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LEAP YEAR
MARCH 19, 1996
TRANSCRIPT
Tuesday, President Clinton introduced his budget proposal for fiscal year 1997 in the midst of continuing debate over 1996 appropriations. The plan includes a tax cut along with savings in programs such as welfare and Medicare. The NewsHour discusses the proposal with OMB Director Alice Rivlin and Senate Budget Chairman Peter Domenici.
ELIZABETH FARNSWORTH: For the White House perspective, we talk now with Alice Rivlin, Director of the Office of Management & Budget. Thank you for being with us, Ms. Rivlin.
ALICE RIVLIN, Director, OMB: Delighted to be here.
ELIZABETH FARNSWORTH: You heard what Congressman Kasich said. He said this administration is addicted to Washington spending, Washington taxes, and does not trust the American people. What is in the budget that would refute that?
MS. RIVLIN: Oh, I think that's just ridiculous. This budget gets to balance over seven years using the Congress's own numbers. That requires very severe cuts. We have cut $124 billion from Medicare over the seven-year period, $59 billion from Medicaid, a whopping $300 billion from discretionary spending over that period. These are very serious cuts. We've done it in a way that allows a modest tax cut for working American families, especially families with children, and we get the budget to balance. That's what they said they wanted. They said let's balance the budget in seven years. This is a Presidential budget which does that. We just need to enact these savings and get on with the job.
ELIZABETH FARNSWORTH: This afternoon, the Republicans said that the spending cuts are delayed too long and that you're too sparing of the main entitlement programs. This has basically been their criticism throughout, is that not true?
MS. RIVLIN: No. I think that's not true at all. Their spending cuts are approximately the same in terms of phasing. When you're cutting a budget, you can't do it all at once. You have to phase in the savings. You're basically cutting a rate of growth of spending and when you do that, the savings accumulate, so they tend to be toward the end of the period. Our budget has about 60 percent of the savings in the last two years of the period which is exactly the same that their budget has. The differences are not in the phasing. The differences are in the size of the tax cut. They want a much bigger tax cut, and in order to finance that, they have to cut more deeply into programs like Medicare and Medicaid. That's been the issue all along. We have enough savings to balance the budget without cutting deeply into those programs, so the President is saying, let's get on with it, let's do it, let's balance the budget, and then we can argue later on whether we want to make bigger cuts in Medicare and Medicaid in order to finance a bigger tax cut.
ELIZABETH FARNSWORTH: Let's take a look at some of the specifics in the budget. The savings are to come from various areas. I'm just going to pick three, some large reductions in defense, which the Republicans in a press conference today criticized. Could you describe the kinds of cut in defense that you want.
MS. RIVLIN: No. We are not cutting defense. This is the same plan that the administration has had from the beginning. We're at the end of the period of phasing down after the Cold War, and we're beginning, as the nation moves forward, to modernize our force, which is the strongest force in the world. So in the next few years, we will actually be adding money to defense. The reason it looks as though defense comes down in our budget is the, the Republican Congress added to the defense budget last year some major spending that the Defense Department didn't even want.
ELIZABETH FARNSWORTH: How about in Medicare? There are cuts in Medicare. Now who will feel the pain in that?
MS. RIVLIN: Mostly the providers of Medicare services. We have proposed that the provider reimbursement rates for hospitals and doctors and the other providers of Medicare services be ratcheted down, that they not rise as much as they would otherwise rise. So doctors and hospitals won't get quite as much from Medicare as they would have gotten, but we think it'll be enough to provide very good services. We don't want Medicare to become a second class program, but we do not think that the beneficiaries should carry a heavier share of the load. We hold the premium, the Part B premium in Medicare at 25 percent of the cost, which is where it is now.
ELIZABETH FARNSWORTH: How about Medicaid? There are cuts there. Who feels the pain that?
MS. RIVLIN: In Medicaid, we think that if we give the governors a lot more flexibility, which is what they say they want, allow them to move Medicaid patients into managed care without seeking waiver from the federal government, that they can save money. We would put a cap on the expansion of Medicaid, a cap per person, so that it stops rising quite as rapidly, and we would save money over the next seven years.
ELIZABETH FARNSWORTH: And no capital gains cut. That's a major difference with the Republicans. Explain your thinking on that.
MS. RIVLIN: Well, we simply don't believe that a cut in the capital gains tax rates is a good idea. It has never been part of the President's plan.
ELIZABETH FARNSWORTH: Where does this fit in now to what I think you referred to today in a press conference as the three ring circus, the negotiations to keep the government from shutting down Friday, the long-term attempt to get a seven-year deal, and then this '97 budget, what has priority?
MS. RIVLIN: Well, I think all three things are important. Perhaps the most urgent order of business is the finish of the appropriations for the year that we are in now, fiscal year 1996, which is half over. There remain serious differences between the President and the Congress, especially the House of Representatives. The Senate has put back in some of the education spending that we wanted restored and some of the environment spending, so we're hopeful that we can work out a deal with the Congress over the next few days or the next week that will finish up fiscal year 1996, that we
have the new budget for fiscal year 1997, and the third ring, if you will, is the overall deal. The Congress and the President were talking actively in December and January about reaching agreement on a whole package of seven-year cuts in the budget to bring the budget to balance in 2002. They got very close, and we are hopeful that starting tomorrow, when the leaders come back to the White House, that we can reopen this negotiation and finish it up. There are enough savings that we all agree on to balance the budget and even give a modest tax cut, so the President is saying, let's just do it. Let's not wait till after the election, let's balance the budget now.
ELIZABETH FARNSWORTH: Do you think the dynamic will change now that Sen. Dole is the, the presumed candidate?
MS. RIVLIN: I hope so. I don't know what's in Sen. Dole's head, but the responsible thing to do, it seems to us, for the leadership of the nation is to stop bickering and get on with the job. We hope that the Senate and House Leaders will see it that way and join the President in a balanced budget over the next seven years.
ELIZABETH FARNSWORTH: Well, thank you very much for being with us.
MS. RIVLIN: Thank you.
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President has also made a big point with saying that, these are his words, that we're going to spend more on what we need; and I think everybody should know that from what I read in this budget, and I've tried to put it together with my staff--it's a lot littler document--but, you know, instead of spending more on what we need, I think we could say the President has determined that we need everything we got, because there is nothing terminated. Most discretionary programs are going up, and of course, I must say to everyone, that's only in the first year. Then in the second year, they start coming down but the President hasn't told us how they're going to come down.
SEN. DOMENICI: I'm not sure that I said that. You know, I, I just merely said this didn't change the President's any. We went down there, and on the entitlement programs, you've got to understand we changed an awful lot. We've reduced taxes dramatically. We've reduced the savings from, from welfare dramatically. We've saved the moneys that we want to keep in the social--in the Medicare system--to keep it solvent, we've reduced that so we don't make it solvent for as long, and I don't think the President has come that far, and he'll have to look at that very carefully, but I want to repeat, from my standpoint, I do not approach this saying, Mr. President, forget about it, you go your way, we go our way. I think I'm hearing--almost hearing Bob Dole say, let's go down there and see what we can do, and maybe we ought to work with the President. It may not be possible, but I think we ought to try.
SEN. DOMENICI: Well, look, she's right on Medicare, Medicaid, and obviously welfare reform. The President has not yet told us what he would sign. We're going to accommodate him, I hope, and send him a couple of bills, including welfare reform. He's vetoed it once, and he--and that's not, not in the balanced budget another time, and I think we ought to send him one, because I don't think he's agreed with it, other than to say he's for it. But let me suggest the tax issue is overstated by Alice Rivlin also, because the Senate was around a hundred and forty to a hundred fifty--excuse me--the negotiators in the White House--and frankly, you could set that tax cut aside and do the balanced budget activities and come along at a later time and do those cuts and have no impact on the budget. They are unrelated. The way they are structured, because they sunset and go out of existence, you can pass them and still have a balanced budget and they do not drive the Medicare and Medicaid savings as Dr. Rivlin contends.
SEN. DOMENICI: No.
