JUDY WOODRUFF: I spoke with Budget Director Peter Orszag from the White House Briefing Room just a short time ago.
JUDY WOODRUFF: Peter Orszag, thank you very much for talking with us.
PETER ORSZAG, White House Budget Director: Good evening.
JUDY WOODRUFF: $3.66 trillion, is that a number you can actually grasp?
PETER ORSZAG: Obviously, it’s a big number. We have to realize we’re facing two very serious challenges. One is the economic crisis we face. That was the focus of the recovery act. And the second is we’ve got these large deficits going out over time, and we do need to get them down as we emerge from the recession.
JUDY WOODRUFF: Well, just two of the terms I heard applied to it today were, number one, “radical,” and the other one was “taking from the rich to give to the poor.” Is this about redistributing wealth in this country?
PETER ORSZAG: No, I think this is fully consistent with what the president campaigned on. We do face these structural deficits in out years, and we also need to make some key investments in energy, in education and health care.
We are asking for, I guess, a greater sense of shared responsibility, and there are some revenue increases that will be borne by those making more than a quarter million dollars a year, after the economy starts to recover and in 2011 and thereafter.
JUDY WOODRUFF: Well, you said those who earn more. You’re proposing to raise taxes, I guess, on couples earning over $250,000 a year. What percentage of taxpayers would that be? And how did you arrive at that number?
PETER ORSZAG: That was the number that the president campaigned on, so, again, this is consistent with his campaign proposals. It’s basically about 5 percent of American taxpayers. For the other 95 percent, they would be experiencing a tax reduction through the “Making Work Pay” tax credit.
Orszag: "We inherited deficits"
JUDY WOODRUFF: Well, the person President Obama had asked to be his commerce secretary, Senator Judd Gregg -- who later, as we know, backed out -- had this to say today about your budget proposal. He said, "This plan is once again a missed opportunity for American taxpayers." He said, "It raises taxes on all Americans, implements massive new spending, and fails to make any tough choices to control the deficit."
PETER ORSZAG: Well, let's be clear about the facts here. We're inheriting deficits that under current policies amount to $9 trillion over the next decade. We're reducing those deficits significantly. We have $2 trillion in deficit reduction. It's coming roughly half from additional revenue and half from spending reductions. The spending under this budget is lower than if we did nothing at all.
And I'd also note, quite importantly, we are making investments in reforming our health care system and making it more efficient that are absolutely essential to the long-term fiscal health of the nation and that will also help to raise workers' take-home pay, because too much of our economy is being devoted to an inefficient health system.
JUDY WOODRUFF: Well, the most frequently repeated criticism, I guess, from Republican I've been hearing is they say you want to raise taxes on the nation's entrepreneurs, small-business owners, at the very time when the country's in a recession. And they're saying, what's the incentive going to be, then, for these people to grow their companies and hire and create jobs?
PETER ORSZAG: Well, let's be clear. Again, the tax proposals that we're talking about kick in 2011 and thereafter, so this talk about raising taxes during a recession is just not factually accurate. And, in fact, if you look at the recovery act, what was just done was a tax reduction partly to spur the economy when it is particularly weak.
But as we emerge from the downturn and return to more normal periods of economic growth, we do need some additional revenue to fund investments in education, energy, and health care, and that is what this budget contains, along with some savings on -- on the spending side.
Tax increases for wealthiest
JUDY WOODRUFF: But if the recession is not over by, say, 2011, are there then provisions -- are you prepared then to delay these tax increases?
PETER ORSZAG: Well, again, one of the purposes of the recovery act was to jump-start the economy and get it back on track. I think we're anticipating the economy will be growing before 2011. Let's leave the hypothetical as to what would occur if that's not the case for the future.
JUDY WOODRUFF: But, still, aren't you making some -- I mean, you look at some of the proposals in here. You really are -- or are you making major assumptions here about some huge changes over some very controversial tax questions, how energy is taxed, health care? A lot of assumptions here.
PETER ORSZAG: Well, no, I wouldn't -- there are bold proposals, but that's what's required. We have major problems that need to be addressed in our health care system, in terms of reducing our dependence on foreign oil, and improving energy efficiency, and improving our educational system.
So, in some sense, what we're talking about are the investments that are required to make a real difference. And that's what's contained in this budget.
JUDY WOODRUFF: You know, well, let me just say -- ask you about two specific things, and that is the criticism that here we are in a economic crisis in this country. At the heart of it is a housing crisis. Is it smart to reduce the tax deductions that people can take for the interest they pay on home mortgages at a very time when you're trying to get people to buy houses?
PETER ORSZAG: Well, again, that provision kicks in, in 2011. All that would be involved here is returning the tax break for, say, mortgage interest for the very highest income folks, those earning more than $250,000 a year, to the rate that applied at the end of the Reagan administration.
And I think we have a fundamental question: If a middle-income family pays $10,000 in mortgage interest, they currently save $1,500 on their taxes. If Bill Gates makes that same $10,000 mortgage interest payment, he saves $3,500 on his taxes. We're just saying, why shouldn't that be $2,800 instead, after the economy has recovered, again, in 2011 and thereafter, use the money to reform the health system?
Cut in tax deductions for donations
JUDY WOODRUFF: And connected to all this, at a time when charities, nonprofit organizations are having a harder time than ever winning contributions and donations from people, you would presume to cut tax deductions for charitable contributions.
PETER ORSZAG: Well, again, I want to be clear about the timing here. This is in 2011 and thereafter, after the economy presumably has begun to recover.
Furthermore, I think most people don't make charitable contributions based just on the tax incentive. And, again, I would say, all we are doing is returning the tax incentive for charitable contributions to the level that existed at the end of the Reagan administration. Charitable contributions were healthy then.
I'd finally say, if you want to put on the green eyeshades, and say, charitable contributions are disproportionately governed by narrow financial incentives, there are other offsetting proposals in this budget that will mean that the financial incentives for charitable contributions are roughly a wash.
JUDY WOODRUFF: You've mentioned the Reagan administration a few times. Is that a model for what you were doing here?
PETER ORSZAG: No, not at all. I'm just saying, at that time, again, in exchange for making a $10,000 mortgage interest payment or a $10,000 charitable contribution, a high-income family received a $2,800 tax break. That's exactly what would be provided in 2011 and thereafter underÂ this proposal.
More budget details to come
JUDY WOODRUFF: There's also -- and, finally, Peter Orszag -- those who are saying you've made -- surely you've made some moves to cut spending, but that so much of the spending cuts you're assuming have to do with ending the war in Iraq, bringing home the troops there, with ending the spending on the Bush -- President Bush's tax cuts, and the argument there is that there should have been a more serious effort made to cut federal government spending.
PETER ORSZAG: Well, there was a very serious effort made, but let's also remember -- and, for example, we have $50 billion in reduced erroneous payments to Medicare providers as part of the Social Security Administration, reducing the tax gap contained in this budget. We are eliminating programs.
But you have to remember, we've been in office five weeks. This is a budget overview, as is normal at this stage for a -- during a transition year. There will be more details to come in April. And as we move through the year, we'll continue to scour the budget to look for additional savings. But after five weeks, I think we've already found a bunch of stuff that we are saying doesn't work as well as it should.
JUDY WOODRUFF: And I guess you're looking for Congress to have its whack at it, too?
PETER ORSZAG: Well, that's part of the process.
JUDY WOODRUFF: All right. Peter Orszag is the director of the Office of Management and Budget. Thank you.
PETER ORSZAG: Thank you.