THE WHITE HOUSE

Office of the Press Secretary

                           PRESS BRIEFING BY
               NATIONAL SECURITY ADVISOR SANDY BERGER AND
                NATIONAL ECONOMIC ADVISOR GENE SPERLING

                           The Briefing Room

1:02 P.M. EDT

MR. LOCKHART: Ladies and gentlemen, welcome to a special addition of the White House briefing. (Music from "Dating Game" is played.) Please welcome our first briefer today -- he loves tennis, rapid GDP growth, and romantic midnight walks on West Executive Drive. (Laughter.) Let's bring out the man Wall Street calls "the sexiest deficit hawk in all of Washington," Bachelor Number One, Gene Sperling. (Applause.)

(The music continues.) (Laughter.)

MR. LOCKHART: That took a long time to find this morning. (Laughter.) Okay, that was too easy and I'm sorry I did it. Gene will make me pay for it. But to get to a more serious point, Gene Sperling and Sandy Berger, the President's National Security Advisor, are here to brief you on our upcoming trip to Sarajevo.

MR. BERGER: You'd be an eligible bachelor if you worked until midnight every night, too. (Laughter.)

Let me briefly walk through the President's second, and I should add final, overseas trip for this week. (Laughter.) Friday's summit in Sarajevo will launch the Balkan Stability Pact, a cooperative enterprise between the nations of Southeast Europe and their partners throughout Europe, the United States and elsewhere.

It has three main objectives: advancing political and economic reforms in Southeast Europe; promoting cooperation, tolerance and security there; and working ultimately to integrate the region into the European mainstream.

One way to look at this moment is in an historical context, is to recognize that after World War II, we and our European allies worked through the Marshall Plan and NATO to rebuild the nations of Western Europe and create democratic and unified societies. After the end of the Cold War, the collapse of the Berlin Wall, we did quite a good job of integrating and rebuilding the nations of Central Europe and bringing them into the mainstream of Europe and indeed into, in some cases, the NATO Alliance.

There remains this troubled region of Southeast Europe with some very promising countries, some very troubled nations, and we have a really historic opportunity after Kosovo to bring these nations into Europe and to realize a goal that the President has been working for since early in his administration to help build a Europe that is undivided, democratic and at peace for the first time in history.

Today in Brussels, there is a Donors Conference to deal with the immediate humanitarian needs of Kosovo. And we've spoken about that earlier and you'll have, obviously, some reporting today in terms of what the results of that conference is in terms of the short-term commitments that countries make with respect to aid to Kosovo. The summit in Sarajevo on Friday, will begin a broader discussion of the shape of the future for all of the Balkans and Southeast Europe.

Let me take you quickly through the schedule. We will leave bright and early tomorrow morning and stop overnight at Aviano Airbase in Italy. The President then will fly Friday morning into Sarajevo.

Our meeting there I think symbolizes our shared hopes for the region. It is I think quite interesting and symbolic that we are meeting in Sarajevo -- a city where at the beginning of this century a conflict led to World War I, a city that has seen some of the most wrenching battles since World War II during the war in Bosnia. Now we're ending the 20th century in Sarajevo with the nations of Europe and North America coming together to talk about how to build a peaceful region.

The President will go to Zetra Stadium which was built for the Olympics -- severely damaged by the war -- and first meet with the three members of Bosnia's joint presidency and then with the Prime Ministers of the Bosnia Federation, which is the Serb-Bosniac entity and the Bosnian-Serb Republic, Mr. Dodik. Bosnia is slowly but steadily returning to a normal life after four years of wrenching conflict.

The peace there is taking hold. The economy is beginning to grow, grow 40 percent rate this year. Refugees continue to return, more in the first half of '99 than in any comparable period. There is freedom of movement throughout the country. Government institutions and multiethnic police forces have been established. Successful elections have been conducted. But there is still much work to be done in Bosnia, and the President will stress the high priority we place on continuing implementation of the Dayton Peace Accords and building a multiethnic society and a growing economy.

Now, the Stability Pact Summit, which we will attend of Friday, actually begins tomorrow, Thursday, as the nations of the regional countries gather in Sarajevo to meet in advance of the rest of the Europe and North America descending there, to discuss their common future.
The President and other leaders from outside the region, of course, will join on Friday.

The meeting will begin with brief welcoming remarks by the Bosnian presidency, by Finnish and EU President Ahtisaari, and by the EU Special Representative for the Stability Pact, Bodo Hombach, who until recently was Chief of Staff for Chancellor Schroeder. I've noted this to John Podesta as a career path that he might think about. (Laughter.)

Then the participants will go into a closed session to hear presentations from the countries of the region, their vision for progress and cooperation on tasks, including strengthening democracy, civil society, ethnic and religious tolerance, economic reform.

The President has emphasized in connection with the Stability Pact one of the principles that was key to the Marshall Plan, which is that the countries of Europe under the Marshall Plan, came together and they, themselves, helped to fashion and define what the future would be. And we want this to happen also with the Balkan Stability Pact; that is, this is not simply the outside countries coming in and defining the future for this region, this is the region defining its own future with the help of the outside nations.

I expect that we and other participants will commit to deepen cooperation with the region across a range of issues -- democracy, security and development, in particular. Gene will talk about the economic initiatives. Let me just say that I expect that the conference will send a very clear message to the people of Serbia as well. The one country whose government will not be present due to its failure to abide by the objectives and principles of the Stability Pact -- the message will be simple: with Milosevic you are excluded from the Stability Pact and isolated from the rest of Europe. With a government committed to democratic reform and international cooperation, we are prepared to help bring Serbia into the Europe mainstream.

After the conference, the President will visit a multiethnic high school in Sarajevo. It, too, was very badly damaged during the Bosnian war. It's now being renovated. The people in this area wrote to their government asking them to rebuild the school. It's finally now being rebuilt with local and international help, including some from USAID. The President there will speak to an audience of students and teachers, parents and civic leaders on both Bosnia and on what has transpired at the meeting in Sarajevo on the Stability Pact.

Then after greeting members of the Sarajevo religious community, he will tour a Serbian Orthodox church, which is next-door, underscoring our commitment to promote reconciliation and our respect for the culture and the traditions of the Serbia people. Finally, he will participate in a roundtable with regional media from Bosnia and Serbia to emphasize our support for freedom of speech and independent media as a means of advancing democracy, freedom of expression, and the notion that autocratic dictators cannot stifle legitimate debate. Then back to Aviano and home early Saturday morning.

Let me conclude by stressing this point. The EU and its member states will be the principal contributors for reconstruction in Kosovo and they will provide most of the development assistance for the wider Southeastern European region. And I think that will emerge today -- the Kosovo portion of that in the Donors' Conference. But fair burden-sharing -- which is essential -- cannot be an excuse of abdicating our responsibilities. America's participation is very much needed and helping the region is strongly in our national interest, reducing the risk that our troops will have to fight another far costlier European conflict down the road, and helping to make the whole of Europe a stronger partner for advancing our security, our prosperity, and our values.

And now Gene will address the economic aspects of the summit, and then take your questions. And I present you, Mr. Sperling.

MR. SPERLING: I knew this wasn't going to be the very best day to be briefing. (Laughter.)

As the President and Sandy have said, having won the war, we must win the peace. And winning the peace means not only the immediate humanitarian side for Kosovo, and even the longer-term reconstruction of Kosovo, but also working on an economically viable vision for Southeastern Europe as a whole.

I think it's first worth recognizing that the countries in this region do face significant challenges, even for the countries that were not part of the Yugoslavia breakup -- Romania and Bulgaria -- their breakup from the Soviet Union economic system overnight certainly has led to a tough transition, to a market economy, and also to the competition that comes with having to trade and compete. They have to quickly update in terms of equipment and production lines to compete with those countries that have long had access to such modern ways of doing business and finance.

Secondly, the countries that formerly make up Yugoslavia -- Slovenia, Croatia, Macedonia and Bosnia -- really face a triple burden. First, they face the breakup of what had been an integrated Yugoslavia and economic system. Secondly, to some degree, many of them have infrastructure that has been devastated by war. And third, many had built up a dependence trade-wise on Serbia, whose economy has now been badly, badly hurt.

Third, these countries by themselves are relatively small. Their combined GDP is $82 billion, with 47 million people. If you compare that to Poland, Hungary, the Czech Republic and Slovakia, they have $280 billion for 65 million people. Some of the countries are particularly poor. Albania has only $1,200 income per person, GDP per person; Bosnia $300; Macedonia $960. Only Bulgaria -- Bulgaria has 9.6 million in population and Romania 20 million. Every other country has a population of below five million.

So what does this mean? It shows that it is essential for there to be -- that when you have such small countries, poor countries, the need for integration, the need to deal with them as a region, as a whole, the need for them to have broader access so they have the ability to specialize in areas that they can compete in, that they can trade.

Secondly, it also stresses the importance not only because of their size and relative poverty, but also because of the transition of being non-market economies into being integrated into the Western economic system for many reasons -- for the degree that it stimulates investment for their access to markets, and that these things are all related; when one has access to other markets, other people are willing to invest and build factories in those places if they believe they can trade from there.

Third, there is a reason to deal together in a region because of the history of war and the special reconstruction needs that they have. This explains largely why the Sarajevo summit is needed. Remember again, as I think Sandy and I have both stressed, at one level what is going on here is meeting humanitarian needs. And Sandy spoke of what we were doing in his speech the other day on that.

Second, is there will be a conference in the fall dealing with the more long-term on Kosovo. But the third issue is the economic sustainability and viability of the region as a whole. And that is what this summit is designed to discuss. And I think it does a few things. As Sandy said, the Southeast Europe countries will be meeting before. I think one can look not only to Marshall Plan analogies, but look to what we've seen even as we've dealt with the financial crisis in the last two years to know that the only thing that truly works is when a country takes ownership and is part of devising its own plan.

It has to be an author, it has to think through its own economic vision and viability. And in this case, you need the countries to think together as a region. So by having a focus where they are all meeting first together, it means that they will be coming to the meeting on Friday able to, having thought through, talked among themselves, able to communicate their sense of what the economic needs are of the region for the future.

Secondly, this will only work if there is a sense of an investment compact, an understanding between the Southeast European countries and other more developed countries and the international institutions that in exchange for concrete actions that they take to strengthen their economy, to make the transition to market economy, to make the kind of rule of law transitions that encourage investment -- that special efforts will be made, both bilaterally and multilaterally, to bring investment opportunities to the region -- investment opportunities that will allow for the sustainability and integration with the private sector.

And third, that we need to integrate Southeast Europe into the global trading system. These countries, as we've said, have low GDPs among themselves. They need to have the access to the more developed markets. This is where they will have the greatest opportunities for export and growth. Increased exports will help them with their foreign exchange. Access to markets will promote private sector development and export industries. And we believe very much that the simple contact brings forward the degree of technology and innovation and sharing that comes with being part of an integrated system.

And then we also believe as part of the trade integration that we should have a long-term goal of getting entrance for these countries into the WTO. Several are far along in the process. When the President is there Friday, he will talk with some more specificity about some of the things that the United States will seek to initiate, but they will seek to address the type of concerns and issues that we've laid out here.

Q How much money will this cost U.S. taxpayers -- this economic development of the region?

MR. SPERLING: Well, again, there's different levels. The $500 million that Sandy talked about was already part of the supplemental that had passed. It was already what had passed into law. As to the long-term needs for Kosovo, the World Bank and others have been out doing a needs assessment. I don't think that anybody has a clear picture, but there is an understanding that Europe would deal with the lion's share of that burden, though the United States is certainly committed to doing its part.

In terms of the types of issues we're talking about here, I don't believe that this will require as much substantial resources as an aggressive commitment to be part of this compact by the countries to make changes and by us to use the tools that we have in terms of opening markets, in terms of capital investment, to bring investment opportunities.

I don't know -- Sandy, do you have more on that?

MR. BERGER: Just two things. Number one, Kosovo and the region, I think in both cases we have made clear that we believe the Europeans must bear the heaviest share and the figure that -- the $500-million figure which we put on the table today in Brussels was subject to the Europeans and others putting substantial sums of money for Kosovo -- humanitarian assistance for Kosovo on the table.

Second of all, I think it's important to think of Friday's summit not as a money raising -- not as a donors' conference. Friday's summit is really to launch a regional compact with the rest of Europe, and set the direction on democracy, on security, on economic reform that will bring this region of the world eventually into the European mainstream.

Q Do they sign something, Sandy? Do these Balkan countries sign something, make public commitments? I mean, I don't understand what's going to come out of this thing.

MR. BERGER: There are two things that I think will be -- two material documents. Number one, the regional countries themselves in the meeting will present their own plans and commitments with respect to economic reform, with respect to democracy, with respect to security. That will be how this meeting -- after the open part of the meeting and the introductory comments, one representative of each -- three representatives of the region will talk about these three areas, what they're prepared to do. At the end of the meeting, there will be a Sarajevo declaration, which will describe the general commitments that have been made with respect to each of these areas.

Q Sandy, do you see some sort of economic or political structure emerging from this involving nations of the region? Something like an EU just within these nations?

MR. BERGER: I don't think -- let's see whether Gene has a different view. I don't believe that we envision a regional common market, for example. These countries really need more to trade with Europe and to trade with us and to trade with each other. That's obviously an important part of the trade is with each other. But in volume terms, where the growth is, there's access to the European market, access to all markets. So we want -- what will emerge, I hope, is a far more cooperative region, working together in all of these areas, but as a way ultimately of becoming part of the mainstream institutions of Europe -- the EU, NATO, OSCE, and others.

Some of these countries already are part of one or more of these institutions, but ultimately success here down the road is when you don't have a region of Southeast Europe which has really been left behind in many respects from the advances that have been made since the end of the Cold War with some exceptions, like Slovenia and a few other countries.

MR. SPERLING: Just to emphasize -- I think that one does need to distinguish between them having a common vision for the region as a whole, and thinking of a region as a whole as we go into doing investment compact, and simply having some form of customs union or something among themselves.

As Sandy said, these are relatively poor countries. Access to a single major U.S. or European city in many ways that offer more export buying opportunities than virtually -- than several of the countries combined -- but not only that; they want to be integrated with what brings them the kind of technological innovation and integrates them into the market. And I think doing that means having access to the EU, to the United States, and becoming an attractive investment environment.

And in terms of funds, in a sense the success of things will depend very much on the steps they take because there's nothing that one can do to lead to investment. One can offer certain opportunities, one can try to encourage, one can have certain types of subsidies, but ultimately someone still has to believe there is a viable, economic investment with a return to put funds in there, and those ultimately will depend on the steps that they take to -- that they take to give people confidence that they are making the transition to a market economy. And to the degree that happens, the type of assistance that we can provide will be very helpful, but it will not necessarily be money-oriented. It will be in the ways that we're able to open and help bring private capital there.

Q What's the prognosis on that, in terms of their taking those steps? I mean, how long do you think it's going to take to build that kind of confidence? How optimistic are you that they're going to be willing to adopt the kinds of things you're going to recommend?

MR. BERGER: Let me let Gene answer that question. But I want to preface it by saying -- it's a mistake to look at this region in monolithic terms. You have countries like Slovenia, who are on their -- basically about to be admitted to the EU. Bulgaria, for example, has undergone rather substantial economic reform; Romania that is in the process of reform. So you have a number of countries in the region that are at different stages of development, different stages of integration. And what we hope to do is to get them thinking together more regionally, working together more regionally, as a way ultimately of absorbing them into Europe.

MR. SPERLING: Just to back up what Sandy was saying, Slovenia actually has about $1,000 per person GDP. And Croatia has respectable, too. And then, on the other hand, Albania is $910. So you do have, as Sandy said, it is not monolithic.

But I think the overall answer is I don't think one should set -- I think I started this by going through what the burdens they face are. These are significant burdens. Any one of the burdens that many of the countries that were formerly part of Yugoslavia dealt with would be difficult. But, on the other hand, we've seen countries -- Poland, others -- who have been willing to make the commitment have revitalization and economic growth and modernization at paces far faster than anyone thought. So I think one should have reasonable expectations and judge it against the burdens that they face, but again, if you look in the past one can find examples of countries that have made the transition much better than expected, and others that have continued to struggle.

Q What is your assessment of Slobodan Milosevic's standing inside Serbia proper today?

MR. BERGER: I think that most people in Serbia today, to the extent that we can determine that, I think believe that he has led them down a path to destruction; that he has brought them four wars and a ruined economy. And I think we see that in the large numbers of people who have come out on the street, and I think we see it in other ways of people who have been in Serbia and have talked to people there. So I think there is a good deal of disaffection with Slobodan Milosevic and I think that one of the most important elements of Friday will be the empty chair. I doubt whether we will have an empty chair, literally, but we'll have an empty chair, figuratively. Serbia will be the only country in the region not there -- only country not part of an enterprise that means rebuilding and rebirth and growth and better lives for the people of the region. And that is a view shared widely among the Europeans and by us. And I think that statement will not be lost on the Serbian people.

Q What guarantee do you have that dissatisfaction or disaffection of Milosevic will be translated into some sort of government that the United States can live with or wants?

MR. BERGER: Well, ultimately, the Serbian people will determine their own destiny. There is growing opposition to him not only in the civilian sector, but in the military sector. You saw General Perisic this week come out in opposition to Milosevic, former chief military -- head of the VJ. So this is obviously military people protesting the lack of pay.

I can't write the script, but I do believe that opposition to him is growing and that we will support those in Serbia, and others in Europe will support figures who are working for democratic change in Serbia.

Q The Finnish President has invited one of the opposition leaders to Sarajevo. Was that with the cognizance and approval of the United States? Are other dissidents being invited as well? And will there be any attempt to coordinate strategy in Sarajevo to destabilize Milosevic, clandestinely or otherwise?

MR. BERGER: Well, I believe President Djukanovic will be there from Montenegro. There may be other opposition figures that President Ahtisaari has invited. That certainly has our support. I don't think the purpose of this meeting is to concert our efforts with respect to change in Serbia, but I think that there will be a very clear statement by virtue of the fact that something here is moving forward -- a new Southeastern Europe is taking shape -- and the Serbian people are going to have to decide whether they are simply going to not be a part of that and continue to suffer because of their leadership, or whether or not they want change.

Q -- opposition of Milosevic continues to grow within Serbia, and it comes to a point where there are towns or even whole regions that are open in their opposition to him, is there a possibility that there will ever be anything beyond humanitarian assistance for those places?

MR. BERGER: Well, that is an idea that has been discussed by some of the Europeans. I think it is something one has to be very cautious about, to assure that, in fact, any assistance is not directly or indirectly benefitting Milosevic. At this stage that is not something that we are prepared to do, but we will obviously discuss it with our partners.

Q How much of an obstacle economically will the absence of Serbia be to fulfilling your vision of --

MR. BERGER: I think Serbia is an important part, historically, of this region, and has been an important part of the former Yugoslavia. And, therefore, it is obviously easier to envision the integration and rebuilding of this region with a democratic Serbia than without it. But we cannot envision Serbia's participation with its current leadership.

Q It's not clear to me what you all are expecting from this group of countries. Are you wanting them to meet shared principles that are pretty broad, or are you looking for specific targets of performance or changes --

MR. BERGER: Well, i think this meeting is a beginning, it's the launching of something that will take place over a period of time. And i would hope that coming out of this meeting there would be not only agreed principles and agreed directions, but also agreed mechanisms by which the region will cooperate among itself and with the rest of Europe and the United States.

Q Sandy, while we have you there, could you tell us why General Wesley Clark was given notice that he would end his term as SACEUR two months early?

MR. BERGER: Well, let me say, first of all, that General Clark is a superb commander. The President has the highest degree of confidence in him. He believes that he did a terrific job as our commander in South America, SOUTHCOM. He's done a terrific job as SACEUR. And he did a superb job in the prosecution of the conflict in Kosovo -- witness the fact that we won.

The CINCs are appointed generally for two-year periods, with generally a one-year extension. General Clark was appointed in July of 1997. He was extended for one year recently. Now, in contemplating the successor to General Clark a year from now, Secretary Cohen believed that he had, in the person of General Ralston, the Vice Chairman of the Joint Chiefs, a particularly exceptional follow-on commander. General Ralston, if he doesn't assume that command by April of next year, will have to retire under the rules of the military.

So we're talking about General Clark serving for another nine months, then, if the Senate confirms General Ralston to replace him, General Ralston taking his place. But I can tell you that the President has the highest regard for General Clark, believes that he has conceived and executed a strategy in Kosovo that was superb. And we look forward to his continuing to serve as SACEUR for the next eight months and hopefully we'll find other ways in which he can serve his country after that.

Q Sandy, another "while we have you here" -- why is the White House and NSC interested in setting up a computer system to monitor all the computers in the country, and how do you address the concerns that this would give the government too much access to personal and financial information?

MR. BERGER: Well, let me try to put this back in focus. More than a year ago, the President issued a presidential directive, PDD 63, asking us to look at the vulnerability of the critical infrastructures of this country to outside disruption, terrorism. And that's not just our cybersystems. It's also our power systems, our electrical systems, et cetera. But an important part of that is cybersecurity. And as you all know, increasingly things are run by computers and controlled by computers, and increasingly, we're seeing the vulnerability with computer systems to outside penetration.

Now, as part of this plan which is being developed -- it's not gone to the President yet -- there has been developed a system, essentially an intrusion detection system for federal government computers. The Defense Department already has such a system; the rest of the government doesn't. So that if there's an attack on the IRS, the FAA immediately will have notice that there is an intrusion into a system and be able to take countermeasures. This is extremely important. It's extremely important to the American people that their IRS information, that the ability to run an air traffic control system, that the Social Security system -- that all of these computers systems be safe and secure. And that is what this plan seeks to do through a number of initiatives, including this detection system.

I would say on the privacy side, that we're very sensitive to the privacy issues. The President has appointed a privacy advocate who is at OMB, to -- for a number of purposes -- but who is in particular working with the team that is working on this initiative to make sure that the appropriate safeguards are taken to protect individual privacy.

Q Well, you're talking not just about government information, you're talking about industry and the whole process?

MR. BERGER: Well, part of this initiative -- we can't, obviously, impose any kind of system on other industries. There are advisory committees in which we're seeking to educate various industries to the problem. Some industries are very far along in terms of their cybersecurity. Some industries are surprisingly primitive and this is simply -- that element of this is principally to help them come to grips with their own vulnerabilities.

Q Is it possible to protect these computers systems without a certain intrusion into people's privacy? Is this a case of the ends justifying the means?

MR. BERGER: No. I think if somebody attacks the IRS and gets into my tax file, that's a violation of my privacy. And I think that if wehad a system that makes that less likely, that's a protection of my privacy. So this is not a black or white issue here.

Obviously, we are very concerned about protecting privacy rights, but there is also a privacy right of not having hostile entities attack systems. We're not only talking about 17-year-old kids in their basement. We're talking about governments that we know are developing systems to go after our -- get access to our computer systems, and we know that, in fact, as has been reported in the past, there have been intrusions into sensitive systems. So I believe that we have an obligation to protect sensitive information, national security information, information that goes to the safety of the American people. And what we're trying to do is to create such a system and do it in a way that protects people's privacy rights.

Q Will the Russians be represented in Sarajevo? Will the Russians be there?

MR. BERGER: Yes. Prime Minister Stepashin will be in Sarajevo.

Q Sandy, you keep bringing up the issue of the IRS. Did anything happen? Anybody try to infiltrate their system or any other --

MR. BERGER: Well, I'm not going to go into specifics. All I can tell you is this is not an abstract problem. This is a -- and it has been widely reported by the media of instances where the Defense Department has had efforts to penetrate its systems, and other agencies. Defense actually has spent a fair amount of time and effort building various detection systems. But what we're trying to do is bring the rest of the government systems up to that level.

Q Speaking of compassion, at his press conference yesterday, the Vice President said it's time for both countries to sort of change our mind-set after the Cold War. Did Stepashin give the Vice President any assurances that the Russians would cut back on their spying in the United States?

MR. BERGER: Well, this is one of those issues which is best, I think, dealt with through private discussion rather than public discussion.

Q Sandy, one more on Stepashin. Yesterday, Stepashin and Gore hinted that -- or talked about cooperation on the ABM Treaty and possibly resuming cooperation on some ballistic missile defense programs. Can you tell us anything about what kind of cooperation they're referring to?

MR. BERGER: Well, if you go back to Cologne, when President Clinton met with President Yeltsin, they agreed to begin discussions soon -- August-September -- on further defining START III and on changes that may be necessary to the ABM Treaty, should we decide to go forward with a national missile defense. The Russians agreed to have those discussions and those will go forward, as I say, sometime in the next few months.

One of the things that President Clinton discussed with President Yeltsin -- indeed, President Reagan discussed it with President Gorbachev at one time in a far more ambitious context -- was that a national missile defense program, should we go forward with it, is not aimed to protect the United States against Russia. We have deterrents -- we have to have credible deterrents to do that. It's aimed to protect the United States against the threat of ballistic missiles from rogue nations.

Now, that is a threat that's faced not only by the United States, it's also faced by Russia. So it is conceivable that we could cooperate on some elements of this program, again, if we decide to go forward. No decision has been made, the President will not make that decision until next year. But it is conceivable that we could cooperate in such a way that would protect, of course, American security, but would also provide tangible benefits to the Russians and give them, therefore, greater incentive to make changes in the ABM Treaty.

Q Do you have a readout on the Arafat call?

MR. BERGER: The President spoke today both to Chairman Arafat and to Prime Minister Barak. They both reported to the President on the meeting that had taken place between Arafat and Barak, I guess either yesterday or the day before at this point. Prime Minister Barak, as he said when he was here -- said to Chairman Arafat that he had every intention of implementing the Wye Agreement if that was their mutual desire. He had some ideas with respect to how Wye and final status talks might be merged at some point that he wanted to lay out for Chairman Arafat, which he did.

There will be further meetings at a working level over the next few weeks, at which point I think we will have some decisions about whether we're going down the Wye road, or whether or not we're going down a road that has some modifications.

Q Any reply from Assad yet?

MR. BERGER: Reply to what?

Q The President's letter? To the President's letter that was sent over --

MR. BERGER: No.

Q Gene, no hard figures to be announced on Friday of assistance?

MR. SPERLING: No.

Q No hard figures?

MR. SPERLING: We may have -- the President may be being more specific in some initiatives to encourage investment and trade, but they'll not necessarily be in the form of dollars or outlays. But we will have more specifics.

MR. LOCKHART: Before Gene goes -- anything on taxes and budget?

Q Yes. You said over the weekend the President will veto a $500-billion tax cut proposal over 10 years. He's proposed $250 billion -- Democrats are saying $300 billion. How high realistically can the President go in working out a compromise with Congress that would avert a veto?

MR. SPERLING: Let me put it this way: If you were doing analysis of our whole plan -- and I would certainly encourage everybody here to do their analysis of the different plans -- I think you would find that if there was anything to criticize about our plan, you might suggest that we were too tight on discretionary -- domestic discretionary spending; that once you have built in our defense increase, that we have by the year -- 10th year of our plan, significantly less than inflation in the 10th year. So even under our plan we have probably as much as a 10-percent cut in real terms in domestic, discretionary spending.

Now, if you start from that -- if you start from the notion that we already have a tight budget on domestic discretionary spending, not as some people have claims and big new spending -- if anything as I think the Washington Post editorial page and Bob Green and others have suggested, ours may be a bit too tight. Now, if we have $250 billion of tax cuts in our proposal, and we already have a tight domestic discretionary budget which funds education, public safety, health, environment -- everything -- fighting crime, drugs, all the things that are very important to the American people -- and somebody who comes forward with something greater, larger, has an obligation to show people how much more would they go below that, or much less would they do for Medicare.

Right now, it's very hard to describe the Republican budget because the numbers that they are suggesting are so unimaginable. Over the weekend, we heard members of the Republican Party say they're not only going to have an $800-billion tax cut, they're going to pay down a couple hundred billion dollars extra in debt. And Senator Lott says he'll meet us on defense spending. So add those up. That would come to a 50-percent real cut in government by the year 2009 -- 50 percent, cut the entire government in half.

Now, if I went out and I said they were going to cut education in half, they'd say, no, we're not going to cut education in half. If I said they were going to cut veterans' spending in half, they'd say, no. Well, every time they protect something there, the other cuts go 60, 70 percent.

So I don't think we're going to make progress on this until people start doing what responsible members of Congress and this administration have done for years, put together a whole budget. What we've said is, an $800-billion tax cut unquestionably deserves to be vetoed. It would starve Medicare up to the point of its insolvency and lead to dramatic cuts in domestic priorities like education, health and science.

At $500 billion, a compromise option was being put out in the Senate. As we made clear over the weekend, those numbers don't add up as well. They would lead to, again, too little for Medicare and too deep cuts for everything from education to science to public safety. I do not -- if somebody has a suggestion, if somebody wants to go beyond ours, let them show us -- let them show you, let them show the American public -- what their whole budget implications are.

You know, if you look at what Chairman Greenspan has been saying, he has been talking about how one should deal with a projected surplus. When you don't know that the money is going to come in the out-years, when it's just projected, what's the responsible way of dealing with it? If you take that money and pay down the debt -- just to pay down the debt, or for savings for Medicare or Social Security, you are saving funds. If projected surpluses don't turn out, you've done the most responsible thing in the meantime.

If you allocate these funds, whether it's for large new spending or large new tax cuts, and your surpluses don't work out, then you have left a very starved government, a starved Medicare, possibly starved Social Security, for the future.

So the President has said a $500-billion tax cut would threaten our ability to fund Medicare, Social Security and education. He'll veto it. We have not seen a package that goes over $300 billion that meets the President's test. If there is such a package, I think someone needs to come forward and show how it all fits together, how it won't lead to starving Medicare, how it won't lead to hurting defense, how it won't lead to starving education and other priorities.

Q So $300 billion is the maximum?

MR. SPERLING: You know, what I'm not going to do is get into something where we say a figure and someone says, well, what if you did $10 billion higher or $10 billion lower. When there's been something specific on the table that was viable, the Senate bill, the House bill, the compromise, we've been willing to come out and say that we would veto those bills because they threatened Medicare, Social Security, debt reduction, education. I'm not going to get into each hypothetical.

But I am saying that so far I have not seen somebody put together a complete plan that goes above $300 billion and provides adequate funds for Medicare and education and other priorities.

Q Gene, Senator Daschle came out of the White House last week saying that he understood that he had an ironclad commitment from the President not to go above $295 billion. You're not saying exactly that now; you're saying, well, let's see it and see how it works. Is there such a commitment, which Daschle again today is saying there is, or is there not?

MR. SPERLING: Well, you know, again, we have a policy of, one, I'm not going to go into what his private discussions were with each and every senator or our colleagues or our strategy. And I don't want to get into the situation where people put out hypothetical packages and we go to each specific.

I will tell you, and I'll tell you as clearly as I can, that we have not seen, nor do we believe by the way our numbers look, that you can put together a package that goes over that amount that does not starve our ability to save Medicare and not let it go insolvent in 2015, and have adequate amounts for military readiness and readying our people for the 21st century. So I think that we are pretty hard on that. I'm not going to get into the hypothetical veto game throughout -- we've never done that and I'm not going to start now.

Thank you.

END 1:55 P.M. EDT