter with the Japanese. (Laughter.)
Q The President accepts what, the gracious --
MR. MCCURRY: The gracious expression of regret extended by the Japanese government.
Any other subjects? Okay. We'll be around after the speech.
THE PRESS: Thank you.
END 10:45 A.M. EDT