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                     Office of the Press Secretary
                         (St. Louis, Missouri)
For Immediate Release                                   October 28, 1996     
                           PRESS BRIEFING BY
                      OMB DIRECTOR FRANKLIN RAINES
                            AND MIKE MCCURRY  

St. Louis Symphony Community Theater

St. Louis, Missouri

9:10 A.M. CST

MR. MCCURRY: Good morning. We've got exciting economic news today that puts us on a path to a balanced budget, reflecting the President's strong commitments. And I'd like to start straight in -- I can come back and do other questions, other topics, but I'd like to introduce Franklin Raines, the Director of the Office of Management and Budget, who is here with us today, to further enlighten you about this wonderful news.

Frank. Thank you.

MR. RAINES: Another in a series of my good news announcements, particularly the ones that I had nothing to do with, so I'm just announcing the results. The President will announce today that the budget deficit for Fiscal Year 1996 was $107.3 billion. This $107.3 billion figure represents the smallest deficit since 1981. As a percentage of the economy, the GDP, the 1996 deficit is just 1.4 percent. And this is the smallest share of GDP since 1974.

From these numbers it's clear that the President has more than fulfilled his promise to cut the deficit in half in his first term. In fact, he's cut it by 63 percent -- from $290 billion in 1992, to $107.3 billion in 1996. The deficit has fallen four years in a row for the first time since 1945 to '48, and it's fallen four years in a row under one President for the first time since before the Civil War.

Today's announcement shows that the President's 1993 economic plan is working far better than even the administration had predicted. The plan was designed to produce a cumulative $505 billion deficit reduction over five years. We're now projecting that we will achieve $936 billion in deficit reduction from 1994 to 1998. This greater deficit reduction is due largely to a stronger economy than even the administration projected, bringing in more revenues and enabling less spending.

In just three years of this plan, the administration has cut the deficit by a total of $431 billion, almost as much as was projected for the entire five-year period.

In each year of this presidency, the deficit has come in lower than the administration had projected for that year, as I'll illustrate by walking you through this chart. I hope you can see it. As you can see, the administration inherited a deficit that had reached a record $290 billion in 1992, and was projected to rise.

Then, the President, working almost solely with the Democrats in Congress, was able to enact his economic plan. In the President's Fiscal Year 1994 budget, he projected a 1994 deficit of $262 billion. And the actual deficit was only $203 billion.

In the President's Fiscal 1995 budget he projected a 1995 deficit of $176 billion. The actual 1995 deficit was $164 billion. In the President's Fiscal Year 1996 budget, he projected a 1996 deficit of $197 billion; the actual deficit, as you now know, $107.3 billion.

Let me focus just a minute on Fiscal 1996. The result came in part because of a strong economy. We collected nearly $26 billion more in individual income taxes than we predicted in March. We collected nearly $5 billion more in corporate income taxes. And we also had lower spending due to the strong economy. We spent $12 billion less than we predicted in March, and of that $12 billion, quite a substantial sum came from entitlement spending in the Department of Health and Human Services; $8 billion less, $2 billion less in the Labor Department.

If you take a broader view and you look back over the three-year period, you'll see that the predominant impact of the deficit reduction was due to a stronger economy and due to what some call "technical factors," which are really reestimates of entitlement spending, which goes down with the combination of strong economy as well as efforts to contain economic -- medical cost increases.

These figures show that the administration has consistently used conservative economic and technical assumptions. The economy has grown by 11.8 percent since the end of 1992, compared with the 10.7 percent that was projected. Interest rates on the 10-year Treasury notes have averaged 6.52 percent, compared to the 6.59 percent that was projected. Unemployment has averaged 6.1 percent, compared to the 6.4 percent that was projected, and the CPI has increased at a rate of 2.8 percent, compared to the 3.2 percent projected.

So the assumptions have been conservative and they've been more accurate than our friends at the Congressional Budget Office and the President is committed to continuing on this path, reaching a balanced budget, continuing to use conservative economic and technical assumptions.

Q How much credit do the Republicans in Congress deserve for spending cuts to help get down to this number?

MR. RAINES: Spending reductions since the Republican Majority has been in place, has been relatively modest compared to the overall total, although we have been able to work with them in the last year on a mutually-acceptable budget, something that if we had been able to do earlier, these numbers could have been much better.

Q You didn't answer the question, though. How much of the spending reductions is because of this?

MR. RAINES: If you're talking about real spending cuts, you're talking in the area of disagreement, where they were proposing something that we didn't agree to in 1996 in error of a couple billion dollars. It's been relatively small. In fact, if you look at the total discretionary spending from when the President took office through 1997, discretionary spending has, in fact, been flat. It was $515 billion in the first year; it will be $506 billion next year, so what you've seen is a freeze as opposed to anyone having engaged in dramatic cuts in discretionary spending, but that freeze has had a real impact because there's been a real reduction.

So unless we want to get into the question of whether cutting from the base is slowing spending or real cuts, I think the real record is that the improvement began with the adoption of the President's economic plan in which there were no Republican votes, have now continued through a period when there was this great clash, and I think as you saw at the end of Fiscal Year 1996, a strong agreement for everybody to get on board the deficit reduction train.

Q Why when you describe what you've done and you call it a freeze, but when you describe what the Republicans want to do when they want to freeze spending at certain rates or reduce the increase in spending, do you call that a cut? I'm a little confused about that language.

MR. RAINES: No, I actually think both are cuts. I think they are both cuts, because it's a real reduction. All I was pointing out was that in some occasions, they would prefer to call cuts from the base a cut; in other cases, they're slowing the spending. I think they're both cuts. If you can buy less with the dollars, it's a cut, and we think there -- if you hold spending down to the same level over five years, that's a cut. And if you are -- if you look out in the future and you want to reduce the levels of entitlement spending, that's a cut.

Q Why is a reduction in the growth -- if it's still going up, why is that considered a cut?

MR. RAINES: Because previously you could buy a thousand cataract operations with a certain dollar amount -- if the cost of cataract operations goes up and you don't increase the budget, you can buy fewer. For people getting cataract operations, that's a cut.

Q How much of the reduction in the deficit do you attribute to economic growth versus reduction in spending, or as you talked about, the discretionary spending being flat?

MR. RAINES: There are a number of different ways that you can look at it, but roughly, about half and half; about half is from the increase in economic growth and revenue and about half is from holding down spending.

Q How much of the -- if you talk about there's real impact from the discretionary freeze, how much of that do you attribute to the 1990 budget agreement?

MR. RAINES: 1990?

Q Yes.

MR. RAINES: The 1990 budget agreement had the number that I had at the top. That's what we inherited when we came in.

Q -- caps over five years --

MR. RAINES: We are well below the discretionary caps today. The discretionary caps have not been effective in terms of bringing down the budget. What brought down the budget deficit were tough decisions below the caps. So the caps did not bring down the budget deficit. The '90 agreement increased spending in the first years and said, later somebody will make the decision to cut. What happened was, actually, for the first time under one of these agreements, real decisions were made. So we are well below the caps at the moment.

Q How much below?

MR. RAINES: I don't know off the top of my head, but we are well below.

Q What's your forecast now on when balance might be achieved?

MR. RAINES: In 2002 is what the President has said that we're going to achieve balance, and that's our plan.

Q Have you figured out how much of the deficit reduction is due to tax increase in the 1993 plan versus good economy or the spending freeze? Some outside groups have said it's about half or more of the deficit reduction is due to the tax increase.

MR. RAINES: It's a little hard to disentangle the impact. The overall impact over -- from '93 to '96 from OBRA was about $230 billion. Do you remember -- part of the reason for the tax program was to have a credible plan to reduce the budget deficit which then would reduce interest rates, would then bring up the economy, so it gets a little entangled to try to pull out discreet items.

Q -- of the -- no?

MR. RAINES: Of the total? No. It is -- if you're talking about the tax increase from that and its impact on the overall, no it's not nearly half. The overall economy has produced at least half. But, remember, one of the important things is the feedback we've gotten in the economy from having a credible approach to a deficit reduction plan, that bill had a lot to do with establishing that credibility.

Q I understand that 2002 is the goal for a balanced budget, but is President Clinton prepared to commit that there will be a decreased annual deficit for each of the next four years?

MR. RAINES: Well, the President certainly hasn't gotten into year-by-year projections. As most of you know, both we and the Congressional Budget Office project that the 1997 deficit will be somewhat higher than 1996, but from that point on we would -- neither of us has done a new estimate. We estimated in March $144 billion; it will certainly be lower than that, given the strong progress we made in 1996. But we will not be laying out new estimates on a year-by-year until we put out the budget in January.

Q Do you know why -- why it goes back again in '97?

MR. RAINES: Well, the major reason is that '96 was so strong. Ninety-six was extraordinarily strong, and it has driven the budget deficits substantially lower than anyone had expected, and so it's not a -- there's no huge technical reason, other than '96 was relatively so strong. If it had come in anywhere near what people had expected, you would see this steady pattern.

Q You say it's been exceptionally strong this year -- do you expect a slowing of the economy next year?

MR. RAINES: The economy currently is performing within the range of our economic projections, so that we don't see a major impact from the economic numbers on our out-year projections. There will be some; there always is. But when you compare it to a $1.6 trillion deficit, we don't see any changes that we currently anticipate having a significant impact.

Q -- this line that's been in the President's speeches about the first time there's been a drop since before the Civil War under one President -- could you explain what that means? Most of the time there weren't deficits, isn't that correct? What is this boast about before the Civil War possibly mean? Could you explain it?

MR. RAINES: The reason I think it's important is that budget balancing is the toughest politics there is in America, and --

Q But my question is, during that period of pre-1900, were there budget deficits? I mean, were there simply surpluses?

MR. RAINES: There were budget deficits through much of that period, primarily related to wars. Wars and depressions. I don't think anybody in this room remembers the Depression, but there have been substantial budget deficits. That's why we have a large national debt, is from budget deficits over time.

The important point I think to come from that is more the policy decision point, and that is to achieve budget deficit reduction four years in a row implies something about your ability to tackle a very tough issue, because no one wants to take the steps, no one wants to make the votes necessary to do this. It's very -- it's usually very popular to talk about deficit reduction in the abstract, but to get in there and do it day by day is very hard and very unpopular work. So I think it's fair for any President -- this one or any other who said, I'm going to take on deficit reduction as one of my major themes to get that noticed.

Q So if you're saying from the Civil War through like 1910 there was a deficit each year?

MR. RAINES: You keep dropping off at the very end. Just repeat the last part.

Q So are you saying that from the Civil War through like 1910 there was a federal deficit each year?

MR. RAINES: No, what we've said is that for the first time for four years under one President. You've had different patterns. Only --

Q Isn't that meaningless unless there were deficits during that whole period?

MR. RAINES: There don't have to be deficits during the whole period. There were deficits during that period. Again, as you will recall, there was a Civil War during that period, there were a number of recessions and quasi-depressions. The point here is that -- why is it so unusual in American history to have deficit reduction four years in a row under one President? There must be a reason. It's not a fluke that this has occurred. And it's primarily because it's such hard work. Usually people would rather put it off to the next President and not tackle it. This one took it on in his first year. He took a lot of heat for it. He had to put together a budget plan where he only got votes in his own party; took the Vice President's vote to bring his economic plan into effect, with people predicting that it would increase the deficit.

So it's just a reminder than even though these numbers are terrific, this stuff isn't easy. It doesn't just happen on automatic pilot.

Q Mr. Dole and Mr. Kemp say that the President only really kept half of his promise and that is the promise not only to reduce the deficit, but also to lower taxes, and that he hasn't done that part of it and that burden on the average American has not been greatly reduced by this.

MR. RAINES: The President has proposed not only his economic recovery plan, but also a plan that would have reduced taxes on the average family. He has in fact reduced taxes on millions and millions of working families through the earned income tax credit. But the problem was that we didn't get a budget agreement. If there had been a budget agreement there would have been tax reduction.

Q But he didn't propose that until almost the end of this term, and that wasn't something that came along --

MR. RAINES: Well, one of the -- I think it's got to be either one way or the other. Either he took the tough actions to balance the budget and therefore couldn't propose the full range of tax cuts that he wanted to propose, or if he had proposed them we would have been accused of not taking the steps to balance the budget. I think what's inherent is that it's always desirable to say we're going to cut taxes and balance the budget. But what you never see is the balance the budget side. I think what's happened here is we've seen the balance the budget side.

Q And isn't it true that we really didn't see the balance the budget side until we got into this election cycle, because all the President's budgets had deficits over $200 billion a year as far as the eye would see until the Republicans came up with their Contract calling for a balanced budget -- isn't that true?

MR. RAINES: I did this multipart chart and -- my whole chart was on this one point. I have failed in my entire effort here.

Q I'm not asking you about your chart, I'm talking about the President's commitment to a balanced budget.

MR. RAINES: Every year the President was able to -- he always showed the deficit going down and every year it went down further than he said.

Q -- stipulate -- thank you.

MR. RAINES: I'm sorry, I really am trying to answer it. Every year he has shown it has gone down. That's why I did my multipart chart, was to be able to show it happened every year, not just in '96.

MR. MCCURRY: Last question right there.

Q Can I try Mick's question the same way? The President's budget that he submitted in 1995 did not anticipate deficit reduction by 2002. It was only after he started negotiations with the Republicans that that happened. Given that, why is he always criticizing the Republicans as extremists rather than praising them for helping him work toward what you yourself say is a laudable goal?

MR. RAINES: Maybe I misunderstood the question. The President has agreed to balancing the budget -- not reducing the deficit, but balancing the budget by 2002. And that agreement came as one of the byproducts of the negotiation that went on last fall. It is true that we did not have a bipartisan agreement on 2002 as the date until then. And I believe that the Congress should get some of the credit for achieving that bipartisan agreement on 2002. That was the one thing that we were able to get from those budget negotiations. That was very important, and it should not be viewed as a partisan question, in my view, but the President has been reducing the deficit towards a balance over his whole term.

So the difference is, when did the 2002 date get agreed to. It is true that happened after the election. When did the President start balancing the budget? From day one.

Q How much has the debt increased in the four years of the Clinton presidency? And how much more are taxpayers paying on debt service as a result of tt?

MR. RAINES: How much has the debt increased?

Q The debt service increased and how much has the debt --

MR. RAINES: I'll have to get that number for you. What I do know is that the total amount of deficit over that period is down almost $500 billion, so -- it's down -- because of what we've announced here today, the deficit is $485 billion lower than what was projected by the Bush administration.

Q -- deficits over four years.

MR. RAINES: I don't have it right here; let me get it for you. Cumulative over the period? I don't have it. I'd have to add up --

Q How much was added to debt service as a result of President Clinton's policies?

MR. RAINES: How much is reduced -- debt service is down from what it was projected to be by probably $30 billion a year. The important point, remember, is that if we hadn't had the deficits of the prior 12 years, we'd have a surplus today, so these cutting of the deficits and reducing debt service is very important, because that's part of how you balance the budget is, stop piling up the debt.

MR. MCCURRY: Thanks, Frank.

From your old friend and colleague, Mark Gearan, I bring you greetings. Mark Gearan, who is now the Director of the Peace Corps, is in Amman, Jordan at this very moment signing the first-ever agreement between the government of Jordan and the Peace Corps, which will allow 25 volunteers to begin serving in Jordan next spring. Jordan is the 133rd country the Peace Corps has entered into partnership since 1961, a total of 145,000 Americans have participated during the 35-year history of the Peace Corps, and today close to 7,000 volunteers are serving in 91 countries all around the world in a variety of projects; Jordan will be the latest in that long, proud history. I promised Mark Gearan, who says hello to all of you, that I would announce that and he reports not missing the campaign at all.

Q Is he still shell-shocked from Dukakis?

MR. MCCURRY: Okay, anything else? That's our news for today.

Q Newsweek reported yesterday that a man by the name of James Wood, who is the head of the American Institute, had gone to Taiwanese businessmen to try to encourage them to give to the President's campaign. Do you know anything about that?

MR. MCCURRY: I only know that he has denied that in that same account. There is also reference there to an inquiry that the Inspector General at the State Department may be conducting. I'm attempting to find out more, but I assume at the State Department daily briefing today that will be a subject that arises.

Q Would the White House obviously tell people that that's not their position, that's not their business to go out to business leaders --

MR. MCCURRY: It's absolutely the policy that those who represent us, even those who are serving in an unofficial capacity because of the unique stature of our unofficial relationship with Taiwan should not be engaged in partisan political fundraising in connection with the work that they do representing the positions of the United States government.

Q Mike, can you tell us anything about what kinds of decisions and meetings the President has been having or making about the future of U.S. troops in Bosnia while he's been out on the campaign trail?

MR. MCCURRY: The President has had some meetings with his national security advisors on this point. Most of them occurred some time ago when the President approved four options that would be identified for consideration by NATO military planners as part of their review of how best to secure the gains in Bosnia at the conclusion of the International Implementation Force in December of this year. Those four options are well-known, they've been discussed before, they continue to be reviewed by NATO military planners. I'd say of the four, the likelihood of no mission or a continuation of IFOR seem less likely than do the two medium-range options, but they are being reviewed carefully.

Defense Secretary Perry has had discussions with his counterparts. Secretary Christopher will participate in a North Atlantic Council ministerial-level meeting in December -- yes, in December, which will review the work of the NATO Military Committee, which has been meeting throughout this period, and recommendations will be developed within the Alliance, operating as it does by consensus, that we'll provide whatever recommendations there are for a post-IFOR force.

Q Is that the decision time, Mike, that December meeting?

MR. MCCURRY: Most likely December -- by December they want to have more concrete plans in place that have been reviewed at the political level, but there would have to be decisions made prior to the NATO summit, to be sure, if they were going to keep some type of force available in Bosnia. Meanwhile, our timetable for the conclusion of the IFOR mission is the same; we've got some troops dispatched to cover that withdrawal as you know; no change in our thinking on that central question.

Q But that doesn't mean you might not introduce some other troops at a later time? I mean, that's --

MR. MCCURRY: We would only introduce troops in connection with covering the withdrawal that's underway, but that would be separate from the question of what kind of force is there to secure the gains to protect some of the aspects of the civilian implementation under the Dayton Accords at the conclusion of the IFOR mission. That's a separate question -- the introduction of any forces in connection with that type of force would have to be carefully reviewed by the President and that would come only after a recommendation from NATO military commanders about what they foresee as such a force, and the timing on that has not changed. It's the one that I've discussed with you before.

Q Mike, are you anticipating, if the President decides that a follow-on force of some sort is needed, to you anticipate that he would do another televised address explaining why?

MR. MCCURRY: I can't hear the last part of your question.

Q If he decided a follow-on force is needed, do you anticipate him doing any kind of national address to explain why to the American public?

MR. MCCURRY: I expect as we conclude the IFOR mission and then move into the period of considering what type of participation the United States would consider, that he would discuss it not only with other leaders, but with the American people in a very direct way, yes. But the timing for that will be closer towards the end of the year.

Q Any reaction to Ambassador Dennis Ross leaving empty-handed?

MR. MCCURRY: Well, as you know, the Ambassador made a very determined effort yesterday to bridge the remaining differences that exist between the two sides. They have made considerable progress in the discussion of security-related issues and also withdrawal around Hebron, but there are remaining issues that are unresolved.

My understanding is that Chairman Arafat was scheduled to depart on a previously scheduled trip to Europe. Ambassador Ross indicated that he would like to take a break. He has been over there for three solid weeks. He has left U.S. Ambassador to Israel Martin Indyk and our Counsel General in Jerusalem Ed Abbington, who has very good contacts with the Palestinian side, at the table so that the two sides will continue their work as he returns to the United States. But the work will continue, and the need for reaching agreement also continues.

Q Any plans for the President once again to make calls or intervene directly?

MR. MCCURRY: No, the President made calls both to Chairman Arafat and to Prime Minister Netanyahu yesterday to encourage them to try to break through on these remaining differences. That did not happen yesterday, but both of them indicated to the President they would continue to address the issues that are unresolved.

Q Were those calls made before he left -- before Ross decided to leave? Were those calls designed to prevent a collapse?

MR. MCCURRY: Those calls were designed to encourage progress in the talks. Ambassador Ross had met with Prime Minister Netanyahu at that point and we proceeding to a meeting with Chairman Arafat.

Q What was the White House involvement, if any, in Mr. Huang's decision to make himself available suddenly after it appeared he wouldn't be until after the election?

MR. MCCURRY: Our involvement was the one that you saw publicly. We encouraged cooperation by those who have had information. I'm not aware of any direct involvement beyond that. I think that was the decision clearly made by Mr. Huang's attorney.

Q There wasn't any encouragement or pressure put on him either by the White House or by the head of the DNC to --

MR. MCCURRY: Well, we very publicly encouraged people to cooperate with legitimate inquiries.

Q What do you make of Dole yesterday in California suggesting that the administration may not last another second four years because of ethical lapses?

MR. MCCURRY: Look, I don't have much to say about Senator Dole's remarks in the last years. He's been sort of serial flailing as he makes his circuit around California, and it's increasingly becoming less necessary to respond as the shrillness and the absurdity of the remarks accelerates.

Q -- mentioned Senator Dole's name --


Q I'm not talking -- I'm talking about President Clinton. He has not mentioned Senator Dole's name hardly at all in his speeches. Does he plan to do that in the final --

MR. MCCURRY: There are points during the past couple days, and I assume there will be points in the coming days, where he will contrast his views with that of his principal opponent.

Q -- call him --

MR. MCCURRY: His principal -- "my opponent," yes.

Q Mike, Ross Perot has been markedly more biting in his attacks on the President in the last couple of days, including the President's lack of military service. Is that a concern? Is the White House concerned that maybe there was some sort of agreement struck between Dole and Perot in Dallas -- excuse me, between Mr. Reed and Perot?

MR. MCCURRY: No, I think the American people have watched this President in his capacity as Commander-in-Chief deal with a number of difficult international issues. They have the capacity to make a judgment about his capabilities. From everything we know, they are satisfied with his performance, and they get the right to make that decision next Tuesday.

Q Mike, I wonder if the President has any thoughts about whether he believes the press has been more favorable to him in this election as Mr. Dole has charged.

MR. MCCURRY: He would be surprised at that allegation.

Q Why?

MR. MCCURRY: He has a contrary view. (Laughter.)

Q What is it?

MR. MCCURRY: His view is that the press is properly skeptical and afflicts the comfortable and comforts the afflicted.

Q Mike, how do you think we are to understand this apparent change of heart on Perot's part?

MR. MCCURRY: I think there may be some misreading of what he actually said yesterday. As Mr. Scott Reed discovered, Mr. Perot does not intend to retreat from this race in Mr. Dole's favor, and I think that episode speaks volumes about Mr. Perot's true thinking.

There will be many days ahead where that will be different.

THE PRESS: Thank you.

END 9:43 A.M. CST