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Office of the Press Secretary

For Immediate Release January 7, 1998
                          PRESS BRIEFING BY 

The Briefing Room

4:10 P.M. EST

MR. TOIV: Hello again. Once again, making an encore appearance in the White House Briefing Room is Secretary of Health and Human Services Donna Shalala, as well as Bruce Reed, the President's Domestic Policy Advisor.

MR. REED: In a moment Donna will try to put this whole child care issue in context. I thought I would go over the gritty details of the announcement and we can take questions at the end.

First let me say that we feel that this is a real opportunity for bipartisan accomplishment. Donna and I have both had conversations with a number of members of Congress in both parties and we've gotten a very good reception. There was a strong bipartisan turnout at the event this afternoon. And much of this package builds on a long history of bipartisan accomplishment. The child care development block grant which we're dramatically expanding was enacted in 1990 under the Bush administration with strong bipartisan leadership on the Hill from Chris Dodd and Orrin Hatch and then Governor Bill Clinton. And the expansion of the child care tax credit is also a program that has a long history of bipartisan support, supported by President Reagan, President Bush and President Clinton.

The centerpiece, as I said, of this announcement is a dramatic expansion of the child care development block grant, which states use to provide subsidies to low-income working parents, many of them who are moving from welfare to work. In last year's welfare reform bill, we got a $4 billion increase in child care to move people from welfare to work. That is a big factor in welfare reform's success to this point. But in states across the country there are still waiting lists for many working parents -- low-income working parents -- who never went on welfare in the first place. And this initiative is designed to help states deal with both low-income as well as parents who are moving off of welfare.

The overall increase is $7.5 billion over five years. That program is currently $3 billion a year. It will get to $5 billion by the fifth year. And this will enable us to increase the number of kids who are getting help from 1 million in the latest figures to 2 million by the out-years.

The second thing we're doing is expanding the child independent tax credit, which provides tax relief on a sliding scale to parents who have child care expenses. Our expansion of this tax credit will enable 3 million additional -- 3 million families to get additional tax relief, an average tax cut of $358. As the President said a few moments ago, it will enable a family of four with an income of $35,000 and high child care costs to wipe out their entire federal tax liability. And that's true for most families under 200 percent of poverty who have high child care costs.

Q What do you call high child care costs.

MR. REED: Four thousand dollars a year for two kids.

Let me try to explain how this tax cut works. Under current law, you can get -- you can take 30 percent of allowable expenses as a credit against your taxes if you make $10,000 or less, and 20 percent of those expenses if you make $28,000 or more. If you're between $10,000 and $28,000 if there's a sliding scale, it reduces from 30 percent down to 20 percent.

What we are doing is to both increase the size of the percentage credit and to make it more available to more middle income parents. We will raise the maximum credit to 50 percent and allow anyone who makes $30,000 or less to claim that 50 percent credit. And we will have a sliding scale that allows anyone who makes under $60,000 to get an increased credit. Basically, it will go from 50 percent at $30,000 sliding down to 20 percent at $60,000.

Q Is that a couple or --

MR. REED: These are two-income families, working parents with --

Q And can you just repeat what it is now?

MR. REED: It's 30 percent if you make $10,000 or less; 20 percent if you make $28,000 or more. And that will go up to 50 percent for $30,000 or less and it will reduce by one percentage point for every additional thousand you make, with a floor of 20 percent at $60,000.

Q Is there a cap on that, and will you be changing the cap?

MR. REED: There's a cap on the allowable expenses. It's $1,400 per child -- excuse me -- $2,400 per child of allowable expenses -- $2,400 for the first child, $4,800 for two children and it's capped at $4,800 -- if you have more than two children it's still capped. We're not changing that cap.

Q If you get more than $60,000 you get zero credit or you only get minimum credit?

MR. REED: You continue to get 20 percent. There will be no change in the law. Right now, as I said, 20 percent credit if you're over $28,000. That goes on under current law no matter what income. And that won't change.

Q And so if your total cost, no matter how many kids you have, it's 20 percent of your child care costs?

MR. REED: Yes, 20 percent of child care expenses --

Q Up to the $4,800?

MR. REED: That $4,800 is the maximum allowable expenses that you can claim the credit against. So if you're at $30,000 and you had child care expenses of $6,000, you could claim up to 50 percent of $4,800.

Q And that cap is staying the same, you're saying, or it's not --

MR. REED: The cap is staying the same. We're dramatically increasing the percentage credit you can take.

Q One thing on the $60,000 -- that's not a limit, so you can make a million dollars and still claim 20 percent?

MR. REED: Yes. Yes, that's current law.

Q Under the new proposal.

MR. REED: All we're doing is increasing the amount for families that -- increasing the percentage for families that are making under $60,000. If you make more than $60,000 you won't see any change as a result of this proposal.

Q Can you tell us what it is for singles? There are a lot of single people -- it's just half?

MR. TOIV: Head of household is taxed similarly to married couples --


Q So when I asked you before if it was for double filers, a lot of the times --

MR. REED: While Donna is talking I'll pull out my briefing paper on --

MR. TOIV: I'll call Secretary Rubin.


MR. REED: Let me correct myself. I believe that the -- it's only for working parents, but it doesn't discriminate between single and two parents. So a single parent would still benefit from this proposal. Sorry about that.

Just to finish. We also have a new tax credit for businesses to claim up to 25 percent of the expenses for operating a child care facility, starting a new child care facility, providing child care subsidies to their employees. Then we're increasing the amount of subsidies for after-school programs to allow 500,000 kids a year to get after-school care. And we have a number of initiatives to address safety, quality and early learning, including a new $3 billion early learning fund that goes to states that can use the money to reward innovative programs in particular communities that are reducing child-staff ratios and providing more training; and then a couple of initiatives that the President announced at the child care conference last fall background checks and scholarships for child care providers.

Q I just want to go back to the tax credits for a minute. You're increasing the current budget by $5.2 billion, correct?

MR. REED: That's correct.

Q What is the current budget?

MR. REED: I think it currently costs about -- I think it's about $3 billion a year -- $2.5 billion a year in FY '98. So it's going from roughly $2.5 billion to about $3.5 billion.

Q And is there currently a business tax credit?


Q This is totally new.

MR. REED: It's new. And it's based on a proposal that passed the Senate last year, sponsored by Senator Herbert Kohl of Wisconsin.

Q -- you said $2.5 billion is the current, and then you said --

MR. REED: Sorry, $2.5 billion per year --

Q To --

MR. REED: Is the annual current cost of the existing children's tax credit. And that would be increased to an annual cost of $3.5 billion.

Q There's a tax deduction through payroll that a lot of people can take of up to like $8,000 for their dependent care. Is that something totally separate from this, or -- can you explain how -- is that being changed by this proposal at all?


Q It's the same credit, just in another form?

SECRETARY SHALALA: It's the same credit. It's called the Dependent Care Tax Credit. There's a difference between the children's -- there's a difference between what we did in a bipartisan way last year for just children and dependent care.

Dependent care means not only children; the tax credit that we're talking about changing, but also about elderly parents you can take a deduction for that. Though 90 percent of the people that use this tax credit use it for child care. And it was designed originally for both children as well as if you're taking care of elderly parents, for example. So you get some credit for that care.

And what Bruce just described is the way in which we're changing this to help more middle-income and lower-middle-income families as part of this overall initiative.

Q So is the net effect that that limit -- or that that credit that people currently get or can get as tax-free income in their paychecks to pay for dependent care is going up under this program as well?

SECRETARY SHALALA: It is going up for families who have incomes under $60,000, which is the point that we've made. And let me just say a couple of more things and then we'll go to questions. And let me just say again what the President, the First Lady and the Gores said -- when we're talking to parents who are working, the one thing that always comes up is child care. And they're asking three questions: Can I get it? Can I afford it? And can I trust it? This proposal speaks to all three of those. This is a proposal that focuses on the affordability issue, on the choice issue, to give people more choices out there. For many people, all they can afford is to find some relative to take care of their child. And so this by investing money in this program, we hope to give every parent more choices, whether it's institutional or family day care.

And the third point, which is terribly important, is the quality issue. This is the first major investment in child care quality, outside of the Head Start program, that we have ever made. It's an investment in the people that work in child care centers. It's an investment in their facilities, in the curriculum, in the standards that states have.

One of the things that Mrs. Clinton has made very clear -- and she said it again in her conference -- is if you're in the military in this country and you put your child in a military child care center, that center is visited at least three times unannounced by an experienced child care person who looks at the center and looks at the standards that they have for that center. If you're not in the military, you're a civilian, and you put your child in a child care center any place in this country, you'll be lucky if that child care center is visited by state officials once. And so this investment is also an investment significantly in the states to help them enforce their own rules about child care centers and to help them and local communities and parents to invest in improving the quality of the child care that we have out there. So it's not only about paying for child care, it's also about the quality for child care.

Why don't we -- I think that that's it. And again, to distinguish, as Bruce did, between what we did for welfare families and now what the President is doing for families that go directly to work and don't go through the welfare system.

Q On Head Start, this is increasing by $3.8 billion? Another budget question.

SECRETARY SHALALA: The Head Start increase is $3.4 billion over five --

MR. REED: It's $3.8 billion -- you're right.

Q And what is it now?

SECRETARY SHALALA: Oh, my chart is wrong -- $3.8 billion over five years.

MR. REED: Current Head Start spending is -- it was $4.4 billion in FY'98.

Q How many children are deprived of Head Start, despite all the increases? Do you have any idea? And why isn't everyone covered?

SECRETARY SHALALA: Well, it's a question of everybody that's eligible. What the President has pledged to do by 2002 is to get a million people in Head Start. We believe that will take care of almost everyone who is eligible for Head Start. We are on that track with this budget investment and we have laid out a track that will get us to a million children.

In addition to that, the President is doubling the number of children in the new program called Early Head Start which is a zero to three initiative. One of the things that this child care initiative does is for the first time we're going out to try to develop some models for infants. Parents are having a terrible time finding quality care for infants. And there are almost no centers in this country that will take infants. And this will help the states and community groups to develop some models. And in the Head Start program we're making an investment for infant care just as well.

Q How much of the total package is depending on income from a tobacco settlement? And if there is no tobacco settlement, are you committed to either tax increases or budget cuts in order to fund --

SECRETARY SHALALA: The answer to the first question is one-third. The answer to the second question is that we believe that there will be tobacco legislation next year -- this year, this year -- we're in the new year. We believe there will be tobacco legislation next year -- that's what the President is working for. There's bipartisan support for tobacco legislation and, therefore, we are enthusiastic and will work very hard to get that.

Q Just to follow on that, should somebody who is enthusiastic about these programs -- some parent out there -- should they be just crossing their fingers that tobacco passes, or can they be confident that regardless of what happens with tobacco, the administration is committed to having in the FY'99 budget?

SECRETARY SHALALA: Well, what we do when we put together a balanced budget and send it to the Hill is we pay for it in a variety of different ways. And while some of this package is paid for with tobacco legislation, some of the other parts of our budget are paid for with user charges, with savings from fraud, for example. Many of the things that pay for a budget require congressional approval, so what has happened always -- and we believe we're going to be very successful in getting tobacco legislation -- is we're committed to the policies and then we work with Congress to make sure that those policies get enacted and get funded.

Q Right, but this is an unprecedented tobacco settlement, however likely it may be at this point, would be an unprecedented act of Congress. And so are you just not clear yet what happens if it doesn't pass or do you have a strategy that you're not prepared to say yet?

SECRETARY SHALALA: No, I mean, it is unprecedented in the sense that we have never done tobacco legislation before. But we have vast experience in all administrations in putting budgets together that are financed by a variety of different sources, including user charges that require legislation. And that's what you do when you put the budget process together.

Q But there's no guarantee, is there?

SECRETARY SHALALA: There's no guarantee on other parts of the budget that require congressional legislation. What we do is we put a credible, fiscally responsible budget together. We believe we have bipartisan support for tobacco legislation and that we will get that legislation. This is not pie-in-the-sky. We are very far along, we believe, in consensus on getting tobacco legislation, though not on the specifics.

Q The question is what Raines has said is a tobacco settlement is self-contained, and that if you don't get the tobacco settlement, then the spending you were going to make with the tobacco settlement also goes away. So our question is, if there's no tobacco settlement, does this spending still take place?

SECRETARY SHALALA: Then we do what we always do as part of the budget process -- we get other offsets working with Congress to pay for the policies that we want to put in place. That is the normal process. And my only point about however this is paid for is there is a normal budget process no matter what the label is -- we find other offsets if we need to find other offsets.

Q So the President is committed --

SECRETARY SHALALA: The President is committed to both -- to this being passed by the Congress, to this child care -- historic child care legislation being passed by Congress and to getting good tobacco legislation this year.

Q You'll cut someplace else then if you don't get it -- and this will have the priority if you don't get the tobacco --

SECRETARY SHALALA: It's inappropriate to use the word cut. We will find other offsets if we need to, but at the moment --

Q Why is it such a bad word in this country?


Q Why is it --

SECRETARY SHALALA: We do it all the time.

Q Right, so why can't --

SECRETARY SHALALA: Well, because I don't want to identify what the offsets are. The offsets and the savings in a budget and where we can find a variety of different resources, I don't want to limit myself to defining what the offset is. The point is that we will find other offsets if we need to. At this moment we believe we will get tobacco legislation.

Q For many years we've heard of fully funding Head Start, from the first time that the President has run for office. Are we there yet? Or where is it?

SECRETARY SHALALA: The President laid out a strategy for fully funding Head Start that ends in 2002. We are on that path. And what we have identified in this initiative fulfills the responsibility for next year. And we have laid out what the numbers are going to be until 2002 to get there.

Q -- is the number where we have fully funded Head Start. We are done. That is it. That's the road you've been on all this --

SECRETARY SHALALA: Well, assuming that incomes don't change and other kinds of things, but we're projected to have the Head Start program cover every child that's eligible.

Q Do you think linking the tobacco and the child care is going to increase pressure to have a tobacco legislation? Was this a political move also to use tobacco funding for something as popular such as child care?

MR. REED: I think that it is clear that there is considerable bipartisan support for child care. We think there is considerable bipartisan support for tobacco legislation. It makes perfect sense to link the two in some way. As the Secretary said, a third of this package is connected to tobacco legislation in our budget. But we think that there will be real bipartisan interest in both of these initiatives.

Q Can I follow up? Do you risk painting opponents of a tobacco deal as anti-child care by linking these two, is that your intent?

SECRETARY SHALALA: What a good idea. (Laughter.) Hadn't thought about that. No, I think that -- I think that when we put this package together we put a responsible fiscal package with the appropriate offsets together. This happened to be one of them. And we've been very honest about answering what part of this total package we've assigned to that.

Q Can I clarify one thing on the spending? Is the $20 billion, $21 billion, is this all in addition to what was already budgeted for these programs?

SECRETARY SHALALA: Yes. The answer is yes. And that's why it's historic. That's why it's so significant.

Q The spending on child care is not envisioned by the tobacco settlement that I've seen. Is this going to add to the amount of money that is ultimately extracted from the tobacco companies? And if so, are you sort of setting a precedent that other individual programs are going to be able to sort of take from this settlement?

SECRETARY SHALALA: No, we have not -- we have not submitted a list. And we're at the beginnings of conversations with those who are drafting legislation for what we believe ought to be paid for by tobacco money. So we are now doing that as part of the budget process. You will see some of it there, but this will be part of a significant negotiation.

MR. REED: Could I add -- all I was going to say in addition to that is in the initial proposal on tobacco from the attorneys general in the states envisioned a significant portion of that money going into children's health. Shortly after that proposal came out we enacted the largest increase in health care in 30 years and addressed the children's health need that they had suggested. Child care is one of the top priorities of the National Governors Association and the governors in both parties, so we think this is a natural link.

SECRETARY SHALALA: If you listen very closely to what the President said about the relationship between child care and children's health, the public health issues that I'm concerned about are directly connected to what happens to children after school, for example. So these are not unconnected activities, and remember, most of this money goes to the states.

Q Can I follow on that for a second, because the Vice President talked at length about after-school initiatives and this is not a huge amount of money in here -- $800 million for after school. And there were some advocates for after-school programs here who said it's not nearly enough. Can you address that?

SECRETARY SHALALA: I agree with that, it's not nearly enough. Nor is any of the other pieces nearly enough if you want to cover everything. But let me remind you that we're going from a $40 million program to an $800 million program in the Department of Education. There are monies -- pardon?

MR. REED: It's $40 million to $200 million.

SECRETARY SHALALA: It's $40 million to $200 million the first year. But the total amount over five years is $800 million. So it is a significant increase. This is a new area for the federal government. The expansion of programs has been an activity particularly of large cities around the country. We believe it is a significant and a fair increase and we'll be talking to the Congress about it.

Q To clarify, on the example, the $358 example in savings the President gave, what were you assuming were the child care costs to come up with that?

MR. REED: I think that is Treasury's estimate of what the existing base of taxpayers will receive as a tax cut as a result -- the $358 is not based on a specific case, it's based on current average of current expenses from current taxpayers. And we can try to get for you what --

Q It might make it easier just when someone reads a story to say for someone who makes $30,000, there's four kids, who spent $3,000 on --

MR. REED: Oh, I have several examples if you'd like to see -- I can hand out a whole chart.

Q Where does the other two-thirds of the money come from? You said a third comes from the tobacco deal. Where does the other two-thirds come from?

SECRETARY SHALALA: Oh, there are offsets in the budget. As you know, when we put the budget together we have a variety of different offsets. I have made a major contribution because of the decline in Medicare expenditures to the overall budget. In fact two-thirds of all of the savings is a decline in the growth of Medicare. So you will see it when we lay out the budget that there are a variety of different offsets.

Q And if I could follow that up, what does it mean that a third of the money comes from the tobacco settlement if there's just a big pool of offsets and all the money is going in altogether? Who came up with a third and what's the reason for a third?

MR. REED: As Frank Raines explained the other day, in the budget we will present, revenue is expected from tobacco legislation and spending associated with that, and that's where the third comes from.

Q Well, to follow on that, is that money from the tobacco settlement earmarked for any specific part of this proposal, any of these individual items?

SECRETARY SHALALA: I think we're probably not prepared to answer that now, because the budget is being finalized. So why don't we give you that answer when we roll out the budget.

MR. REED: And in any event, as we've said before, once it gets to the Hill it's all fungible. They can move one piece --

Q On another subject -- this is for Secretary Shalala -- could give us your views, if you have any, on the scientist who wants to go forward with cloning experiments?

SECRETARY SHALALA: Well, we have said very clearly that we believe that human experimentation is morally wrong and unacceptable and should not go forward. And as you know, the President has emphasized and submitted legislation to the Congress that would prohibit either public or private -- or the private sector using these techniques to create a child. So we have taken a very firm position. We have sent legislation to the Hill.

In addition, the FDA believes it has authority to regulate what would be called an emerging technology. It would regulate this technology, as it does others, with a view towards protecting the safety of patients and the public health, which means that the FDA has a rigorous process between now and when Congress debates the legislation that could be used in this particular case. No one could go forward without submitting a request to the FDA, is the point I'm making.

Q Knowing that you cannot tell the FDA what to do and all that, and I understand that; however, given that Congress has yet to outlaw cloning, is there then the possibility that if the doctor from Chicago submits all his paperwork and things seem to be in line, could then the cloning go forward until such time as Congress acts? Is it possible?

SECRETARY SHALALA: I would not predict what the FDA's response would be. All I could say is that they have a very rigorous process for protecting the public health and safety, and this would have to go through that process. And as you well know, there has been extensive complaints about the time that the FDA takes to approve various submissions. (Laughter.)

Q Bruce, two years ago at the State of the Union, the President said the era of big government is over, and yet $20 billion is not an inconsequential sum. Does the improved budget picture mean that a new era is underway?

MR. REED: This is not a big government program. There are no new federal rules in this. This is not a Washington, one size fits all program. This is money that is going directly to individuals or through states to individuals to meet immediate needs. It's tax credits which go to individuals and block grants and other programs that go to states for subsidies to individuals. So we think that the President has demonstrated this week, by balancing the budget -- or by presenting a balanced budget for the first time in 30 years, that he meant what he said. But that doesn't mean that there aren't still important initiatives to get done in this country.

SECRETARY SHALALA: There are also no new bureaucracies that are created, no new major staff requirements that are required. We're taking existing programs and sending larger sums of money to the states and to individuals.

Q Secretary, what happens if someone doesn't file that paperwork or the people involved don't file the paperwork that you believe is necessary to go forward with the cloning program? What actions can the FDA or HHS take at that point?

SECRETARY SHALALA: I think that you should refer that question directly to the FDA rather than me. The FDA is an independent regulatory agency. While they send recommendations for regulation through me, those individual decisions about submissions are theirs, and I prefer that you call the press office of FDA, which is now headed by Lorrie McHugh, someone you know.

Q I have an after-school question. Is that money targeted toward cities or poor neighborhoods for the after-school programs?

SECRETARY SHALALA: It's targeted to schools though some of it will be used for community organizations, boys and girls clubs and those kinds of organizations.

Q But will a rich suburb and a poor inner-city have the same shot at that money?

MR. REED: It's somewhat targeted, but not exclusively to poor neighborhoods.

SECRETARY SHALALA: We need to keep every child in America busy between when school is out and their parents get home.

Q Can you do the child care exclusively through the budget, or do you need separate legislation to do this?

SECRETARY SHALALA: We need legislation in the tax area, clearly, because there are some reforms that are introduced. In the child care block grant, we do not need legislation; we simply need the appropriate appropriation. In the area of quality, we will need some changes in existing legislation. So there are some changes. They're not overwhelming, though.

Q Have you begun to work with members of Congress on these --

SECRETARY SHALALA: We've begun our conversations with members of Congress today. Both Bruce Reed and I have talked to members of Congress, and we'll be meeting -- we've already talked to members of their staffs in terms of briefings, and we'll be meeting with them as soon as the President announces the whole budget.

MR. REED: And a number of members in both parties have already introduced legislation which is consistent with the President's plan.

Q Bruce, are you asking a sunset on the business tax proposal, or is this a certain number of years, or is it going to be permanent? And what is the most a company can receive in any year?

MR. REED: I believe the most -- businesses are allowed to claim 25 percent of qualified cost, which is a fairly expansive definition. They can't claim more than $150,000 per year. And it's a five-year tax credit. You know, our budget only goes five years.

THE PRESS: Thank you.


END 4:42 P.M. EST