THE 1998 FEDERAL BUDGET PLAN FEBRUARY 6, 1997 TRANSCRIPT

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The President has released a $ 1.69 trillion budget that includes middle class tax cuts, and new spending for education, children's health care, and crime prevention. The GOP leadership says the plan is a "good first step," but needs work. Of most concern are cuts in the "wrong" places, and not enough middle class tax relief. Office of Management and Budget Director, Franklin Raines, discusses the plan with Elizabeth Farnsworth, followed by a critique by Sen. Pete Domenici (R-N.M.), who speaks with Margaret Warner.

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A RealAudio version of of this segment is available. Kwame Holman provides background on the 1998 Federal Budget Plan. February 6, 1997: OMB Director Franklin Raines discusses the President's 1998 budget plan. January 30, 1997: The NewsHour historians look at the history of bipartisanship. November 12, 1996: Kwame Holman reports on the latest rounds of budget negotiations. November 12, 1996: Elizabeth Farnsworth discusses the budget negotiations with Senate Majority Leader Trent Lott (R-MS). Browse the NewsHour's coverage of the Budget Outside Links: The Office of Management and Budget has placed President Clinton's FY 1998 Federal Budget request on the Internet.

MARGARET WARNER: Often in the past the opposition party has been quick to label the President's budget "dead on arrival." Is there more receptivity in Congress this year? For that, we turn to Pete Domenici, Republican of New Mexico, and chairman of the Senate Budget Committee. Thanks for being with us, Senator.

SEN. PETE DOMENICI, Chairman, Budget Committee: Thank you.

MARGARET WARNER: How does the President's budget look to you?

SEN. PETE DOMENICI: Well, it's not dead on arrival. But if it's the bridge to the next century, let me say it's under construction. What the President gave us is not going to be the bridge. And we think for many reasons it shouldn't be the bridge. So I think we're in the process of constructing that bridge.

MARGARET WARNER: Now this afternoon at the press conference you made a fairly serious charge which was this wasn't even a balanced budget by the year 2002. What leads you to say that?

SEN. PETE DOMENICI: Well, what I said was if you— if they have used the Congressional Budget Office, as we do, their budget will be $50 billion in the red in the year 2002. So it is not balanced.

MARGARET WARNER: So you're talking about economic assumptions?

SEN. PETE DOMENICI: Yes. I want to make sure that it's only--it is not programs. We've got those all--where both of these big powerful economic groups are on all fours, but it's in terms of how many taxes--how much taxes do you expect to receive over the next five years, that they have a lot higher number than the CBO, and they've been right--that is, OMB's been right for a couple of years, but CBO makes the point that can we really have a recession-free economy for five more years, and so they've adjusted theirs down a little because they think that's more apt to happen.

So, in a sense, we don't start from the same point, and if we all start from what the Congressional Budget Office says, which we generally do, the budget's about $50 billion net out of balance in the last year.

MARGARET WARNER: Now, you got into this kind of dispute with the President last time.

SEN. PETE DOMENICI: Yes.

MARGARET WARNER: How hard are you going to push this particular issue?

SEN. PETE DOMENICI: Well, look, it remains an issue, because what we want to do is make sure that we don't mislead the American people, and I'm not saying they intend to, and I'm not saying we know how not to. But, frankly, we ought to err on the side of caution when it comes to how we're going to get there and how honest, I mean, how certain we are that we're going to get there. So I'd rather say at this point that we know where we have to go, and yet, the President has sent us something to start with, and we clearly--I think we're hearing that almost everything is on the table. I heard that from Mr. Raines just now, keep a couple of things out, but the way he said them, there's no question that we all agree.

He wants to make sure Medicare is made solvent for 10 years. You can count on it--seniors and Americans. That's what we want. We just have a little argument that maybe theirs doesn't do it quite right and that maybe it won't permanently help because it all comes out of the providers, and we're not sure that's the way to reform it and make sure it's still there for 10 years.

MARGARET WARNER: All right. You said that this bridge was under repair.

SEN. PETE DOMENICI: Under repair, under construction, whatever you say.

MARGARET WARNER: Okay. If Republicans could make three major repairs, or we won't carry the metaphor too far, but what would they be?

SEN. PETE DOMENICI: Well, first, I think--I think the tax side of this is a bit misleading also, and you didn't give me a chance to say that, so this is a chance. The President cuts taxes $98 billion, a very large portion of that are credits for college tuition. We think college should be second in a list of priorities; that we ought to spend more money and more resources on kindergarten, elementary, and high school, because that's where the big problems are. But back to the point, $98 billion in tax cuts, but there's also $76 billion in tax increases. The President uses all those tax increases to pay for programs. We think if we're going to increase taxes, we've got to give the public more of that back, and there's got to be more than $22 billion net in tax cuts. That's one.

I think in the Medicare issue we might very well agree on a number and how much we want to save. But we can't--we can't sit by and watch the President take about $80 billion out of Medicare and say, I'm making it solvent because I'm not making the Trust Fund pay for it anymore, and then just say to taxpayers, pay for it. So we've got to get together and figure out what is the better way to handle that and a better way to reform it, but the dollar number in terms of savings may be all right. We're not trying to do much more. So that's one.

MARGARET WARNER: Can I interrupt you right there, even though I want you to get to your third point?

SEN. PETE DOMENICI: Sure.

MARGARET WARNER: Are you saying that the $100 billion Medicare savings, that the administration says they are presenting are phony, that they're not there?

SEN. PETE DOMENICI: No. Let me put it this way. First of all, the President--this is a net number to the President. Everybody should know he increases Medicare, because he puts Alzheimer's and other things in, and this is the net number, but every bit of that savings comes from two things: one, from one thing--providers, be it hospitals, doctors, HMO's, they're going to reduce payments to them. That's the extent of the reform. There have got to be more options to seniors. That's got to be a way of saving money so that we have something permanent beyond that. He took a huge amount of the expenditures out of there, and he didn't count these as savings, but he said somebody else will pay for it. And we think that's putting a very big burden on the taxpayer, and we've got to figure out a way to do that more fairly.

MARGARET WARNER: You also said today that one of the problems here was that there were six new entitlement programs. Now you just heard Frank Raines say he wouldn't call them entitlement programs, but briefly tick those off, and which ones could Republicans not support?

SEN. PETE DOMENICI: Well, look, I didn't say we couldn't support any of them. What I said was that I didn't think this bridge that we were building into the next century ought to have $60 billion in new entitlements, most of which--now I will agree with him that on school construction, which I doubt very much we ought to do--but he has $5 billion, but it's an entitlement, but it stops at $5 billion. I think maybe you ought to do that on an annual basis and look each year and see how much you can afford.

Secondly, he has new ones for--to pay for health care for the unemployed, to pay for health care for children that are not insured, to pay for--I can't remember the others, but they're that kind of thing, and it's $6 billion worth. Now what I said today is they're all programs that perhaps we could all agree are important. Should we make them entitlements, or should we--should we consider doing fewer of them, and paying for them every year, and not creating another giant surge entering into the next century where we would be kind of kidding ourselves about a balanced budget?

MARGARET WARNER: Back to education for a minute.

SEN. PETE DOMENICI: Great.

MARGARET WARNER: Is your--that is a major new commitment in the President's budget.

SEN. PETE DOMENICI: Yes.

MARGARET WARNER: Are you saying the amount's too much, or that you would spend it in a different way?v SEN. PETE DOMENICI: Well, I think I'm saying a little bit of both, but I would like to stress more so tonight the fact that I think the priorities are probably not acceptable to the American people, although, you know, any time I say that about the President I know he does polls, so he probably knows more than I, but frankly I think when you take 90 percent of the new tax expenditures, tax credits, tax deductions and expenditures in education for new programs, and 90 percent of it is for college educations of one sort or another and 10 percent for such things as reading and the like are for the real problem area of America, kindergarten, elementary, and high school, junior high and high school, I think the priority's wrong.

I think we ought to put more resources into the primary, secondary schools, in particular to help with skills training, with vocational training, and with basics because what's happening is we're pushing children through, and they're not going to go to college, and they've got nothing, many of them, and then we send many to college, we've got to retrain, so why not focus the money there first? I'm fully aware that parents would like to be helped. I put eight children through college. Thank God they're all finished. I didn't get any tax deduction that's being talked about, and I'm not complaining. Sure would have liked to, but I still think when you're looking at national policy, the big problem is American public education, not the colleges.

MARGARET WARNER: And you are also critical, as you just were, of the tax side of it, saying that there's not enough net tax cuts.

SEN. PETE DOMENICI: Right.

MARGARET WARNER: Would you--are you then saying since most of the new taxes really are an end to corporate subsidies, let's just take that category, are you saying the Republicans would like to keep those corporate subsidies?

SEN. PETE DOMENICI: No, I didn't necessarily say that at all. In fact, I think I said some of them may be very good, maybe they are the things to do, but maybe we ought to--when we increase those taxes, what we ought to do is say we want to give those back to American families, rather than spend it on new programs, so I'd like to see a bigger net tax cut, so that more of the American people who need more of their money to do more of their own things, that they would get that instead of pumping it right back into the spending side.

Let me say the first year this budget increases the accounts that we appropriate by over $7 billion. Now, how can one say we're restraining government? It's got the beginnings of these new entitlement programs, which are going to grow, and then let me say over the five years, the President is spending almost as much as he planned to spend last year in the budgets that never got to balance, so, you know, we've got some real things we've got to work on.

MARGARET WARNER: But then how do you respond to what Frank Raines said in terms of that they're shrinking the size of federal government spending from 21 percent of the economy to 19 percent of the economy?

SEN. PETE DOMENICI: Well, look, I don't know that number, but I also know the numbers that I'm telling you are correct, that the budget is going to grow in the appropriated accounts by $7 ˝ billion the first year; that it's going to grow by 3 ˝ percent real growth; that that's growth, and it's continued on at growth each and every year. From my standpoint we are really at risk in terms of getting to balance and staying there, but also I firmly believe that we ought to do more in the early years and that we ought to be very careful not to build in permanent commitments.

MARGARET WARNER: And briefly where do you think you go from here? Will Republicans sit down and work with the President's budget, as Mr. Raines seemed to be suggesting, or are you going to come up with a Republican alternative first?

SEN. PETE DOMENICI: I would hope that everybody understands, and I think that--I don't know that I speak for every Republican but I've been working carefully with our leader and with other Republicans. I hope they know we're going to work very hard to get a bipartisan budget with this President and Democrats. We just want to do our share to make that bridge a sturdy one and one that gives as much back to Americans to spend as they see fit as we possibly can. And to do that, we have to start working very quickly. I don't think we need to do our budget right now.

MARGARET WARNER: Okay.

SEN. PETE DOMENICI: I think we have to work off of theirs and see what we can come up with, but we have to know where we want to get.

MARGARET WARNER: All right. Thank you very much, Senator, for being with us.

SEN. PETE DOMENICI: Thank you.

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