THE WHITE HOUSE
Office of the Press Secretary
For Immediate Release
May 2, 1997
PRESS BRIEFING BY
THE PRESIDENT'S BUDGET TEAM
The Briefing Room
4:30 P.M. EDT
MR. MCCURRY: Good afternoon, ladies and gentlemen.
Before we break out the champagne in Erskine's office, I thought you
would like to talk to some of those who directed and conducted the
very successful negotiations on behalf of the White House that have
resulted in this historic balanced budget agreement.
I think all of us here at the White House right now are
paying an extraordinary tribute to Erskine Bowles, the President's
Chief of Staff, who really, on behalf of the President, ran and
directed both our negotiating team on the Hill and then the economic
team here at the White House that set the negotiating instructions
and really reviewed the issues.
Some of the members of the team are here, and I'd like
to just pay tribute and tell you more about the people, both with me
here and some who are not here. In addition to Erskine, Frank
Raines, the Director of the Office of Management and Budget, is here
with me to brief you. The Secretary of the Treasury, Bob Rubin.
Janet Yellin, the Chair of the Council of Economic Advisors. And of
course Gene Sperling, who is the Director of the National Economic
Council. In addition, because they can't be here, I would also pay
tribute to John Hilley, are extraordinarily gifted Director of
Congressional Affairs, who had to leave town but who would otherwise
be here, and also Larry Summers, the Deputy Secretary of the
Treasury, and Jack Lew, the Deputy at OMB have both been part of this
team that almost on a daily, hourly basis has been working with the
President and the negotiators to produce the successful outcome that
we're all proud of today.
I turn the podium over now to the President's Chief of
Staff, and say congratulations, Erskine.
MR. BOWLES: Thank you very much, Michael. I think, as
most of you know, one of the things I said when I stood at this
podium a couple of months ago is that the only way I could
rationalize coming back to Washington was to have a chance to work on
truly a historic agreement to have what would be a bipartisan
balanced budget. And that we have achieved today, and I cannot begin
to tell you the pride that this team has in what we have
This is something that many, many people have worked at,
many, many people have tried to do in the past, and we have actually
achieved it after many, many hours of long and intense and arduous,
but I must say very fair, negotiations with the other side.
I think this bipartisan balanced budget that we have
achieved, too, is a direct reflection of how far we have come over
the last four years. If you just remember four years ago, when
President Clinton was elected to office, we were looking at annual
budget deficits of $290 billion a year, and those budget deficits
were forecasted to go to $400 billion to $500 billion by now.
We were looking at annual deficit-to-GDP ratios at that
time of almost 5 percent. We had one of the highest deficit to GDP
ratios in the industrialized world.
During the last four years, this team behind me has
brought down those budget deficits not once, not twice, not three
times, but all four years -- from $290 billion down to $107 billion.
And we now have the lowest deficit-to-GDP ratio of any of the G-7
countries. That is remarkable progress to bring that deficit down 63
percent in just four years. And just yesterday we announced that we
believe the budget deficit this year would be about $75 billion,
marking the fifth straight year of deficit reduction.
So through a lot of hard work and a lot of real
practical approach to fiscal discipline, this economic team, through
the President's 1993 plan, has brought real fiscal discipline to this
country and we have come a long ways towards balancing the budget.
Now we're going to take that last step towards achieving a balanced
budget by the year 2002.
Let me tell some of the things that are going to be in
this balanced budget that we are particularly proud of. Not only
will this budget be balanced but it will reflect the priorities and
the values of this President. And there will be in this balanced
budget health benefits for 5 million kids, kids who are currently
uninsured. There will be the restoration of benefits lost in welfare
reform for legal immigrants. There will be funding for food stamps.
There will be funding for welfare-to-work so we can move people from
welfare to work. There will be the largest education funding
increase in over 30 years. There will be funding for major increases
in Pell Grants. There will be funding for America Reads.
And the education tax credits and the education tax
deductions that the President talked about that will be so beneficial
to the middle class, they will be included in this balanced budget.
And there is also a huge victory in there for American people, on the
nondiscretionary domestic spending side, where we were able to
protect the President's priorities.
We are very, very proud of this balanced budget. We
believe it is the final step in bringing us all the way towards true
fiscal discipline in this country, and I am delighted to have had a
chance to be a part of it.
Now let me introduce you to Frank Raines, the Budget
Director, who really did all the heavy lifting, along with John
Hilley and Gene Sperling, to make this happen.
MR. RAINES: Thank you, Erskine. What a great day this
is for all of us and everyone in the nation who believes that we need
to have a strong and sound national economy to benefit our people.
What tremendous news. First we get the news that for the first time
since 1973 the unemployment rate has dropped below 5 percent. Many
of us thought we'd never live to see that happen again. And now
we've got the news that we are going to -- we have an agreement to
balance the budget for the first time in three decades.
So incredible things continue to happen in this economy
and in our effort to try to preserve the economic growth that we are
seeing. And I have to tell you, I'm very proud to have been able to
be part of a team that the President and Erskine have put together to
try to reach this result. It hasn't been easy, but for all of us, we
knew that there were few things more important that we could do in
our lifetime than to try to help bring sane economic policy back to
this country after a decade when that policy almost brought us
You know, immediately following the President's
election, he announced that his first priority was to try to reach a
bipartisan agreement to balance the budget. And we've been working
on that ever since.
In February, he sent up his budget that outlined his
plan for how we might balance the budget by 2002. And in this
agreement, what we have is an agreement that essentially adopts the
President's proposals regarding defense, adopts the President's
proposals regarding international affairs, adopts the President's
proposals regarding domestic appropriated spending.
In this agreement, we adopt essentially the President's
economic outlook for the next five years. In this agreement, the
President's plan to reduce entitlement spending over the next five
years while investing in important programs for our people has also
There are new benefits in the Medicare program at the
same time that we restrain the growth of the program, modernize the
program, and ensure that it will be fiscally sound into the middle of
the next decade.
The Medicaid program, we restrain growth in the program
while at the same time investing in kids, restoring benefits that
were wrongfully stripped from legal immigrants in this country, and
restoring some of the benefits that, again, wrongfully, we believe,
have been eliminated for some of the most vulnerable citizens in the
food stamp program.
Now, we have a large expansion of health coverage for
children that many people would only have dreamed of several years
ago. And in the program, we have a tax program that the Secretary of
the Treasury will be talking about that is one that makes a great
deal of sense for Americans and it reflects the priorities that the
President has been talking about ever since he first ran for office.
So for me, as someone who worries about the budget, who
came from the financial area, who is very concerned about having not
only a balanced budget but one that reflects our values, this could
not -- could not be a better day. And it is one that I am very proud
to have been a part of this effort.
Let me just finish by saying one thing, in putting this
into perspective, and how difficult this process was -- the
negotiations were essentially about how we would allocate $9 trillion
of taxpayers' money over the next five years. It's not surprising
that that takes a little time and that you want to be careful about
how you do that. And we think that this agreement is a careful use
of taxpayers' money, investing it in those things that the American
people believe in the most, and that will bring them the kinds of
benefits in the future by investing in human capital that will
provide growth and opportunity for all Americans.
This will provide, for the United States, the soundest
fiscal policy of any nation in the world -- of any industrialized
nation, we will be far and above. As I've said to some of you many
times, the effort in other countries has been how to get their
deficits down to 3 percent of GDP. This year, we'll be at 1 percent
of GDP, and the deficit will be at zero -- one of the only major
industrialized nations -- the only major industrialized nation that
has any hope of achieving that.
And by doing that, what we're going to do is to extend
this economic expansion that's providing so much opportunity for the
American people and that we believe is what the American people have
really sent us here to do for them.
SECRETARY RUBIN: Thank you, Frank. As I was listening
to Erskine and Frank, I was thinking to myself, if you go back to the
transition -- not this transition but the original transition before
the first term -- and Gene and I were both there. We met with the
President for about six hours -- well, then President-elect down in
Little Rock. And he talked about education and the importance of all
the things we needed to do for the future of the country. And then
he said, but threshold priority right now, after 12 years during
which the federal debt has quadrupled, is that we must get back to
And who would have thought -- and out of that, of
course, came the powerful deficit reduction program of '93, which
brought down the deficit well over 60 percent, that in my judgment is
absolutely central to the good economic condition we've had in the
last four years. But who would have thought back then in Little Rock
we would now reach a day where we entered both a balanced budget
agreement and had 4.9 percent unemployment and, as Frank just said,
had a deficit in the current year that's likely, A, will be the fifth
year in a row the deficit is down, and is likely to be in the
neighborhood of 1 percent of GDP. It really has been a remarkable
period ,and I think today is a truly remarkable accomplishment.
Having said that, within that context, let me comment
very briefly on the tax package. What we agreed to was an $85 billion
net tax cut over five years, which is a tax cut that we can now
afford because of the economic growth and economic success of the
past five years. Within that context, there is a provision that
protects the education programs that the President proposed in his
original budget, the tax credit and the tax deduction. Most of that
$85 billion on a net basis will be used to fund programs that will
benefit middle income people. And as the President said in his own
remarks in announcing the budget arrangement, there is protection
against an explosion of tax cuts in the second five years, which is
extremely important in terms of making sure we don't get back into an
era like we had in the 1980s.
So I think that we have really reached an agreement
overall that is very good for the American people and will continue
the kinds of economic conditions we've had over the last four and a
half years, and, within that context, a tax segment which is also
good for the American people and will do its share in promoting the
kinds of economic conditions that we've enjoyed for the last four and
a half years. And I think we now have taken a major step toward
continuing for the years ahead.
MR. SPERLING: Well, I can say without reservation,
today is a great day. It is a good day, it is a very good day for
the White House. It's a good day for Democrats. It is a good day
for Republicans. It is a great day for the American people and for
the American economy.
As Bob said, when we came here, we didn't just have the
challenge of balancing the budget and bringing the deficit down; our
vision was that we could both bring the deficit down and increase
private sector investment while also increasing public sector
investment at the same time in key areas of education, protecting the
environment, Medicaid, programs that helped poor people like the
earned income tax credit.
In the first four years, we showed that could be done
through our '93 deficit reduction plan. But in '95 and '96, we did
spend more time warring with each other on the budget than working
together. And the fact that 1997, already in the first few months,
has been a year of working together and getting a balanced budget
that protects key priorities like education for the American people
makes this a very, very great day indeed.
I have been very blessed with the people I have had a
chance to work with on our first economic team and our current
economic team. It was a very good time to be NEC Director and to
have Erskine and Janet and Bob, Frank, and everyone as a team,
because our instructions were very clear from December on: We were
supposed to try to put the partisanship behind us and work together
with Republicans and Democrats to get a bipartisan balanced budget
agreement. We have done everything from toning down the rhetoric to
making gestures when appropriate to have a new atmosphere that will
allow us to work together.
We've had a great team here. The people who worked with
us up on the Hill, I have to say, Senator Lautenberg, Congressman
Spratt, their top aides have all worked well with us, but I have to
say that it has been particularly excellent experience to have worked
with Senator Domenici -- Chairman Domenici and Chairman Kasich and
Bill Hoagland and Rick May, their top aides. They worked with a real
sense of decency and good faith with John Hilley and Frank Raines and
myself for many, many weeks, through many, many long meetings -- that
we had pre-briefs here and then post-briefs afterwards. It's been
one continuous budget meeting.
But I also want to say, John Hilley is not here, at the
nexus of congressional knowledge and budget knowledge, there are not
many people who can compare with him. And I know he's not here, but
he played an incredible role in this.
I also want to mention Chris Jennings, our health care
expert, who has had to go through the most technical and difficult
MR. MCCURRY: He just went to get the paper for you --
MR. SPERLING: I want to just mention real quickly what
you're probably very interested in, which is some of the facts and
some of the things that we've got an agreement to. On Medicare, we
have $115 billion in savings. This will put the trust fund out to
the year 2008. That is a very significant accomplishment for the
country and, just as important, it gives us time to now work
together, hopefully through another bipartisan process, to take care
of the long-term Medicare.
Q Are these savings or cuts?
MR. SPERLING: These are $115 billion --
Q In cuts?
MR. SPERLING: They are -- you can use any term that you
want to -- (laughter) -- because you can say, you're slowing the rate
of growth. You can say cuts. You can say whatever. The important
thing is, we felt it was good policy. We started at the bottom and
we looked at what was good policy, and I'm happy to say on Medicare,
we never went a penny above what we thought was good sound policy.
Q How do you get it --
MR. SPERLING: What's that? Let me just -- some of the
benefits that are in there is the mammography and diabetes and
colo-rectal preventative benefits. We also have reduction in the
One thing that we think is very important is, as the
President mentioned, as we did put home health care in Part B, we are
counting that as part of the premium, but we are phasing it in over
seven years, so that the average recipient would only see their
monthly payment go up around a single dollar next year and about a
dollar more each year after.
At the same time, we've made an excellent policy
improvement by expanding the number of Americans who are protected
from paying any additional premium, which is -- and we have increased
those so that instead of everyone being protected 125 percent and
below poverty, it's 150 percent and below poverty.
On the President's discretionary spending -- pardon me?
Q Is that an income --
MR. SPERLING: It's more about $15,000, because
remember, this is poverty level for older Americans.
Q You're saying -- that makes over $15,000 will pay
this extra premium?
MR. SPERLING: That is right.
Q Are you saying it's $12 a year for the first year?
MR. SPERLING: That would be the amount additional that
you would pay, is about $12 a year -- about a dollar more a month in
your monthly premium.
Q And then a second dollar more a month in the second
year and a third dollar more --
MR. SPERLING: Yes, right, right. And we feel that by
-- most things that are in Part B are covered under the premium.
This keeps the policy consistent. But this policy is good for the
Medicare program. This is not like situations in the past where one
was just having a premium increase as a way of savings. This was to
facilitate a shift that allows the Medicare trust fund to help be
protected to the year 2008. And by protecting everybody 150 percent
below and having to be so marginal and phased in, we think this is
sound policy and we are very happy that we have the support for this
proposal that we do.
On discretionary spending, the President's proposal,
with the improvements we had today which was another $8 billion for
highway and transportation, the discretionary spending is only about
$12 billion lower over five years, or about a little over $2.5
billion a year than the President's initial proposal. To give you a
sense of the magnitude, in the last two Republican budget resolutions
there was usually a $40 billion to $45 billion difference per year.
So in terms of the area of our government that protects education,
fighting crime, drugs, the environment, medical research, we have
come extremely, extremely close to the President's budget. And that
is a very significant and important fiscal achievement for the
In education, we are very happy that they agreed to our
America Reads proposal, one of the President's key initiatives; to
the education tax cuts of $35 billion for a $10,000 deduction and a
HOPE Scholarship tax credit. Additional presidential priorities that
are in this are our welfare to work program, both the tax cut -- up
to $5,000 for hiring a long-term welfare recipient -- plus the $2
billion welfare to work jobs initiative; $16 billion in a new
children's health program that will allow us to cover up to $5
million more children who are not covered.
On the environment, our brownsfield initiative, our
Superfunds initiative that was announced in Kalamazoo. I think, over
all for us, this was extremely close to the budget that we set forth
with the priorities we have. We had to make a few compromises on a
couple of tax provisions that were not our priorities, but other than
that, I think this is very, very close to the budget that this team
put together and I think we're very, very happy with this agreement.
And we will work our hearts out now to pass it.
Q How did you crack the welfare provisions on
immigration and children and so forth with the Republicans? Weren't
they going to stand pretty firm on that?
MR. RAINES: Well, let me take a crack at that. You
know, when the President signed the welfare bill he had a series of
things that he said needed correcting in the bill and vowed that he
would correct them. We made proposals to do that. And as you may
know, the first reaction from the other side was to stand pat and to
defend these provisions that we thought were outrageous. But over
the process of discussions with them and really reasoning with them
on the facts, we found that it was possible to persuade them that
these provisions were unreasonable. And over a period of time and, I
think, very good and healthy discussions, they came to agree with us
that these provisions went too far.
And so, with regard to legal immigrants, we were able to
fundamentally change these provisions so that elderly disabled
immigrants will not lose their benefits and be without protection
even if they'd been living in the country for years and years and
years and worked and paid taxes. So that was a product really I
think of persuasion more than anything else.
Q A question about the tax cuts -- $85 billion for
the first five years. What's the figure for the second five years?
SECRETARY RUBIN: The outside figure for the second five
years -- it goes to a total of $250 billion, so the --
Q Inclusive --
SECRETARY RUBIN: Inclusive of, yes, inclusive of. So
it would be $165 billion. And we'll, in addition, have a side which
will say that the leaders are committed to not having tax cuts that
are explosive in the second five years.
Q Does that mean this is double the revenue drain
from the first five years? Doesn't the $165 million already explode,
versus the $85 billion in the first five years?
SECRETARY RUBIN: I think not because I think if you go
through an analysis of the various types of tax cuts that you're
likely to have, I think -- we spent a lot of time on this and we
originally had some disagreements and we kind of narrowed it and
reached agreement on a number that all of us felt was reasonable
protection given that you're going to have growth in the economy,
don't forget, so the economy of growth, the revenues and everything
gets larger as you get into a second six years.
Secondly, a number of these tax cuts will phase in a
little bit, so you'd always expect to have a larger number in the
second five than the first five.
I'll tell you, we spent a lot of time on this. The
President was very, very focused on not having an explosive second --
Q Was this five plus the capital gains and the estate
SECRETARY RUBIN: There are no specifics with respect to
capital gains and estate tax. It is expected, since the Republican
majority is very interested in both that there will be provisions on
both. We do have protection with respect to the President's
Q What's the mechanism to make sure that the tax cuts
don't balloon? You can write a letter but what's the mechanism?
SECRETARY RUBIN: Well, in the agreement it will say
that the aggregate over 10 years -- the net for the first five years
is $85 billion, and the aggregate over the 10 years will be $250
billion. So you're protected by the agreement and then the scoring
that will take place by the JTC. And the letter will also say that
if there are differences between JTC and Treasury, then we'll have
consultations with each other to iron out differences.
Q But if the law on cap gains is changed, wouldn't
the law need to be changed again if the projections start to come in
higher than they currently are?
SECRETARY RUBIN: Well, all of this is based on initial
scoring at the time that the tax bill is enacted. Obviously, once
the tax provisions are put in place you get all kinds of unexpected
effects. Right now, for example, revenues are much higher than
anybody expected -- well, not higher than we expected because we had
actually had, I think, pretty real -- in fact, very real projections
Q Mr. Secretary, there's a lot of attention being
paid in the media and on the Hill to -- CBO apparently recalculated
its estimates and you came up with a $200 billion extra windfall, $40
billion extra a year to spend. When did you find out about that and
how much difference did that make in being able to reach this final
MS. YELLIN: We recognized, have been recognizing that
the economy has been doing very well, the tax revenues have been
pouring in at a faster rate than CBO assumed, that it looked as
though the economic assumptions built into the OMB baseline which we
have always been proud of our record in forecasting -- this
administration has consistently had conservative forecasts and used
those as the basis for its budgets. We believe the assumptions in
our baseline are quite conservative, and I believe that CBO, over the
last several weeks or months, has come to a similar conclusion and
decided to come closer to --
Q When did you find out about the number that you're
going to have $40 billion more a year to spend, and how much
difference did that make in being able to get the final deal?
MR. RAINES: Well, there's a little more drama here I
think in what people think than is what occurred. We have been
talking really since we introduced the President's budget about what
are the appropriate economic assumptions to be used. And throughout
the negotiations it has become clear that we were going to be able to
move the Republicans closer to the administration's economic
projections. And so for a long time we've had that underway, and
that was in talking to the budgeteers. We had not been talking to
CBO on this.
And I believe that what has happened is essentially the
CBO, in an effort to bring their economic projections into line with
the reality that all of us were seeing in the revenue, came to the
conclusion that they ought to update their numbers. But in terms of
the negotiations, we have always assumed that to balance the budget
over this period of time, we would have to move to the more realistic
OMB economic assumptions.
In the end, the difference in 2002 is not very great in
its impact. It did provide some -- probably the ultimate validation
of our point. And when we had the ultimate validation of our point,
we said, now that you recognize our point would believe those
resources ought to be part of this deal. And so we did have some
efforts in the last day or so to try to recognize that remaining
resource. But in 2002, the important year, it wasn't a lot of money,
but it was enough for us to make some adjustments.
Q -- $10 billion, $20 billion?
MR. RAINES: I think in the last year it was down to
about $11 billion or $12 billion difference between where our number
was and what the CBO final number was, and so it --
Q Some people are suggesting it's not that hard to
balance the budget when you find $200 billion extra. Would you like
to confront that suggestion?
MR. RAINES: Well, I recall when we introduced our
budget, that lots of people said, this is totally unrealistic, you'll
never get anybody to agree to these changes that you're proposing in
Medicare, changes -- the reductions you're proposing in discretionary
spending, the policy changes. And sure enough, here we are, just
several months later, and we have a bipartisan agreement on that very
So balancing budgets is never easy, because the one
thing you shouldn't do in attempting to balance a budget is not to
reflect reality. And the reality is that we have seen this economy
grow faster than the models that they've been using traditionally has
shown -- not projections, just the fact -- with our much better
estimating record, we nevertheless underestimated the performance of
the budget by $50 billion on average. And I'm proud to announce, we
underestimated again in 1997.
So this is a very consistent pattern, but it's not
unusual in Washington for there to be a little lag in reality meeting
up with the policy process.
Q Can you describe exactly what you did on CPI?
MR. SPERLING: Can I just add one thing on that? We had
a plan -- we had a plan negotiated, and we were in the process of
discussing that plan -- the three of us were -- when we found out
about this yesterday evening, that there was an improvement. So this
was not funds or sources that were needed for us to have a bipartisan
budget agreement. I think what it did do is it gave a little bit of
room to make some adjustments that some in the Democratic Congress
thought would help get some support and I think help solidify this as
a truly bipartisan budget agreement.
And I think there was a certain logic in saying that, if
the numbers were better, that something like on the Medicaid per
capita cap, where you have a program that is for health care for poor
Americans where we were being rather -- we had a Medicaid per capita
cap, we thought there was legitimate argument with the better
numbers, that if that would help get more support to not have that in
the plan, that that was a reasonable concession to some people who
had some honorable differences and some honorable concerns with us.
So, in the end, it may have helped increase some of the
support, make this more bipartisan, increase the chance of it
passing, but the major outlines and construct of the entire agreement
were well, well in place before we knew about this information.
Q Erskine, could you map out how do you get from here
to a Rose Garden ceremony?
MR. BOWLES: How do you get from here to a Rose --
Q How are you going to get it passed -- map out your
MR. BOWLES: I think we will have -- I think we'll get
there and I think we'll get there as you do in most things; we'll
have to work hard to get the votes. We're going to have to spend a
lot of time in consultation with folks on the Democratic side to
explain exactly what's in there. We'll have to do the same with the
Republicans. But we plan to do that missionary work, to make sure
that people fully understand what the cost and what the benefits of
this program are. And once we have done that spade work, we believe
we'll make it.
It's going to take some selling on our part, but we
think once people understand what's in this package, they'll realize
it's a good package and it does bring true fiscal discipline to this
Q What are your assumptions on CPI?
Q Are you going to require a separate vote on taxes?
MR. BOWLES: Just whatever would be in the normal course
Q Are you going to require a --
Q What's that mean?
Q You're assuming some change --
MR. BOWLES: It's our assumption.
MS. YELLIN: The Bureau of Labor Statistics has
announced a number of changes that it intends to make in its CPI
program. One of those changes is an adjustment for what's referred
to as lower level substitution bias, starting no later than January
of 1999. And we've built an estimate of that effect into the
baseline, along with a few other things that BLS has announced that
it intends to do in the CPI. And there's nothing else.
Q What's the estimate?
Q The change on the CPI index?
MS. YELLIN: Well, a number of things --
MR. RAINES: There was a difference between the
administration and CBO on estimating into the future. In taking into
account what BLS has said, and also -- recently and in the past --
there will be about a .3 difference in the CBO estimate, but it's
going to make it comparable to our estimate, as we've always had in
the budget. CBO didn't have all of the things that we had put into
the budget, but also BLS has made a change. So there has been a
convergence in the actual estimate.
MR. SPERLING: I think, though, just to make clear, in
terms of what people had read in the paper over the last few days,
what you had read was that this experimental index that Janet was
speaking of, that BLS would incorporate into their automatic CPI was
going to bring .15. In addition, there was another change that BLS,
from our understanding, thought would be completely appropriate and
good policy in making a more accurate cost-of-living index that would
have been another .15. That .15 would have required some
authorization from Congress.
There was a decision made by, I'd say, leaders on both
sided of the congressional aisle, that this budget would have a
better -- and the good things in it would have a better chance of
passage if that .15 and other things like it were dealt with in a
different context, outside of this budget.
So in terms of that .3 that you heard, it's just been
.15 that would have required some congressional authority has been
The other .15 is something that would happen in the
normal course of BLS' affairs. Though even as Janet would tell you,
.15 is just an estimate of where they will come out.?
Q So are you including a change in CPI or not?
MR. SPERLING: No.
Q It's only .15 in this budget?
MR. RAINES: There's no legislated change in CPI in this
Q -- you're assuming just .15, that's all.
MR. SPERLING: That is right, though according to
several Congressional budget experts, they think that there may have
been some past BLS adjustments made that they may not have fully
incorporated. So that may help in the baseline sum. But in terms of
what you've been hearing and thinking -- in terms of what .3 -- the
.15 that had been at times considered during the negotiations has
been put -- is not in the balanced budget agreement. Even though
there is indication from BLS that they do think that might make for a
more accurate Cost of Living Index, there was consensus on both sides
that particularly with the stronger numbers and the need to get a
true bipartisan budget agreement, it would be better to deal with
changes like that in a different context.
Q Gene, what are the total domestic discretionary
cuts, and where do they occur?
MR. SPERLING: Well, as I said, it was only -- ended up
being about 12 off our baseline -- off our budget -- or, as I say,
about 2.4 a year, which we are very, very happy with. And Secretary
Rubin, who of all of us, fought the hardest to keep our domestic
discretionary baseline -- and that had nothing to do with the fact
that he's the only one of us who actually runs a department, I assure
you. We're very, very -- we're very pleased with that number.
MR. RAINES: In terms of the number off the baseline --
it's 58 or 59 -- with most of that -- was already reflected in the
President's budget, obviously as part of the President's balanced
Q Where is it?
MR. RAINES: I'm sorry, where is it?
Q Where is it?
MR. RAINES: It's -- well, it's the other way around.
Well, in terms of the $12 billion, we haven't allocated the $12
billion yet across programs, but it's a very small number out of --
MR. SPERLING: Most of it's from the Treasury
Department, I think. (Laughter.)
MR. RAINES: I mean, we basically have $1.2 trillion to
work with to come up with the $12 billion, so I think we'll be able
to find it.
Q What about Medicaid? Can you tell us what happened
on Medicaid when you took out the per capita cap?
MR. RAINES: Oh, sure. Again, when we were mentioning
the -- as we began to win more and more of this discussion on which
were the most appropriate economic numbers, it became clear that with
the resources that were available that we could begin to look back
and say, of all the changes we've made in this budget necessary to
balance, where could we direct resources that would have the biggest
impact on the most vulnerable people in our society. And we looked
at the Medicaid program where we were already investing. But we
said, let's also look at the per capita cap. And that was a proposal
we made to keep the Medicaid expenses from exploding. But it caused
a lot of concern among advocates and governors -- there might be
unintended consequences. We still believe it was a good mechanism in
making hard choices. But when it became available -- it became
apparent we didn't have to make that particular hard choice, we were
very happy to eliminate the per capita cap as a proposal.
Q So what do you do instead? Is there any other
modification to Medicaid to --
MR. RAINES: We continue with our proposal with regard
to disproportionate share hospitals. And so, there's still savings
in there related to that.
Q Mr. Bowles, to what do you attribute this sweetness
then light now with the Republicans? Was it the government shutdown?
And who made the most concessions in this?
MR. BOWLES: Oh, I think it's just that we're all such
really nice people, and this is such a pleasant place to work in.
(Laughter.) And everybody gets along real well. And so, it was no
No, I think really, the truth is there was extraordinary
good faith on both sides of the aisle in trying to put this together.
The meetings that were -- where John Spratt and Senator Lautenberg
and where Chairman Kasich and Domenici and where our guys were in
negotiating the deal it was very positive. All of us wanted to
balance the budget.
So, instead of trying to find ways to break up the deal,
we tried to find ways to put it together. We had tremendous
leadership from the President, from Senator Lott and from the
Speaker. All of them were very positive. We tried to work together.
We tried to resolve our differences rather than spread ourselves
Q In 1990, when we went -- the first day the deal
looked pretty good, then the distributional tables came out, and
things started to fall apart. Do you have tables yet that show which
incomes levels benefit the most from these?
MR. BOWLES: We don't have tables yet. We will have
tables eventually, but I assure you we have spent a good amount of
time thinking about it. And we believe that once we have a chance to
explain this budget to the American people and the benefit this has
to the middle class that we will go a long ways --
Q Are you saying the lion's share goes to the middle
MR. BOWLES: No, what I'm saying is, I think when we
have a chance to explain the benefits of this budget to the middle
class that we will go a long ways toward getting the votes we need to
pass the budget.
Q A question on the tax cut, though --
SECRETARY RUBIN: We don't have distribution tables yet.
In the fullness of time, we will. But I think what Erskine said is
exactly right: if you take the gross or net tax cuts, either way you
look at it -- although we don't -- there are no specifics yet other
than the protection of the President's education tax credit -- the
preponderance of that money is going to be spent on tax cut that are
oriented toward middle income people. I don't think there's a
question about that, because you're going to have a large child tax
credit and an education credit, and those will be the two largest
pieces of the package.
Q Can I take out the --
MR. SPERLING: Mara, we don't have it, but let me just
give hypothetical. If it ended up being around 130 gross and you
have $25 billion or $30 billion -- I don't know, we haven't agreed.
But just as an example, the estate tax and capital gains would be in
that range. When you look at the children's tax credit, which -- if
you did their plan -- ends up being $15, $20 billion -- we don't know
-- plus our $35 billion, the overwhelming majority -- 70, 80 percent
of these are either for education tax cut or children's tax cut,
which the President proposed. So, the overwhelming amount of the tax
cuts would benefit working, middle class families.
Q And just one more question about the tax cuts.
This side letter that says that the tax cuts will be kept to a
certain amount in the second five years --
SECRETARY RUBIN: Yes, actually, the agreement will have
a provision that the $250 billion I mentioned, which is $165 billion
-- that will actually be in the agreement. There will be a side
letter which will also say -- from the leaders -- saying that the tax
cuts will not explode in the second five years.
Q Does that mean that there's --
SECRETARY RUBIN: That's in addition to the protection
in the agreement itself.
Q Does that mean there's a mechanism that they
trigger down to the $165 billion?
SECRETARY RUBIN: No, it's really just a statement of --
we have the protection of the $250 billion number over ten, and then
in addition, there's a side statement in a letter which will have the
content I mentioned once a moment ago. But all this has to do with
the initial tax program, and its scoring.
Also, Gene validated my comment on the other.
(Laughter.) And illustrated it.
Q Are you going to require a separate vote on taxes?
SECRETARY RUBIN: There will be a separate vote on taxes
Q Can I ask you a tax question about the children's
tax -- what will be the rules for that?
SECRETARY RUBIN: The tax program itself is now going to
have to be worked out with the Finance Committee and the Ways and
Means Committee in the ordinary course. The various provisions --
the constraints, if you will, or provisions that we mentioned in the
agreement or in the side letter were intended to create a framework
for that. But there are no specifics with respect to the child tax
credit at this time. We obviously have, as you know, the President's
proposal. Republicans have a proposal. I don't -- I think it's
pretty easy to see what the parameters of this in a rough way will
Q Secretary Rubin, if I could follow up on Helen's
questions -- two years ago in February '95, the budget the
administration presented did not forecast balanced budgets at all,
much less within a set period of time. Do you accept the argument
that Republicans deserve some credit for forcing -- even as they've
had to accommodate to some of your priorities -- they essentially
deserve credit for forcing this on the national agenda where it was
SECRETARY RUBIN: Oh, I think -- I'll tell you -- and I
think -- I want to repeat something Erskine said -- I think the
atmosphere around this negotiation really has been remarkably good.
I really do. I've been here four and a half years, and I've watched
people interact with each other. It has been a very good atmosphere,
and I think everybody deserves a great deal of credit.
But if you want to talk about deficit reduction in this
country over the last four and a half years, I think there is one
person who has been heads and shoulders above everybody else, and
that's the President. He took on this tough issue in 1993. As you
know, he had -- he won by one vote in the House. He had a tie in the
Senate, and the Vice President voted with him. (Laughter.)
And in 1995, we put in our budget what he said. And you
can go back and take a look at the text as he said, this will take us
another step toward deficit reduction, but we also have to deal with
health care and other entitlements. And that was very much oriented
toward continuing this program.
Q Can you tell us what assurances you got --
SECRETARY RUBIN: I think the President has driven
deficit reduction and has brought it to a reality in this country.
Q What specific assurances did you get on education?
As we understood it, Chairman Archer was reluctant to -- of the tax
writing process, and that was one of the things holding this us in
the final days?
SECRETARY RUBIN: Well, without going into personalities
and all of the backs and forths, on the education tax credit -- if
that's your question -- the agreement will say that the -- will have
both a -- I think Gene or somebody may have mentioned this before
--Frank, perhaps -- there will be a tax credit and a tax deduction
modeled after what the President's proposed and will have --
Q -- by five --
SECRETARY RUBIN: Yes, it does. And it will have at
least $35 billion over five years.
Q Is that one of the things that had to be worked out
in these closing hours?
SECRETARY RUBIN: Well, it's in the agreement.
Q What's in the revenue raising package? It's $50
billion, you say, but does that have all of your --
SECRETARY RUBIN: There are no specifics, but there will
be $50 billion that we've -- you have a gross tax cut in the first
five years of $135 billion, of which $50 billion will be financed out
of the code -- the airline tax credit -- the airline tax takes care
of $30 billion, so then you have to get another $20 billion. We had
made a whole series of proposals. And obviously, that's what we'll
all be working together with the Finance Committee, Ways and Means
Q Do you expect though to be proposing the same moves
that hit Wall Street again?
SECRETARY RUBIN: We didn't hit Wall Street. What we
did was to take a very sensible look at the tax code and look for
loopholes. And I'm sure those will be the provisions that we'll be
discussing with Ways and Means and Finance.
Erskine made a good point. We do have -- and we were
told that we could say -- the leaders have agreed that the earned
income tax credit and the low income housing tax credit, other
programs like that that are designed for the poor will not be -- will
not be part of the corporate raisers.
MR. RAINES: Let me add one point that goes back to this
question on deficits. If you really step back -- and I wasn't here
before, so I -- I can't -- I take no credit for the great progress
that this administration has made in reducing the deficit -- but if
you really look at the difference in policy that's represented in
this agreement, the real difference is in the 1980s the theory was
deficits didn't matter -- that all you had to do was to cut marginal
tax rates, and the economy would perform well, and deficits didn't
matter. But what everyone understood by the beginning of the 1990s
was that deficits did matter. And what this represents is the
triumph of the view that the President has been advocating that
deficits matter and we ought to eliminate them.
And beginning in 1993, to today, he has been persevering
in reducing this deficit and ensuring that it disappear, while at the
same time, doing something again people said you couldn't do, which
was move funds to invest in those things that are most important for
the American people.
So, if anything, I would say this is the tide of
Clintonomics in the 1990s, showing that if you have a disciplined
fiscal policy with good investments by the government you can have an
economy that performs better than anyone would have dared to have
estimated in 1993 when he put this program in effect.
Q Is there any means test for Medicare in this?
Q With this economy and a plan, how soon do you think
it would be in surplus? Sooner than 2002?
MR. RAINES: Well, our estimate is 2002, but given how
well we've been estimating the deficit, and if you were optimistic
you might say it could be better. But 2002 I think, given how hard
we've had to work for this deal, we'll be very happy.
Q -- deficit will be this year?
MR. RAINES: We believe -- we have not made a formal
reestimate, but all the indications are from this very strong economy
and steady growth that the deficit will be probably in the -- at
least in the mid 70s, down from I think we were estimating 127 before
this. So we're right there with our -- 127 estimate this year -- but
we're right there with our $50 billion era again. (Laughter.)
Q When you said you have a lot of selling to do, when
do you think you're going to actually pass it?
MR. RAINES: Well, I believe that you're going to see
this agreement move very quickly in terms of a budget resolution.
The budget chairmen are determined to move quickly, to catch up.
They're running behind in having a budget resolution. So I think
you'll see that moving very rapidly in the next couple of weeks. And
once that's adopted they will give their instructions to the other
committees and they'll begin to move legislation and hopefully
everyone who has planned a September vacation will be able to take
Q Secretary Rubin, now that -- assuming you get this
budget plan enacted into law, will the President then move on to
address longer-term financing questions surrounding Medicare and
SECRETARY RUBIN: Well, he has said on a number of
instances that he believes that we need to have effective bipartisan
processes on both those issues. And I think getting a balanced
budget program in place does, in fact, clear the air so that we can
more easily go on -- or more readily go on to deal with these issues.
And a balanced budget agreement in and of itself is enormously
important for our economy. But I think it has an additional benefit
in that it does create a better environment in which to move on in a
bipartisan basis to address these issues.
Q Is the criticism of the Democrats valid in saying
they were not in on the takeoffs and process at all, you were more in
touch with Republicans?
MR. BOWLES: It's very, very difficult to negotiate any
deal with 535 people involved. We tried to do the best we could in
keeping all sides informed. Congressman Spratt and Senator
Lautenberg were there from almost the very beginnings of these
discussions. We tried to be inclusive, to make sure that they and
their staffs were included in all of the serious negotiations. We
worked hard to make sure that we kept people informed.
Could we have done a better job? Absolutely. I'll take
the blame for that myself. But I think in the final analysis we will
have, once we have a chance to fully explain it to the members, we'll
get the support we need to pass it.
Q Mr. Bowles, you started off this briefing in a
somewhat celebratory mood --
MR. BOWLES: I am in a celebratory mood.
Q Since then, at regular intervals, you've mentioned
things where details haven't quite been worked out yet. What makes
you think that it's okay to go ahead and crack open the champagne at
this point? Why isn't there a good chance of --
MR. BOWLES: I think almost all of the major items have
been negotiated. I think clearly there is work to be done; no one
discounts that. The Congress always makes changes and modifications
to any proposals that come over there. But I think we have done a
lot of the heavy lifting and I think we can go forward and get this
balanced budget done. I think we have a lot to be proud of. This is
an historic day for this country.
Q Anticipating the general capital gains tax cut that
the Republicans would like to push through as they move forward in
committee, what about your proposal on homeowners -- the tax break?
Is that retained in the agreement?
MR. BOWLES: We expect it to be in there.
Q Is the President going to insist that any cap gains
break is targeted or goes to individuals or in some ways meets his
MR. BOWLES: In the capital gains?
Q -- on a rate reduction or --
MR. BOWLES: We're just going to work with the
committees on that and try to come up with a reasonable solution.
Q You seemed very close this morning to an agreement,
but there were some unresolved issues. What were those? Was it the
side letter -- or just give us a flavor.
MR. BOWLES: I think we probably had 15 discussions this
morning with all sorts of different people. We did have some
additional clarification on the tax side today and we also had some
additional clarification on some of the spending.
MR. RAINES: Can I add a little bit on an earlier
question that got into inclusion in the negotiations. This has been
a terrific process. Everyone now knows where Senator Domenici's
hideaway is in the Capitol because we have been meeting there off and
on over the last four weeks. We all are very familiar with the snack
habits of Chairman Kasich and Chairman Domenici and Senator
Lautenberg and John Spratt. We are well aware of the shortest route
to John Spratt's office from that hideaway in the Capitol. We've
gotten very used, over this period of time, of a skill that I think
Bob Rubin has really brought to a fine point, which is how do you
emerge and try to be responsive but say nothing about a topic --
(laughter) -- over a period of many weeks as others have found the
hideaway. I mean, this is the most well-known hideaway in the
history of the Congress.
Q What's the number?
MR. RAINES: Well, I can show you directly -- it's right
behind where the President was inaugurated. But this negotiation,
which went on in mornings and evenings and where you had the members
of Congress there. I mean, this was not a staff negotiation. I
mean, Senator Domenici was there. Senator Lautenberg was there.
John Kasich was there. John Spratt was there. People became experts
on areas. John Spratt is now the reigning non-economist expert on
the CPI in Washington, DC and gave a long explanation at the caucus
yesterday about it.
And since the -- in the last couple of weeks, we've been
meeting almost every other day with the Senate Democrats and they've
-- big turnouts for those sessions. We had a -- we've had two
meetings with the Democratic Caucus, the Democrat Budget Caucuses
have been meeting. So that in terms of participation, lots of people
have had input into this and in -- down to the last day, when we were
still taking suggestions from members of Congress about how it could
So, we didn't get to the luxury of going out to Andrews
Air Force Base, but we did have the opportunity to spend many, many
hours with the principals in this matter -- people who have been
working this issue for a long time. And on our side, as Gene said,
coming back -- meeting first with Erskine before; getting our
instructions; coming back after where he would judge how well we'd
done with our -- in carrying out our instructions.
This has been a very intense process, but I think the
important thing is -- a very human process. This has not been driven
by numbers. I've said to a number of you for a long time that this
was not a numbers problem. This was a problem of values and
And we found with these people we were negotiating with
the ability to put together an agreement that we could have mutually
agreeable values and where we both demonstrated the political will to
do the right thing.
Q Two last questions please? One last question?
What is the increase in the estate tax relief? From $600,000 to
MR. RAINES: There are no specifics on that yet.
MR. MCCURRY: No specifics on that yet.
THE PRESS: Thank you.
5:25 P.M. EDT
Bipartisan Budget Agreement