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Office of the Press Secretary

For Immediate Release May 16, 1997
                           PRESS BRIEFING BY 
                     CHIEF OF STAFF ERSKINE BOWLES,
                     DIRECTOR OF OMB FRANK RAINES,

The Briefing Room

12:19 P.M. EDT

MR. TOIV: Welcome to the White House on this very happy day. We have briefing on the budget today. First we will have remarks from Erskine Bowles, the Chief of Staff, of course, and we'll also have available to answer questions Gene Sperling, the President's Senior Economic Adviser. We'll have Frank Raines, Director of OMB; Bob Rubin, Secretary of the Treasury; Larry Summers, Deputy Secretary of Treasury; Jack Lew, Deputy OMB Director; Janet Yellin, Chair of the CEA; and Chris Jennings will be able to answer health-related questions. And I'll get out of the way.

MR. BOWLES: Thank you very much, Barry. Clearly, as the President said a few minutes ago, this is a very proud day for America. It's especially a proud day for this President and for those folks who made that very tough vote back in 1993 that has enabled us to reduce the deficit by 77 percent, from $290 billion all the way down to $67 billion.

It's also a very proud day for all of us who have had a chance to work on this bipartisan agreement. Without a real spirit of cooperation and a very positive attitude, it clearly would not have happened. The team that's up here with me now -- Bob Rubin, Frank Raines, Gene Sperling, Janet Yellin, John Hilley, Jack Lew -- have all done a magnificent job in trying to move this forward in a very positive manner.

I also have nothing but the highest admiration and respect for all of the people, both the principals and the staff, in the Congress who worked on this -- Senator Daschle, Senator Lautenberg, Congressman Spratt, Tom Keane, Bruce King on the Democratic side. On the Republican side, the Majority Leader, Mr. Lott, Speaker Gingrich, John Kasich, Chairman Domenici, Bill Hoagland and Rick May all just could not have been more cooperative. It really was the positive attitude of these people that made this happen.

What I think that we in the White House are happiest about is that we have finally now had the chance to really drive a stake into the heart of fiscal irresponsibility. We will now be able to balance the budget by the year 2002, but we'll also not just balance the budget, but we will balance the budget in the right way, by protecting the values of the American people.

This balanced budget will continue to do those things that are necessary to grow the economy. It will continue to invest in education, in training, so our kids will have the skills they need to compete for those high-wage-paying jobs in the global marketplace. It will continue to invest in early childhood programs, so our kids are prepared to enter school ready to learn. And the President will definitely, because of the firm commitments in this budget, be able to deliver on his promise that every 8-year-old will be able to read, every 12-year-old will be able to log on to the Internet, and every 18-year-old will be able to graduate from high school with a diploma that means something and have the opportunity to go on for two additional years of education.

This balanced budget agreement also allows us to extend the live of the Medicare trust fund, out to the year 2008, solving the short and intermediate-term problems associated with Medicare. It will also provide health care insurance for five million additional kids. It will help us move a large number of folks from welfare to work, to implement the welfare reform legislation that was passed last year. It will restore disability and health care benefits to legal immigrants. It will protect our environment by cleaning up 500 toxic waste dumps and by allowing us to implement the Brownfields initiative. And, lastly, it will provide tax relief to hard-working Americans while ensuring that the cost of these tax cuts will not explode in the out-years, causing fiscal irresponsibility to return.

I truly believe this has been a great day for this country, a great day for America. I'm very proud to have had a chance to be a part of the team. And now I'd like to bring on Frank Raines, who will answer any questions that you might have.


MR. RAINES: I don't have anything to add to what Erskine has said. Why don't we just go to any questions you've got and each of us will answer them.

Q When you gentlemen and lady stood before us two weeks ago, you insisted that the bulk of these tax cuts would go to the middle class. Now, many of your Democrats are saying one of two things -- either that's not going to happen and it's going to be a disproportionate tax cut for the wealthy, or, number two, you simply cannot deliver on all the tax cuts that have been promised, and thus, what's going to happen is that in the budget committee -- or in the tax-writing committees, that's where the real work is going to get hashed out, and the Republicans control those. Number one, can you assure us that the bulk of this goes to the middle class? And, number two, can you assure us of anything at this point?

SECRETARY RUBIN: Yes, I think -- you have the document. I think one thing we can certainly assure you of is that there is a very good framework now to create a tax cut that's good for the American people. In terms of the distribution, we've got a $35 billion education tax credit. There surely is going to be a large child tax credit -- I shouldn't say "surely," but it would seem very likely given that the President has strongly proposed a child tax credit and the Republicans -- the majority of Congress has proposed a child tax credit. So if you put the expenditures on tax cuts together in the budget, far the greater part of those expenditures will be on tax cuts that are directed toward middle income people.

Q What's the value of those two tax cuts?

SECRETARY RUBIN: Wolf, nobody -- the only provision with respect to the specifics of the tax cut that exists right now in the agreement is roughly $35 billion for the education tax cut. The rest is going to have to be worked out in the committees and the administration working with the committee. So nobody knows what the numbers are. But if you look at what the President's proposal was with respect to child tax credit, and you look at the majority in Congress, and you take those numbers -- anything on that spectrum --and you add it together with the education tax credit, that is going to be the predominant portion of the total tax cut.

Q And what will be the value, approximately, ballpark, of the estate tax relief and the capital gains tax cut?

SECRETARY RUBIN: Wolf, there are no specifics that have been agreed to beyond the agreement, as Erskine said, that we've had an affordable tax cut for the first five years with a net of $85 billion, and that we would have a total tax cut on a net basis of $250 billion -- that's on a net basis -- and that within the context of the first five years there would be roughly $35 billion for the education tax cut. Those are the only specifics with respect to the tax cuts that have been agreed upon.

Q What kind of capital gains tax cut do you imagine? What sort of road-based capital gains tax cut would you look for?

SECRETARY RUBIN: I don't know -- I think it is likely there will be a capital gains tax cut because that is something that the majorities in Congress have wanted to have from the very beginning. What its specifics will be, it seems to me, is something we need to work together with the committees on and get a capital gains tax cut as well as a total tax cut program that's good for the American people.

I think what's happened here, though, is really very positive, because what you have is a framework that is affordable. You have a framework that prevents an explosion in the outer years, and, therefore, protects the fiscal responsibility of this program. And you have specifically set forth the commitment to include roughly $35 billion in education tax credit. And then there are additional savings with respect to the list of relatively small tax cuts, such as the Brownsfield, that people said they would work to create. And those are the only specifics in the agreement, but you have a very good framework and now we need to work together to get a tax cut for the American people.

Q I just don't see how the numbers quite add up to produce the kind of -- I mean, you have all these things that they say will be part of it and I don't quite see how you get a broad-based capital gains tax cut as part of that deal. Doesn't it kind of put the Republicans in a box, they have to make a choice --

SECRETARY RUBIN: I think we all need to work -- you've got a lot of proposal that have been advocated by a lot of people. They can't all be fully accommodated, and I think what we need to do is all work together to get a tax cut that meets the interests of the American people, and most importantly, it's got to fit within this context.

Frank, did you want to add something?

MR. RAINES: Remember, this is a budget agreement, it's not a detailed tax bill. And the budget has done what a budget is supposed to do -- it's provided the parameters. We know how big the tax cut will be in the first five years, and over 10 years. The items that we know will be in there are the President's education tax credits, and we're working on the additional items that we've proposed. The committee is obviously going to have to fill in the rest, but that's usual -- is that the committees have work to do here and they have far more demand than they've got room to deal with, and they're going to have to work that out. But that's traditional in every tax bill.

Q Right, except the difference is that what you're doing, though, is you're telling us and you're telling the American people, this is a tax cut, the bulk of which, or a lot of which, will go to the middle class, and, in fact, you can't really say that, can you?

SECRETARY RUBIN: It seems to me all you can say at this point is what is likely to happen, but when you consider that the President has advocated, and has included in his budget, a substantial child tax credit, the congressional majority proposed a child tax credit that was larger, it seems to me likely -- though, as you say, no specifics are set yet -- that you're going to have a substantial child tax credit, which the President believes you should have. If you take a substantial child tax credit and you add together the education tax credit, that will be -- if it works out that way that will be the bulk of the money that's spent on tax cuts, and that does go to middle-income Americans.

Q Could you tell us, Mr. Secretary, what the administration's position is on the estate tax relief? It's $600,000 per estate now. What would you be willing to see it go up to? And on capital gains it's 28 percent; how low would you, the administration, like to see that capital gains tax rate go?

SECRETARY RUBIN: Wolf, I think it is likely that you will have both capital gains and estate tax provisions in this legislation. Beyond that, I think that the only thing that I can tell you is that we're going to work with the committees to develop proposal that are in the interests of the American people. And beyond that, I don't think anybody can say what the specifics will be. This is he beginning of a process.

Q But you said in the past, you and the President have both said that you believe in targeted capital gains tax cuts, not a broad capital gains tax cut. Is there any condition placed on the capital gains tax cut?

SECRETARY RUBIN: There was no condition placed on capital gains. I'll just repeat what I said before, Mike. There are no conditions with respect to the capital gains tax cut. Clearly, there are going to be a lot of different views as to what its content ought to be and we all need to work together, and that's what we are committed to doing.

Q Mr. Bowles, you mentioned that the Medicare trust fund would remain viable through 2008 under this agreement. There are critics who feel that the outcoming baby boomer generation will not be adequately protected, that decisions on them, on that generation have been postponed. What assurances, if any, are there that they will be taken care of?

MR. BOWLES: I think the answer to that is the same answer we have given all along. Within the context of a balanced budget agreement we wanted to solve the short and intermediate-term problems associated with the Medicare trust fund and extend the life of it out at least for a decade. We have done that.

We do need, and we have said all along, it should be a two-step process, and we need a bipartisan process now to address the long-term needs associated with both Medicare and Social Security.

Q What is the President going to do to address that?

MR. BOWLES: He'll be announcing that at the appropriate time.

Q This is a non-budget question. Could you explain why so few Democrats voted for the abortion alternative that the President supported?

MR. BOWLES: I cannot, but I'm sure that when Mike comes out he'll be prepared to answer that.

Q Mr. Bowles, on the legal immigrants, did both sides agree to restore everything that was there before, or are these still some things missing?

MR. RAINES: On legal immigrants, the President had said last year when he signed the welfare bill that he thought the bill had gone too far and it dealt with legal immigrants unfairly. What the agreement is is to restore benefits to disabled immigrants who were in the country as of the date when the President signed the bill, which is a restoration for the most needy that we believed was an unfair provision of the welfare reform bill. And so it is a movement in the right direction. It does not have restoration for everyone who were excluded in this agreement. But it picks up everyone from that time or anyone who has become eligible and is currently receiving benefits who are disabled legal immigrants.

There are a couple other provisions that we -- just to focus your attention on -- which will just give you the framework of this. We've got in gross savings in this agreement $320 billion, $1.2 trillion over 10 in gross savings. The net savings are $204 billion, $906 billion over 10 years, after taking into account the tax cuts. But also some numbers that I think you've shown interest in before, those immigrant provisions that we just talked about, the five-year total is $9.7 billion to restore those benefits. We have $1.5 billion to restore benefits under the food stamp program. All $3 billion that we requested for welfare to work is included in this agreement. Children's health, $16 billion for the new children's health program to cover up to five million new kids. We've got $1.7 billion of environmental efforts for Superfund and land acquisition and another $1.5 billion offsetting the impact of any premium increases on low income elderly.

So these are numbers that we talked to you before about and I just wanted to reiterate to you that these have been achieved in the agreement.

Q Has the President decided when he wants to submit fast track legislation to Congress? This may not actually a question for you, but maybe for Mr. Bowles or Mr. Sperling, Mr. Rubin.

MR. BOWLES: We have not made that decision yet. As the President has said, we do want to do it this year, but we have not made a decision on the timing. The President is -- we have a recommendation that we are preparing to submit to the President; he has not received it yet. He will probably receive it today and will make a decision in the not-too-distant future.

Q Does that recommendation call for submission of this legislation in either June or September?

MR. BOWLES: It calls for submitting it this year, absolutely.

Q Erskine, while we have you up there, maybe you could explain so we -- there seems to be a little controversy in Tuskegee that the President didn't go to Tuskegee to make this formal apology on behalf of the federal government, but instead forcing the survivors to come up here. And that was, supposedly, at least some of the critics have been suggesting, that was a sign of disrespect. Was there consideration of the President going to Tuskegee, and if so, why didn't he go there instead of inviting everybody up here?

MR. BOWLES: Wolf, I believe that we felt that people would really be honored to have a chance to come to the White House. Most people in America really look forward to the chance to come to a Rose Garden ceremony, and we thought this was a way we could really honor these people in the highest and best way. And that was the reason we decided to do it here.

Q But it's in the East Room, not the Rose Garden.

MR. BOWLES: The East Room, too.

Q But part of their concern, I think, was due to the extreme age of some of the survivors, whether it would be a hardship on them to make the trip.

MR. BOWLES: Our hope is that they will be honored. This is a chance for us to honor them. It's a chance for us to issue an apology. It's something that we wanted to do in the best way we possibly could, and we thought doing it here at the White House would honor that kind of commitment.

Q Just going back to the fast track issue, the President repeatedly called in public for fast track authority. What is the delay? Why not submit the legislation, just go ahead and do it? Can you enlighten us on that?

MR. BOWLES: We may submit to legislation -- we will submit to legislation this year. We have not made a decision as to when we will submit it. We will make a recommendation to the President. That recommendation will probably go in today, and I don't want to guess when we will make -- what the outcome of that recommendation will be.

Q What is holding it up, is my question. Why is there a delay? Because he's been saying for months --

MR. BOWLES: We've been consulting with members of Congress; there are a number of very difficult issues involved with it, as you well know. We want to make sure that when we go we have the best opportunity of getting it passed.

Q Can you tell us what the issues are? (Laughter.)

MR. BOWLES: I'm not going to get into it until after the President has a chance to review the legislation.

Q I just want to get back on capital gains with Secretary Rubin. You know the politics of tax cuts as well as anyone, and the $35 billion for the President's education tax cut kind of puts the Republicans in a box if they want to deliver both a child tax credit for the social conservatives and a capital gains tax cut for their business backers. And if they decided that they would rather go with a broad-based capital gains tax cut and -- on the child tax credit, as long as it kept the President's $35 billion for education tax cuts, would that be acceptable to the administration? Mostly a capital gains --

SECRETARY RUBIN: I hear you. Let me respond this way if I may. I don't think anybody has put anybody in a box. I think that Frank said it very well -- this is a budget process; there are a lot of views as to what the rest of the tax cut ought to be over and above the $35 billion. The letter itself says that the House and Senate leadership will seek to include various proposals. This is distinguishable from the language on the education, which was "it was agreed that the package must include," and then it goes on to say "we'll seek to include various proposals in the administration's '98 budget as well as various pending congressional tax proposals."

We've all got to work together now to come up with a sensible tax package, and you're trying to take us much further down the road than we are at the present time. Do I think it's likely there will be a capital gains tax cut proposal in the agreement? Yes, I do think so.

Q But what if it became mostly the President's --

SECRETARY RUBIN: You can raise a zillion hypotheticals; I'm not going to respond to them at this point because I truly think -- we all want to work together. We are entering this in a very -- just the same spirit this thing has gone on so far, a bipartisan spirit of getting to a tax package that is good for the American people.

MR. SPERLING: Can I just -- just one reason why it would be logical to infer what the Secretary of Treasury said is that if you look at what Senator Lott put out for their initial tax package proposal, which was $193 billion over five years, $109 billion of their proposal when they were choosing themselves was the child tax credit. The fact that the child tax credit was a core part of the contract, a core part of S-2, and that not only has the President supported it, but many major leading Democrats in Congress have supported it -- actually, -- was probably the first proposal; Congressman Gephardt has proposed it -- I'm just saying that it would be very, very unlikely that the tax credit that has the broadest impact on American families and they've supported they would want to pull back. So that's just very logical to infer that everybody would have an interest in having that kind of tax credit.

I just wanted to mention just one or two numbers that we might not have gotten on our domestic discretionary. One of the most important things in it is on the Pell Grants, which goes to nearly 4 million low-income people going to college. We are very happy that there is an agreement to take our expansion which goes from $5.9 billion in fiscal year '97 to $7.6 billion in fiscal year '98, a $1.7 billion -- or 29 percent increase in a single year.

And this will mean that over a two-year period, over 3, nearly 4 million low-income people going to college will be getting $500 more per year. And, as part of our plan, we would bring on a few hundred thousand new people who are older students who previously had not been eligible. Other things that were agreed to were our levels in Head Start, which was an 8 percent increase of $324 million, a nearly 10 percent increase in the EPA operating budget, which would be $293 million, and a doubling of our Technology Literacy Challenge, which is the new initiative that the President has, which is designed to be part of our goal to make every 12-year-old technologically literate.

Q The Lott-Gingrich letter still uses the figure of $500 per child. I assume, Mr. Secretary, from your comments, your not comfortable seeing that kind of figure just yet.

SECRETARY RUBIN: No, that was our child tax cut proposal, too.

Q But are you certain it's going to be $500 per child? You're not comfortable saying that, are you?

SECRETARY RUBIN: I'm very comfortable -- that was our proposal, and it was also their proposal. I agree with Gene. It seems to me, if both sides have proposed it, it's very likely to happen.

Q Except there was one significant difference --

SECRETARY RUBIN: Unless you get some third party --

             Q  But yours phased in in a while and also kind of --
             SECRETARY RUBIN:  No, you all are trying to get -- with

all due respect -- we have a budget agreement, we have a very good framework. It got bipartisan agreement. It is fiscally responsible. It precludes an explosion in the out-years. It has a specific with respect to the education tax credit. Then it says, people will work together to do a bunch of things, and we have now got to work on the specifics. That all has to work out as a result of the process of the committees and the administration working together.

Q What will be the cap on the $500 per child tax credit, as far as income per family?

SECRETARY RUBIN: Wolf, I can honestly say that I do not know. (Laughter.)

Q Let me put this another way, with the tax cuts --

MR. RAINES: You're not going to get us to write the tax bill standing before you. The Congress of the United States has a legislative process. This is a budget agreement. It is the most far-reaching and the most detailed budget agreement in history, but it is not legislation. Congress has to enact legislation, and on the tax bill there are lots of details that they will be filling in and that you will have more than enough opportunities to look at those, and we will be participating with them, with our ideas as to how they should be filled in.

Q With respect to these specific cuts, is everything in this document agreed upon, for example the student loans? You say you're going to save $1.7 billion and $1 billion will come from the guarantee agencies. Has that been agreed upon by the Republican leadership?

MR. RAINES: I can comfortably say, everything in this document -- (laughter) -- every word, every number has been agreed upon as part of the agreement. This is the specifics you were looking for; they are right here, 26 pages of specifics that lay out what the budget agreement is.

Q Let me posit this a different way. Obviously, if the White House didn't have some concerns about how this tax portion of the legislation is going to get written, it would not have insisted on a two-tiered approach, whereby you do the tax cuts separate from the budget process. That assures you some level -- for example, the veto threat. So my question is, is it not accurate to say that it was because you were worried about how the tax cut portion gets written that you want to do it separately? And number two, if you are to a degree concerned about that, what are your concerns? I mean, what would cause the President to veto a tax cut bill? Or if not -- I mean, at some level you have to have some concerns.

MR. RAINES: Let me put it this way. Actually, I believe the first person to suggest separating the tax bill was the Speaker, and so I don't think it's accurate to say that this is either a Democratic or a Republican idea. It is what both sides agreed to as the appropriate way to go, and I think they have very good reasons to support and we have very good reasons to support it.

The President has already said that he will sign a bill that comports with the parameters of the agreement, he will not sign a bill that doesn't comport. And when he sees the bill, he will know whether or not it comports with the agreement or not.

But this is not -- there is no mystery here. This is an area in which it's clear both Democrats and Republicans on the Ways and Means Committee and the Finance Committee have said that it is their job to fill in the details of the tax bill. We respect that and the agreement respects that. And we expect to work with them, both Democrats and Republicans, to put together a tax bill that meets the aspirations of the American people. And I think that that's -- the important thing here is that what is often the most contentious part of a tax bill, which is how big will it be, how will it be paid for, and whether or not the President's priorities will be respected -- that's all in this agreement. There is a lot more to be done, but from our perspective this is an outstanding agreement on taxes and sets a framework for us to move forward in a fiscally responsible way.

The one thing we know won't happen this time is what happened in 1981, where a tax bill grew and grew and grew and people -- their compromises came from adding to the tax cuts. Here, people are going to have to make tough decisions because they've only got so much allowed to them. And so I think we're going to see probably one of the most responsible efforts at cutting taxes that we've seen in recent years.

Q One non-budget question, Mr. Bowles, I just wanted to follow up on the question I asked you earlier. Are you saying that the President's spokesman has some information about this abortion initiative that you as the Chief of Staff do not? (Laughter.)

MR. BOWLES: What I am saying, Mara, is I spent all day yesterday, until around midnight, in conferences with people going over this budget. I haven't talked to the President about the vote this morning. Michael has and I'm sure Michael can answer your question with a little bit more specificity than I can.

Q Mr. Raines, one other subject you're working on is the District bailout package and memorandum of understanding is to be signed today by the Mayor. What are you going to do to navigate that through the Congress and are there any hurdles that you foresee, you know, bringing it to fruition?

SECRETARY RAINES: Well, I'm going to be meeting with the Mayor and the head of the City Council and Dr. Brimmer this afternoon. They have, in fact, already signed the MOU. I will sign it this afternoon in a meeting with them. And we will plot strategy for going forward and having this enacted.

One of the things I think we're particularly proud of is that this agreement specifically protects the elements of the President's plan relating to the District of Columbia -- in taxes, in Medicaid. And, therefore, we have, included in the agreement, the room for the President's proposal. We now have to work to move as rapidly as we can to get that enacted into law. And the fact that we've got this agreement I think is very good, because it provides a framework and support around the President's proposal to ensure that we don't have this proposal lost among the competing demands that face Congress.

Q Councilman Norton was very disappointed in what she called the public spat between you and the City Council. Are you going to avoid that as you go down the road?

SECRETARY RAINES: I don't think there was a public spat between me and --

Q Well, over the memorandum of understanding, there was, because they rejected it initially and then they had to come around.

SECRETARY RAINES: Well, I don't think I had a spat -- if they took a little longer to come around to agreeing than might have otherwise been the case. I would have preferred that we had an agreement earlier. It would have given us more weeks to work the legislation through the process. But this is a democracy and we support home rule and these are elected officials and they have to have the right to work through a very complicated proposal and make up their mind. They took that time and they now agreed to the MOU and we are all working hand in hand. So it would be surprising on something this complicated if everybody agreed on every detail. But I think what's really surprising to many is that we now have this agreement, after all of the concerns were expressed and worked through. And now we can move forward in a united way to get the President's plan enacted.

MR. TOIV: Thank you, everybody.

MR. SPERLING: There's one point -- I'm sorry, we just --

Q You've got a few more numbers? (Laughter.)

MR. SPERLING: Yes, there's one thing -- because this was, I think, misreported repeatedly over the last two weeks and I think it's an important point to make, which is that of the $225 billion in the assumptions that were changed at the end by CBO, about $120 billion had already been assumed in the budget negotiations. In other words, Chairman Kasich and Chairman Domenici had already assumed the revenues would be about $120 billion higher.

Of the remaining $105 billion, perhaps around $40 billion was used to relieve various provisions to increase bipartisan support. But the main point is that about 80 percent, or over 80 percent of the $225 billion had already been assumed or was used for deficit reduction -- over 80 percent. It was a very small portion that was used at the end for highways, to get rid of the Medicaid per capita cap, to make this bill a little more popular and increase its bipartisan support. But, again, it was only a small fraction of the $225 billion that was used at the end. The overwhelming majority was already incorporated in the balanced budget plan.

Q Could you just talk about the minimum wage for work --

MR. SPERLING: Actually, Mike is going to address that when he gets out. Thank you.

Q When is Mike coming out?

MR. TOIV: Mike will be out very shortly, very shortly.

END 12:49 P.M. EDT