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Office of the Press Secretary

For Immediate Release January 27, 2000
                           PRESS BRIEFING BY
                      CHIEF OF STAFF JOHN PODESTA,

                           The Roosevelt Room

10:13 A.M. EST

MR. PODESTA: Maria Echaveste, who has been running the process to build the State of the Union, putting together the policy consults and to really work with the process of getting the drafts and working with the speech writers and getting the prep done, will be in. Obviously, Gene is here -- Gene Sperling and Bruce Reed are here. And Sandy Berger will join us at the end and talk about the foreign policy sections of the speech.

I think that the President will begin by talking about this great moment of prosperity and great moment of promise for the country. He's going to spend some time talking about the strategy that he and the Vice President brought to town in 1993, a strategy that has had proven results. We'll review that very briefly. He will challenge the Congress to get on with the unfinished business, to pass the patients' bill of rights, to pass the minimum wage, and to deal with critical issues that were left behind from last year's unfinished business.

But he's going to spend the bulk of his time challenging the country to take the long look ahead, to think about the big challenges facing the country, and then lay down a specific program of what we can do this year to go down the path that he will lay out. It will be consistent with his themes that he has talked so much about, of opportunity, responsibility and community. You can expect to hear those words.

Q I'm sorry, say those words again. (Laughter.)

MR. PODESTA: We're going to -- he'll talk about continuing on the path of fiscal discipline, continuing to pay down the debt. Obviously yesterday -- or a few days ago -- I can't remember any more --

Q The day before.

MR. PODESTA: -- discuss the fact that our budget will retire the entire federal publicly-held debt by 2013; challenge the Congress to extend the solvency of Medicare to 2050; challenge the Congress to modernize Medicare, to extend its solvency, and to add a much needed prescription drug benefit.

I think that -- there are strong sections on the environment. There is as strong section on science and technology. The President spoke at Cal Tech here last Friday, and I think he will talk about how investments in science and technology can power the economy forward and also do things like come up with new cures for diseases like cancer and diabetes, Alzheimer's and AIDS.

And then I think he'll spend some time this year talking about some new issues that have come up because of the wiring of the global economy and the growth of the Internet, how do we close the digital divide. He'll talk about the challenge to privacy in medical records and financial records, and the new threats that come, the new national security threats, which Sandy will talk a little bit more about later, that are the result of this new interconnected world, and networked world.

But that's kind of the structure of what he will be doing tonight. Maria, if you want to take a second, just talk a little bit about --

MS. ECHAVESTE: Sure, just the process of how we got here. And the first thing is that all those policy ideas, even those that are a sentence long, represents a lot hard work by a lot of people. With Gene and Bruce, and George Frampton at the Council on Environmental Quality, and Neal Lane at the OSTP, Office of Science Technology and Policy.

We did get a little late start this year, because we didn't finish the budget until November. But people had been working, and after the budget was done, put together some policy memos for the President, ideas to get some feedback, see what the President is interested in doing. And then we had a couple meetings with him in which he, as they -- the budget process and the State of the Union process sort of have to dovetail together and work, coordinated.

And then we sent an outline. Terry Edmonds, who, as you know, is our chief speechwriter, and he got his team together to send a draft that, yes, was very, very long. But we wanted to make sure everything was in there. And then we began the very important process of tightening, editing. And he has been working on it. And we keep getting back marked-up copies, and we've had several run-throughs, of which our -- it's not just simply reading the speech, it's thinking through, is this what we want to emphasize? Is this what we want to stress? And so I think we've had several really good sessions. We'll start again this afternoon and be ready for tonight.

The only other thing is, the other thing that -- we're the repository for innumerable requests for, special requests for mentions -- I've got eight pages, single-spaced, of everybody who's said, please have him say this.

MR. PODESTA: We may be making a lot of enemies tonight. (Laughter.)

MS. ECHAVESTE: Yes, exactly, and they all know my name. (Laughter.)

Q You mean people in the public or people in the government context?

MS. ECHAVESTE: Actually, across the board. It's really quite interesting how many people --

MR. PODESTA: A few members of Congress.

MS. ECHAVESTE: So I'll just stop there and hand it over to Bruce.

MR. REED: As John said, tonight the President will propose an ambition Third Way agenda. And we are confident we can get it done this year. Tonight's speech follows a familiar formula restoring the vital center by promoting opportunity and responsibility. Let me go over some of the major sections of the speech.

First, the President will call for a 21st century revolution in education and lay out a sweeping education plan. He demands more from our schools and invests more in them. And he is proposing an unprecedented increase in education spending, $4.5 billion in new spending, as well as a new $30-billion college opportunity tax cut that he announced last week.

He's also calling for an unprecedented level of accountability. The major education initiatives are, first, doubling funding for after-school to $1 billion, which will allow us to provide after-school and summer school to 2.5 million kids, including every child in every failing school in America. The largest increase in Head Start funding in history, $1 billion. That will take the program from $5.3 billion to $6.3 billion. We've already nearly doubled money for Head Start since we took office in '93. These new investments will build a foundation for our long-term goal of universal pre-school for every child.

He's going to propose doubling funding to turn around failing schools. Last year he called on Congress to pass his fund to turn around failing schools or shut them down. Congress gave us $134 million in the last budget to do that. We're doubling that to $250 million this year.

He has a new proposal to reward states for making progress on standard achievement; a $1-billion teacher quality initiative, including new proposals on higher pay for teachers in return for higher pay for teachers in return for higher standards.

He's going to propose a $450-million increase in class size funding, which will allow us to get halfway to our goal of 100,000 teachers to lower class size in the early grades. He'll talk about his school construction initiative, to provide urgent repairs to 5,000 schools a year, and his tax credit to build or modernize 6,000 schools. He'll talk about charter schools. And again, he'll talk about the steps we've taken to expand access to college, and finally open the doors of four years of college to all.

And we believe we can get this education plan done. We have doubled spending on education and training over the last seven years. Five years ago, Republicans were talking about dismantling the Department of Education. They don't talk that way anymore. Last year, they joined with us in enacting a record education budget, and we think that we'll be able to work together to enact these proposals this year.

The second big part of the speech is on rewarding work and family, with the goal of helping parents succeed at work and at home. He has already proposed a major expansion of the Earned Income Tax Credit. In tonight's speech, he'll have a new proposal to make the dependent care tax credit refundable. This helps cover child care costs, and it will enable the typical family of four with $25,000 in income to receive up to $2,400 to pay for child care.

He'll talk about the health care plan that he unveiled earlier this month to expand -- the CHIP program to cover parents, together with CHIP for kids. This new plan will allow us to cover nearly one-quarter of the uninsured in America. He will again call on Congress to join with him to strengthen and modernize Medicare, and make an impassioned plea for affordable prescription drugs for all seniors, and passing it this year.

He'll add a fatherhood agenda, including tough new child support measures, but also helping put fathers who have child support to work to pay it off.

The third big section of the speech is on crime and guns, with the goal of making America the safest big country on Earth; calling on Congress to finish the job of putting 50,000 more police on the street; passing the common-sense gun measure that has been tied up in conference for the past six months. And Tom Mauser (spelling), whose son Daniel was killed in Columbine, will be in the First Lady's box, and so that's a section of the speech to watch out for.

He'll talk about support for smart guns and increased gun prosecutions and some other measures. And then, in a moment Gene will want to talk about the New Markets section of the speech, which is also quite expansive.

John already talked about the environment, science and technology. The speech closes with a section on community, laying out a number of steps to build one America. He's proposes a new tax credit for charities, which Gene can talk about in a minute; calls on Congress to finally pass the hate crimes bill. And elsewhere in the speech, there is a strong plea to Congress to finish the unfinished business of the last century, passing campaign finance reform; passing a real patients' bill of rights; finally raising the minimum wage.

It's a big agenda, but we think we can get it done this year. Four years ago, everybody said we wouldn't be able to get anything done because it was an election year, but we went on to pass Kennedy-Kassebaum, raise the minimum wage, enact welfare reform. And the President will signal tonight that with or without help from Congress, he is determined to use his executive authority and the force of his agenda to get as much done as he can until the day we leave.

MR. SPERLING: Clearly the President will stress that much of what is good in the American economy and much of what is good in our budget estimates and budget surplus emanates from the fiscal discipline the country has exhibited over the last seven, years, and that certainly that has been an integral piece in what will soon be the longest expansion in our country's history.

He will certainly remind people that he stood before Congress two years ago and asked them to maintain their fiscal discipline in saving the surplus, and that because we have done so, and often with the President's veto pen, America has experienced back-to-back surpluses, and that if we stay on that path -- he will challenge Congress to stay on that path so that we can pay off the external national debt entirely by 2013, the first time since 1835.

He will, as he has been, stress that we should get a bipartisan down payment this year on Social Security reform by simply taking what has been an almost uniform commitment now to use the Social Security surpluses for debt reduction, and by simply doing the next logical step, which is ensuring that the interest savings from that debt reduction go not to other spending or tax cut measures, but to this purpose, to protecting Social Security.

He will also stress the importance of us reserving a substantial amount of the surplus and having new reforms, most dramatically prescription drugs, and both extending the solvency of Medicare to 2025 and, as I said, in offering the voluntary universal prescription drug proposal. He will make clear that he is allocating nearly $400 billion of the on-budget surplus for the purpose of extending the solvency of Medicare and for prescription drugs.

And finally, on the fiscal discipline side, he will, as he has in the past, stress that while there are many strong, bold and important initiatives, that all of this must be done in the context of the fiscal discipline and path of debt reduction that has brought us to the point we're at.

As Bruce mentioned, he will make a special effort, as he has so often, to stress that now is the time to make sure we are including all communities in our country in our prosperity. He'll stress his New Markets Initiative, how he's doubled the proposal. He will make clear his appreciation to Speaker Hastert for joining him in Chicago and pledging to work together on bipartisan legislation. And he will mention his new New Markets tour designed to close the digital divide this spring.

He will also make very clear that on open markets, that America must go forward, that we must have a new consensus on open trade; and that he will vigorously seek to achieve passage of China permanent NTR, as well as the CBI and Africa Trade Initiatives.

I have -- we are also putting out today more of our tax cut initiative. And I'll do that briefly, but I could go on as long as the President's State of the Union if I went into all the details. So I'll save some for your questions and I can be available later.

I think the overall context that the President has is that his overall tax cut will be approximately the same size as last year. We feel that there can and should be targeted tax cuts to address needs, savings, health care, education, of rewarding work, but they need to be done in a way that stays on the path of fiscal prudence and paying off the national debt.

He will propose today, as part of that package, a new RSA, retirement savings account. And this builds off what the President called upon in the '92 election, the IDAs, individual development accounts. It's also, in a sense, a form of the USA account. They are all geared at the same basic goal, which is that we do far too little to encourage lower and moderate-income families in our country to save, to accumulate wealth, and save for a first home and a dignified retirement.

Of the nearly $100 billion that we offer in tax expenditures every single year for retirement and savings initiatives, only $2 billion goes to families in the bottom 40 percent of the tax bracket. The families that struggle to go paycheck to paycheck, that need the most incentives to save, get the least incentives in our current system. And this President has made this a priority.

There was a lot of support last year in the USA account, but a lot of feeling that at a more manageable -- that people wanted more diversity in the package. This would be a $70 billion initiative, and what it would essentially do is for lower and moderate income families, when they started a new account at $100, they would be matched up to $1,000 for their contributions. So a family could contribute $1,000 and be matched $1,000. And the first $100 they put in, they would get an extra $100 match as an incentive to start these accounts.

These tax credits would go to the financial institution or the employer, so the match would go to the employer who would provide these funds. A family -- an individual who did this for his full life would accumulate $266,000 in savings if they utilized it to its full extent.

There is also, in an effort to do something about the fact that only 18 percent of people who work for small businesses have employer-provided pensions, we have a 50-percent tax credit for small businesses who provide automatic pensions to their non-highly-compensated employees. Together those two parts cost about $71 billion.

In addition, the President will propose a targeted marriage penalty tax relief. This provision, when phased in, will mean that the standard deduction for a married couple where both parents are working would be double the standard deduction of a single individual deduction. So, in other words, a married couple who both are working would have the same size standard deduction as if they were each working and filing individually.

In addition, in 2005 we would expand for all couples, whether or not they were facing a marriage penalty or not, a $500 increase in the standard deduction. This would cost $45 billion over 10 years and help 42 million families.

As Bruce mentioned, we are also expanding the child care dependent tax credit, expanding and making it refundable. And as Bruce said, what so many people have stressed is that however well-intentioned the dependant child care tax credit is for the families particularly making under $30,000, offering the tax credit when many of them have no tax liability does little to deal with what is an enormous burden and disincentive to work for many families, which is the high cost of child care. By both expanding the child care dependent tax credit and making it refundable, it will be a major piece of the President's overall agenda to take away the barriers to work for families who are trying to get into the middle class.

Finally, as Bruce mentioned, building off the Philanthropy Conference that the First Lady and the President did at the White House, we'll have three provisions that will encourage charitable giving. One that Bruce Reed and the First Lady's Office have worked on would say that for people who don't itemize, that 50 percent of their contributions over $500 they'd get a credit for. So this would allow the majority of Americans who do not itemize to also share the notion of getting deductions for charitable contributions. In addition, we would make things easier for foundations. And the third provision would allow for larger amounts of stock to be donated by individuals without hitting their income cap.

So those are the provisions we're putting out that we have not put out so far.

Q Gene, how does the stock conversion work for charities?

MR. PODESTA: There's a 30 percent limit right now.

Q Would you raise that?

MR. SPERLING: We are raising that to 50 percent. And this is something the people in the philanthropy community feel is very important to them, that there are many people who have accumulated significant wealth, stock wealth, but are discouraged from giving because they would come up against the 30 percent cap. Many of the foundations and philanthropy advocates believe this would get them greater access to some of the new wealth that's been created in the last five years.

Q And that's parity with cash now?


Q Gene, could you tell us -- you've got a $70 billion here, a $45 billion there -- if you add up all these things, all the President's proposals, the different education and tax initiatives, what does it all come up to?

MR. SPERLING: It will be approximately the same as last year, which would be that there would be a net tax cut of in the range of $250 billion. So in other words, it would be --

Q For 2001?

MR. SPERLING: For the next 10 years.

Q You said it's a net?

MR. SPERLING: That's net, that's right.

Q Does that mean that he still has some tax increases in loophole closures?

MR. SPERLING: We have a significant package addressing the unfair use of tax havens, shelters, loopholes that Treasury has worked on, and that will be in this package. When you net that out, the net tax cut, or the amount coming out of the on-budget surplus would be around $250 billion.

Q And the cost of the new initiatives in education and training and across the board, what would they be?

MR. SPERLING: I would say that -- we'll obviously have all the details out on February 7th, but you will see a gross tax cut in the range of $350 billion, and a net tax cut in a range of $250 billion. But if you're asking how much money are we dedicating from the over-budget surplus to tax cuts, it will be in the range of $250 billion.

Q Is there a tobacco tax increase in there?

MR. REED: We'll put out the details on the tobacco plan with the budget. Our proposal this year focuses primarily on holding tobacco companies accountable for reducing youth smoking.

Q A modified look back?

MR. REED: There may be something like that in there.

Q But there is no 55 cent per pack tax increase?

MR. REED: As I said, we'll put out the details. It will be available February 7th.

MR. PODESTA: I want to add one thing to Gene's -- I don't think anybody mentioned this, but the other three things, since everybody is interested in tax cuts, that we're talking about doing is, a $3,000 long-term care tax cut; a tax cut to help people buy into Medicare. The President has proposed that people 55 to 64 be able to buy into Medicare, and we'll provide a 25-percent tax credit to make that more manageable, and a tax credit who are in COBRA to keep their insurance when they're in between jobs.

MR. SPERLING: Another one that maybe some people might not have noticed was that we also put out something to deal with the relief from the alternative minimum tax. And I know many of you have written that. And the problem that is basically happening is that families with a large number of children, who are taking a large number of deductions, are starting to hit up against an alternative minimum tax that was designed to address wealthy taxpayers and corporations, not families which simply have lots of deductions because they have several children. And so this initiative gradually takes out -- exempts the child dependent exemptions from counting against the alternative minimum tax credit.

Q Gene, two things. Can you give us a ballpark figure on the tax -- shelter loophole closings? And a few minutes ago, you said that there would be an on-budget surplus for extending the life of Medicare and prescription drugs. Can you give us a breakdown there, in figures?

MR. SPERLING: About three-quarters would address solvency.

Q Okay, so roughly $100 billion for prescription drugs?

MR. SPERLING: Again, we'll give out all the details. But again, those are net numbers, so they don't -- so you have to remember that there are some offsets in savings. So what we're giving out is, we'll give you a sense of what is the take from the on-budget surplus.

Q And the loopholes, the shelters --

MR. SPERLING: I think you'll find it in the range of eight to ten a year.

Q Gene, is there any kind of threshold on the marriage penalty deduction?

MR. SPERLING: Let's see. I don't think so.

Q So, in essence, you're wiping out the marriage penalty?

MR. SPERLING: I don't think -- people have different descriptions of the marriage penalty. There are about 45 million couples who are affected by the differential treatment for a family versus an individual. Of those, about 25 million get a marriage bonus; they do better. And about 20 million do worse.

The system was essentially set up at a time when there was a single earner. So basically, if you have a single earner, the different rates are a winner for you. The people who actually face a penalty tend to be the reason -- two people working who are making near the same amount of money. And there's about 20 million of them. One of the ways to address that is by making sure that their standard deduction is no worse because they're filing jointly than it would be if they were filing individually.

There's another issue, which is, where the thresholds hit, 15 percent, 28 percent, et cetera. So there are very different variations of what people consider the marriage penalty. We feel ours is a more targeted one, because it tries to address those families that actually are experiencing a marriage penalty , as opposed to some which just go across the board, and actually spend tens of billions giving more to families that are already -- the 25 million who are already getting the marriage bonus.

Q Gene, I don't quite understand the numbers you're giving on the gross increase in the President's spending proposal. What is the total on the President's spending proposal?

MR. SPERLING: Again, the net tax cut is $250 billion. The gross would be between $80 billion and $100 billion higher than that. But we'll give out all the details when we put out our budget.

Q And that's for all of his new spending initiatives?

MR. SPERLING: I'm sorry, that's for the tax cut.

Q I'm talking about the initiatives.

MR. SPERLING: Let me say this. Last year, the President had a gross tax cut of about $322 billion and a net tax cut of $250 billion. This will be in the same range. The gross tax cut will be slightly higher because there are more loophole closures.

Q We were asking about appropriated funds. The cost of new initiatives and the figure that's out that's been in the press anyway is about $150 billion. Do you have a figure, or is that the figure -- about the new initiatives, the cost of the new initiatives?

MR. SPERLING: I don't know what people are adding up, but you can think of it in the following way. You're taking the entire Social Security surplus and putting that off limits to pay down the debt. Then there's an on-budget surplus which is in the ballpark of what I think most budget experts thought was the realistic CBO estimate that came out. A large chunk of that also goes to additional debt reduction to deal with Medicare. Anything else we're doing kind of new and above would have to fit in the remaining on-budget surplus.

We've described a lot of that so far -- $250-billion, approximately, net tax cut, and you've seen some of our health care initiatives. So I don't think there's any great mystery. I think we've talked about discretionary initiatives, it's a little difficult because sometimes one discretionary count's up and one's down, so it's not necessarily new additional spending.

Q Give us the gross and then give us the net, after offsets.

MR. SPERLING: On discretionary.

Q Just tell us how much you're going to spend overall and how many offsets --

MR. SPERLING: I just want to make one thing clear. This is not a budget briefing. We're getting done February 7th. What we're doing is, we've rolled out different levels of our initiatives and we're putting out another chunk of them today, and I think that most of the major initiatives have been put out. I don't think it's hard to figure out what the overall parameters are, because it has to fit within the on-budget surplus.

Q Let me ask you on Social Security, Gene, how much of the interest savings will be dedicated to shoring up Social Security?

MR. SPERLING: The way that our plan works is that we take the entire Social Security surplus and pay down the debt during this 10-year period. That creates significant dramatic interest savings for the government for years. What we do is say that those interest savings, having been created by debt reduction from the Social Security surplus, should be committed back to Social Security. That would allow us to extend the solvency of Social Security to 2050.

The point that the President has made repeatedly is that Republicans continue to use the phrase Social Security lockbox, which might give somebody the impression that somehow this was actually specifically benefitting Social Security. This may be committing Social Security surplus for debt reduction, but the benefits of that debt reduction remain completely unallocated under Republican initiatives. Not a single penny is committed to extending the life of Social Security by a single day.

When the President talks about a Social Security lockbox, or paying down the debt for Social Security, he's taking the interest savings after 10 years and ensuring that that's extending the solvency of Social Security until at least 2050.

And what the President said is that while we still need to have bipartisan process to go beyond, this is a bipartisan down payment we can do so we can at least extend the life of Social Security to 2050. We have never gotten a good response as to why Republicans would not support this reasonable provision.

Q John, can you talk about, first of all, what the President will say about the Vice President in the State of the Union, and secondly, is the State of the Union that the President gives this year different in some fundamental way since it's his last year from the ones he's given the previous seven years?

MR. PODESTA: Well, I think that you will hear him talk about the Vice President in much the same way he has in the past seven years. He's been his partner in this from the very beginning. He's led on certain issues. But I think you will see that it will be about the same as you've heard him speak about the Vice President in the past seven years on the critical issues I think he's played a leadership role on. Obviously, the Vice President has been the President's partner on virtually everything, but there are certain key questions where he's up front and has played a leadership role.

With regard to whether this is a different State of the Union, obviously it's the first State of the Union of the new millennium, as well as the President's last State of the Union. And I think that he will try to present to the American public a vision about where the country can go, what the big challenges are, taking, as Teddy Roosevelt said, that long look ahead, and then use that framework to lay down some concrete steps we can take right now, this year, to move down the path of greater prosperity and greater opportunity.

Q How much closer to the next millennium is this speech going to take us? (Laughter.)

MR. PODESTA: I think his horizons are large, but they're kind of consistent with human thought. No, he'll be talking about the challenges that we face from -- Sandy just came in -- from both the national security perspective and the economic perspective, from the education and health care, over the course of the next four or five years.

Q One thing on the numbers. I heard at one point that to extend the solvency of Medicare to 2050?

MR. SPERLING: At least 2050, yes. Oh, I'm sorry. Did you say Medicare or Social Security?

MR. PODESTA: Social Security to at least 2050; Medicare to at least 2025.

Q You mentioned that the President plans to use his executive authority as much as possible to get things done, with or without Congress in the coming year. Can you elaborate on that a little bit?

MR. REED: Sure. Well, in a host of areas over the last seven years, the President has used his executive authority to get things done for the American people with executive orders on privacy, on child support, on welfare reform, on medical errors and so on. We intend to continue doing that, for two reasons -- first, to get things done, to break the logjam in Washington, to not wait for the legislative process; but also our experience has been that every step we take through executive action also helps to build pressure for Congress to take action as well.

Q Can I just refine my question? Is this an attempt to expand the authority of the presidency itself?

MR. REED: It's an attempt to get things done for the American people.

MR. PODESTA: Let me give you another example. In 1996, when the Congress passed the Kennedy-Kassebaum bill, also an election year, they gave themselves a three-year deadline to put in place comprehensive medical privacy bills. They spent three years, they couldn't get the job done, they were gridlocked by various interests on Capitol Hill. The President made a proposal. That triggered presidential authority under the statute to provide real protection for mental records in this new electronic era. The President seized that authority, proposed regulations, and will finish the job this year and provide real privacy for medical records in this electronic world this year.

MR. BERGER: The second half of the speech is on national security. (Laughter.) What the President will do this evening is set forth the broad challenges that we face in an increasingly globalized world, at a time when we are at the zenith of our power and influence, to promote peace and democracy and a more widely-shared well-being. He'll talk about four or five of those broad challenges. One is to encourage the long-term transition of our former adversaries, Russia and China, into stable, prosperous democratic nations.

We have a great stake in supporting democracy and economic reform in Russia, even as it struggles with the legacy of communism, with a self-defeating war in Chechnya. The President will call for greater efforts with Russia on reducing the nuclear threat, as well as working cooperatively with Russia on threat reduction programs in Russia that will safeguard nuclear weapons and nuclear materials.

As for China, the best thing we can do to counter the government of China's illusion that it can foster stability at the expense of freedom is to bring China into the WTO and expose it to the kinds of forces of change that will occur. And, of course, that would be a big issue for this Congress, hopefully earlier rather than later in the year.

The second challenge is to protect our security from conflicts in a world that threaten our interests and our values. The President's obviously made enormous progress over the years in helping to bring peace to the Middle East and stopping two brutal wars in the Balkans, and advancing the peace process in Northern Ireland this year, and getting talks going on Cyprus.

Next year -- or this year is one of enormous challenge, particularly in trying to achieve a comprehensive Middle East peace and building the institutions of autonomy in Kosovo, and hopefully moving the process forward on Cyprus.

The third challenge the President will talk about is keeping the inexorable march of destructive technology from giving terrorists and hostile nations the means to undermine our defense. That means restraining threats from North Korea, from Iraq and Iran. It means spending more on preparing for biological and chemical threats to the United States. It means spending more and doing more on protecting our cyber-systems from hostile attack.

And finally, the President will speak about the challenge of narrowing the huge gap between rich and poor in the world, which is actually in some respects getting larger -- 1.3 billion people now live on one dollar a day or less. The President will talk about a number of initiatives.

Last year, he joined with Congress to do a very major debt reduction program, with our allies doing the same. We need to move that forward. We need to help countries build their democracies, fight drugs. The President will be submitting a $1.6 billion, two-year program to help Colombia fight the narco-traffickers.

There is in this budget an initiative for helping fight AIDS in the developing world, particularly in Africa, $150 million, and a new initiative the President will announce tonight which will provide tax incentives for private industry to develop vaccines for malaria, tuberculosis, and HIV/AIDS, that are particularly directed towards poorer countries where there is not the wealth and income to sustain the research on this kind of medical advance.

In general, the President will make a strong plea for leadership, American engagement, bipartisan, in the year ahead in foreign policy.

Q How much tax break on the vaccination?

MR. BERGER: It will be $1 billion over the decade, which will be essentially a dollar of tax credit for every dollar that is purchased by certified organizations that are distributing this in the developing world, for particularly new vaccines that are developed as a result of this initiative, in those three areas of malaria, TB and HIV/AIDS.

Q So it's actually -- the tax break goes after the vaccine has been developed to purchase it, as opposed to R&D for the pharmaceutical company?

MR. BERGER: The tax break -- it will be in some ways iterative. The tax credit will create a market for developing new vaccines on malaria, because they will be -- whatever the purchasing power that exists now essentially will be doubled.

Q How much will that help HIV, because it's much more expensive?

MR. BERGER: Well, it is -- there's a wide range of initiatives in the budget on AIDS and HIV. This is particularly directed towards the problem in the developing world, and particularly, for example, in Africa, where this has become a problem of such magnitude that it is affecting the stability of countries, the ability for them to maintain economic viability. And both the assistance for treatment of AIDS in the Third World, the $150 million this year, and the vaccine program are simply part -- in a sense the international part. I don't know whether Bruce or somebody wants to talk about that.

Q Sandy or Bruce, is this as much about distributing these drugs in countries that need them and really can't afford to buy them? Or is it really about R&D to come up with new vaccines, new treatments, new medications?

MR. BERGER: It's about the latter -- I mean, it's about both. This credit will only be available for new vaccines that are developed as a result of the initiative. But in assessing whether or not to invest X million dollars in developing a new malaria vaccine, companies will know that there is not only whatever market they think is out there by virtue of the countries themselves, but essentially times two.

Q Will he announce anything new about how the U.S. approaches Iraq? I mean, we're nine years after the war and Saddam Hussein is still in power. We don't have weapons inspectors on the ground.

MR. BERGER: The four pages I had on Iraq -- (laughter) -- Podesta cut, so we're probably not going to unfold a new Iraq policy. But essentially, our policy remains the same. That is, we're going to continue to contain the threat that Saddam poses to his neighbors, poses to the region, while at the same time working with others to bring about a regime change in Iraq.

Q What about the ABM or Comprehensive Test Ban treaties?

MR. BERGER: He will mention the development -- we continue to develop a national missile defense system, that he will decide on later this year. At the same time, we negotiate with the Russians in an effort to accommodate the ABM treaty to these changes. He will mention the Comprehensive Test Ban treaty, hoping that we can have, this year, a bipartisan dialogue on the treaty that will create a greater degree of common ground and understanding about what the treaty does and addresses some of the criticisms from last year.

Q They won't specifically ask for another vote?

MR. BERGER: Not in the State of the Union speech itself, no.

Q Is he going to talk anymore about the Clinton Doctrine, the notion of intervening in sovereign countries to prevent genocide or other chaos?

MR. BERGER: Well, I wouldn't describe it exactly that way. I mean, what has been called a doctrine is -- I think the President has said that where our interest and our values are threatened -- as they were in Kosovo, as they were in Bosnia, as they were Haiti, as they were in Iraq -- and where we have the capacity to act, particularly with others, we should be prepared to do so. But that doesn't mean that we can -- the United States can intervene everyplace in the world where there are wars or conflicts or turmoil.

Q Anything new on the Middle East that he might say tonight on the peace talks?

MR. BERGER: I think he will keep very much within the spirit of his admonition that less said and more done.

Q Is he going to meet with Barak in Davos?

MR. BERGER: I don't believe that Prime Minister Barak will be in Davos. Chairman Arafat will be in Davos and I think we'll meet with Chairman Arafat.

Q You will see Arafat, Sandy?

MR. BERGER: That's our expectation. People coming and going in Davos --

Q Anyone else, like the King of Jordan, who will be there, too?

MR. BERGER: I think the plan now is to have -- because the President is not going to be in Davos for a long period of time, and there are a lot of leaders there, and a lot of private sector people of real interest -- will be to have some sort of a larger reception in which the President has an opportunity to talk to a number of people, including certainly the King of Jordan.

MR. PODESTA: All right, thanks.

END 11:08 A.M. EST