THE WHITE HOUSE

Office of the Press Secretary

                                PRESS BRIEFING
      BY OFFICE OF MANAGEMENT AND BUDGET DIRECTOR FRANK RAINES,

ACTING ASSISTANT SECRETARY OF THE ARMY FOR CIVIL WORKS JOHN ZIRSCHKY, ASSISTANT SECRETARY FOR WATER AND SCIENCE AT THE INTERIOR DEPARTMENT,

PATRICIA BENECKE, AND CHIEF OF STAFF TO THE SECRETARY OF ENERGY, ELGIE HOLSTEIN

The Briefing Room

1:00 P.M. EDT

MR. HAAS: Good afternoon, everybody. We've got another important announcement today regarding the line-item veto and regarding an announcement of related policy.

You're going to hear today from OMB Director Frank Raines, John Zirschky, the Acting Assistant Secretary of the Army for Civil Works; Patricia Benecke, who is Assistant Secretary for Water and Science at the Interior department; and Elgie Holstein, who is the Chief of Staff to the Secretary of Energy.

I believe that Frank and then John will have some opening remarks. All four of our speakers will obviously be available for questions. So let me turn it over to Frank Raines.

DIRECTOR RAINES: Good afternoon. The President today made two important announcements. First, as you probably know, the President once again used his line-item veto, this time to cancel eight water and other projects in the Energy and Water Appropriations Act of 1998. The cancellations will save an estimated $19.3 million in 1998, and they were based on recommendations from OMB, the Army Corps of Engineers, the Bureau of Reclamation and the Energy Department.

OMB worked closely with these agencies and with the President's senior economic advisors as we came up with a list to recommend to the President. And, second, the President directed his administration to work with Congress to address the growing problem of future liabilities and delays in completing projects because of the addition of new projects.

There's a serious problem and one that we hope to make progress on, and John Zirschky will be making a short statement outlining the nature of the problem that we face with these kinds of appropriations.

With regard to the line-item vetoes, let me walk you through the details on these projects. First, a few general statements. The eight cancellations include five water projects, all of which fall into at least one of the following categories. They were not requested in the President's 1998 budget, they are new rather than ongoing projects, they have greater costs than benefits, they are recreational for a limited number of people, or that they should be funded at the local level.

In addition, the cancellations include one Bureau project for which there is no longer a federal interest and which would represent an unwarranted corporate subsidy. Finally, the cancellations include two Energy Department projects that are unwarranted corporate subsidies, and they are either unrelated to DOE's mission, or inconsistent with the normal project and review selection processes.

I can tell you a little bit more about individual projects, and maybe we could answer more detailed questions in your Q & A. One project cancelled in the Corps of Engineers is the Lake George project, which would involve the Corps in performing operation and maintenance dredging of a recreational lake owned and operated in the city of Hobart in Indiana. This would require the Corps to construct certain silt traps to prevent further buildup of sediment. This is a recreational lake, not a federal facility, and it's obviously a low priority, given the Corps' fundamental responsibilities in the areas of flood control and navigation.

Another project is the Chena River dredging at Fairbanks, Alaska. This would be to dredge a recreational channel for the use by a single tour boat operator. There is no Corps navigation project in the area, and this would fall into the category of a low priority recreational project for limited use.

Another project is the Allegheny River Project, which would involve dredging a recreation channel to allow passenger boat operators access to a riverfront park in the area.

Another project is Sardis Lake, Yazoo Basin. The Sardis Lake, Mississippi project would require funding for dredging of Sardis Lake to create a marina basin for leisure craft and recreational opportunities.

The Neabsco Creek Project in Virginia would have the Corps of Engineers remove creek debris and sediment in a channel of Neabsco Creek. This was previously examined by the Corps and found not to be economically justified. A project in the Bureau of Reclamations, the In-situ Copper Mining Research Project -- this is a project in which we have spent a considerable amount of money over time. The federal interest in it has expired and is no longer justifiable.

A multipurpose canister licensing would have the federal government pay for the qualification of multipurpose canisters used for the storing of nuclear waste. Under normal procedures, that is to be funded by the developers of the canisters and not by the government. And we believe this would be an unwarranted subsidy to companies developing such canisters.

There is a project on stronger supporting cables for high voltage power lines in the Department of Energy. This is a project related to improving the capacity of these lines. It is one which would have us provide funding to a consortium of companies that would be doing this investigation. It is not a high priority item and it was one that has not -- it has been discussed by the Department of Energy but has failed to get funding in the normal process for funding such projects.

In using his line-item veto, the President has shown great deference to Congress's role in the appropriations process. He accepted the vast majority of the 423 water projects costing $817 million for which the Corps or the Bureau did not request funding in his budget. Now, obviously, some critics will contend that we're being too deferential to Congress and that we should have cancelled more items. Let me take a moment to explain why we didn't do that.

Of the $20.7 billion of spending in this bill, $817 million went for those projects that the President did not request. And this was sort of a list that we began with in terms of candidates for possible line-item veto. But if you look at that $817 million, it's not a homogeneous list.

First, about $225 million, or 28 percent of the total, is for ongoing construction projects or studies or operation and maintenance that have received funding prior to 1998. Many of these are projects in which there would be very substantial cost to stop the work, which might exceed any savings that we would get from cancelling the projects.

A second $225 million, again 28 percent of the total, is for activities that we included in our budget but where Congress increased the amount above our request.

The third set of $215 million, or 26 percent of the total, goes for activities that we didn't request but where the activity is consistent with policies of the Administration and, therefore, Congress would be doing something that is consistent with policies that we've annunciated.

And the last set, $130 million, is a miscellaneous group of projects that required the additional scrutiny that we provided, and we focused our attention on this $130 from which the President ultimately made his choices.

So that we think that we've done a good and thorough job in examining these projects. It will, as the President says, add to -- the numbers add up now to almost $2 billion of savings that he has achieved by exercising the line-item veto since his first use in the tax bill and the reconciliation bill. So we think that this is good value for the taxpayers and that we're making good progress in our scrutiny of these bills.

Now, before we take your questions, John Zirschky is going to just take a moment to explain to you why we want to engage Congress in a discussion on how we can improve dealing with these projects and why having new projects every year is causing very serious problems in our ability to actually get projects completed.

MR. ZIRSCHKY: The Clinton administration has made performance improvement a key goal. You all know the National Performance Review. The Corps of Engineers has been a leader in that effort. In the past few years, we've achieved rather dramatic improvement in our ability to deliver our projects on time and within budget.

For example, as recently as 1993, we were completing about 54 percent of our construction projects on time. We've got that up to about 80 percent or more now. What we're worried about in the future is our ability to continue to improve and meet our schedules on time.

The gap between the balanced budget agreement and the congressional adds is growing. And in order to make the budget work, what we're having to do is to delay some of our ongoing projects basically to make our cash flow work, to keep the obligation levels within the ceilings. This is causing delays in some cases ranging from four months to 23 years on some of our projects.

The Army has established a very important goal for the Corps of Engineers, and that is to satisfy our customers. And we think that this goal of satisfying our customers is potentially at risk by the possibility of funding delays in the future. We sign contracts with all our local sponsors. For example, if we build a flood control project, the local community pays about 35 percent of that cost. If our projects get delayed, the whole project cost goes up, the local government then has to pay a percentage of that cost increase. We don't believe that's fair to our existing customers.

So we would like to work with the Congress to come to an agreement about the optimal way to plan our program, the optimal level of funding for our program.

The Army Corps of Engineers, we believe, is a vital part of this nation and of its Army. We need a construction program, a healthy construction program. That's how we keep our engineers trained. You've heard about El Nino and our preparations for that. This same kind of work that we do on a day-to-day basis are what keep us trained and ready to respond in the event of a disaster.

We like to think of ourselves as the nation's problem-solvers; we've been the nation's problem-solvers since 1775. But this is a problem that is not within our ability alone to solve, so the Corps would like to work with the Congress to try and close the gap between the balanced budget agreement and the new projects that have been started.

We're looking forward to hopefully having a good relationship with Congress in the coming year.

Q Frank, is the administration going to be the grinch that stole Christmas and deny entry to Japanese container ships in relation to the U.S.-Japan trade dispute?

DIRECTOR RAINES: We have been pursuing a policy of trying to negotiate with the Japanese concerning various obstacles to access for American products in Japan. We have taken actions consistent with that, and will continue to do so. We look forward to trying to resolve this issue in discussions with the Japanese government.

Q Mr. Raines, could you comment on what the economic impact could be on this country if this is not resolved soon with the Japanese -- the shipping dispute?

DIRECTOR RAINES: Well, it's our hope that it will be resolved soon. I don't have any estimate of economic impact. My hope is that we have a resolution soon that will work for both countries.

Q Do you have a general feel for the impact?

DIRECTOR RAINES: No.

Q Could I ask a question about the line-item veto today?

DIRECTOR RAINES: Sure.

(Laughter.)

Q For the first time, you say that unwarranted corporate subsidies is a reason for whacking some items out of the budget. I presume in these 423 projects there are others that might qualify as corporate subsidies. How do you determine what corporate handouts are warranted and what are unwarranted?

DIRECTOR RAINES: What we've done is look at each of the projects and try to make a determination of the consistency of those projects with policies, as well as the benefits that the project holds forth. Where the benefit to the public seems to us to be small and there's a grant that is specifically directed to corporations, we've come to the conclusion that that's an unwarranted corporate subsidy.

If there was a significant public benefit and the corporation was simply a partner in that occurring, then we would come to a different conclusion. So we had to make a case-by-case judgment, and we came to that conclusion in the three cases here.

Q How many cases out of the 423 are those that you reviewed in some detail, maybe of the only $130 million that got close scrutiny? Was money going directly to corporations for purposes that would seem to be in the public interest?

DIRECTOR RAINES: I don't remember. It wasn't a large number. Most of these project are projects that in number would be projects directed at the Corps or the Bureau to operate through their activities. So there wasn't a large number of projects directly -- that amounted directly to grants to corporations.

Q What are the corporations?

DIRECTOR RAINES: In these particular cases, there's a consortium in the case of the aluminum wire. It's a consortium led by the 3M corporation. In the case of the nuclear waste canisters, the particular corporations have not been identified and any number of corporations could apply for use of the funds to have their canisters operated.

And in the case of the In-situ coal project -- I'm sorry, copper -- copper mining project --

MS. BENECKE: It's ASARCO and Freeport-McMoRan Copper and Gold Company.

DIRECTOR RAINES: Okay, ASARCO and Freeport --

MS. BENECKE: McMoRan Copper and Gold.

DIRECTOR RAINES: McMoRan.

Q And who is the tour boat operator in Fairbanks?

DIRECTOR RAINES: I don't know the name of it. There, you're going to be beyond me as to the exact names of the operators of the local recreation facilities. I'm sure we can -- someone can find that for you, but I don't have that.

Q What's your reaction to the rising resentment of the exercise of the line-item veto authority in Congress?

DIRECTOR RAINES: I don't note any rising resentment. Indeed, if anything, there's receding concern. As people have seen that we've been examining these projects carefully and the President has been acting judiciously I think there is, if anything, a greater respect for the care that the President has been showing in his use of the line-item veto.

Q Trent Lott yesterday said opponents of the line-item veto may find more people on their side.

DIRECTOR RAINES: Well, I think there is a great irony that there are some people -- and I would not put the Majority Leader in this category -- but there are some who want to be in favor of line-item vetoes in general but opposed to them in the specific. I think that the President is using the line-item veto exactly in the way that it was intended, and that is to exercise judgment in reviewing appropriations bills and trying to identify those areas that are the least justified in cancelling those projects. And I think as people look at what we've done as a whole, I think they'll come to that conclusion. I think a number of them have said that publicly already.

Q Mr. Raines, yesterday John McCain said in a letter to the President, which you've probably already seen, that he thinks that some of this has been politically inspired, dealt out as political punishment. And I wonder if you could comment on that.

DIRECTOR RAINES: Well, I think if you look at what the President has done, it would be very difficult to find the political strand here. Indeed, he has found projects that close allies of his have been associated with, and I don't think anyone has been able to show that there is a partisan political strand here. I believe what Senator McCain was saying was that because we didn't apply the same criteria he would that the only explanation for that must be politics. Well, that isn't the only explanation.

The explanation is what we've done each time we've come to talk to you. We have established criteria for each bill and applied them as best we could, and the President has made decisions based on recommendations from the affected agencies and his advisors. So I don't think there is any mystery about it.

What Senator McCain would like us to do would be to establish immutable criteria that would apply to every bill. And as I've tried to explain to you, I don't know of any such criteria that could apply to every bill because each of these bills is so different and a criteria that would work very well in a military construction bill would work far less well in something such as the DOD appropriations bill.

Q Related to that, why has the number of items vetoed dropped so precipitously from the number that was vetoed in the first bill that was considered? I think it was something like 38 in the first bill, firstly.

And secondly, why so few items in a measure that's generally known to be loaded with pork?

DIRECTOR RAINES: Well, I think trying to find a trend line where there is none is going to be a futile activity. If the MILCON bill had been the last bill you would have said, "Well why did you suddenly ratchet it up at the end? Was that a reaction to people thinking you hadn't done enough?" The MILCON bill just happened to be the first bill and that's why the numbers there. But there's no trend line to be found.

I thought I'd try to go through the list in this bill to identify how, when you really go through and see what projects there were to analyze, you're not talking about an enormous universe. And there are projects that Congress has put in prior years that are, in fact, being implemented. And we thought it would not be the right thing to do to go in and stop those projects in mid-construction, particularly given the costs of aggregating contracts that we would not be able to show that the veto would have reduced the deficit. Indeed, in some cases, we might have increased the deficit by stopping the project.

Q Is one message you're trying to send here that ongoing projects are pretty safe but new ones are in mortal danger? I mean, is that fair to say?

DIRECTOR RAINES: No, I think one of the things that you will see when we stated the policy statement about looking at these future projects, we already have more ongoing projects than is affordable. And we did not believe that we can solve this problem by using a line item veto now. We believe this is something Congress is going to have to deal with. We can't afford everything they've got going.

And those who are suffering are those who have projects that have been approved but whose completion is now being delayed for many years. And I think that that's something Congress is going to have to look at very clearly, that those who are getting new projects are having a negative effect on those who have had projects that are already approved.

In the future, if there are projects, ongoing projects, where we believe the project does not make policy sense and there may be savings, we may well make those subject to the line item veto. So there is no safe haven simply because you were funded in a prior year.

Q In the future, for purposes to get rid of wasteful pork projects or unwanted corporate subsidies, do you think it would make sense to amend or change the line item veto act so that it would also apply in years of budget surplus? I mean, isn't pork just as unjustifiable when there's a budget surplus as in the years with a deficit?

DIRECTOR RAINES: Sure. I don't know. I think as a budget director, I think it's a very useful tool for the Executive working with the Congress to eliminate items from the appropriations bill that there may be widespread views that they are inappropriate. We have not taken an official position on that, but there is a legitimate argument that the President ought to have the line item veto authority under any circumstances.

Q What is your reaction to the legal challenges, and do you think that the President is going to act any differently while this is being debated in court?

DIRECTOR RAINES: Well, I was very disappointed because, as far as I can tell, I wasn't personally sued and I sort of enjoyed going to the Supreme Court and hearing a law suit in which I was a party. And so I'm disappointed about that part.

But we were under no illusions that eventually someone was going to file suit to try to test the statute. And the Justice Department is prepared to defend the statute, was prepared to do so before the Supreme Court, and will continue to be prepared.

I think all of our actions since the statute became effective have been very consistent with the purposes of the statute, and it shows that it's not an unbridled loss of power for Congress. Indeed, it is simply the President working with Congress to insure that appropriations bills do not include unwarranted items that simply add to the deficit.

Q Somebody asked about sort of a hidden or secondary message in this. Is there a message to Congress that plus-ups are going to survive, so the way to get around the threat of the line item veto is just to add $10 or $10 million to a project that's already in the budget because you can't whack that portion off?

DIRECTOR RAINES: As much as people try to find the road map as to how to avoid the line item veto, I think they will be frustrated. We have never said that this category of items is off limits, nor will we. One of the concerns that I have about what Senator McCain is suggesting is that it would simply provide a road map to insure that projects that were unworthy had been clothed in a certain way to avoid the line item veto. So we're not going to establish any hard and fast rules that will be a safe harbor for projects. Each project needs to be examined on its merits using criteria appropriate to the bill.

MR. HAAS: Excuse me, excuse me. We'll take two more. I should have mentioned this. We also have 8 x 11 versions of this and I'll leave them here in lower press. But two more questions, Frank.

Q There has been some problem on Capitol Hill that the President is not paying attention potential allies on Fast Track as he exercises the line item veto. Is that now under consideration at all, and to what extent at all will these considerations come into play with this?

DIRECTOR RAINES: I don't think of Fast Track as being a political consideration. It is a very strong policy consideration. The administration is committed to restoring the President's traditional negotiating capability in the trade area, and that is a very important priority of ours. But this process has really been dominated by this whole review process that we've gone through. And, again, if you look, I think it would be very hard for anyone to find a pattern of supporters or opponents of Fast Track in the decisions that the President has made.

Q But is that coming into play now at all, the weighing of Fast Track issues?

DIRECTOR RAINES: Not any more than anything else or any -- I mean, Fast Track is on our minds because it's one of our biggest priorities, but it certainly is not something that is a factor in the decision making on these. Again, I think if you look at the record of what is included and what's not included, you won't find a pattern around any policy issue other than the line item veto.

And, indeed,that is frustrating to some people. Some people have argued that we should have as a standard only do things that affect members of the other party, only do things that are consistent with a legislative agenda. And that has been a great deal of frustration for a number of people, so I don't think it will be able to be said that we have organized this or had it determined based on any of our other legislative priorities.

MR. HAAS: Last one.

Q The White House says its new education-related events scheduled at the beginning of next week which seem to be pushing provisions that the President would like to see in HHS and Labor-Education bill. Do you think there is any chance of salvaging that bill or is it destined to be vetoed by the President?

DIRECTOR RAINES: I think there is a great chance to have a bill that we can sign, and we have worked with the conference committee and the leadership of the appropriations committees to make it very clear to them what steps would need to be taken to make it signable. We very much hope they will send us a signable bill. And we have continued in discussions and I am very hopeful that the conference committee will make the adjustments necessary so that the President can sign the bill.

MR. HAAS: Frank's got to go. Thank you.

Q Do you have a couple of examples of what you've told the conferees?

DIRECTOR RAINES: If you look at our conference letter, you'll see it.

END