Balance the budget in 5 years, give $91 billion in net tax breaks and change Medicare. The Congress and the White House appear to have a deal. Following a background report, John Kasich (R-OH), House Budget Committee Chairman, and Gene Sperling, the White House National Economic Advisor, discuss the merits of the plan. Economists then scrutinize their analysis , after which Kasich and Sperling return to rebut criticisms.

JIM LEHRER: Now, back now to House Budget Chairman John Kasich and White House Economic Adviser Gene Sperling. Take that, Kasich and Sperling. Let's begin with you, Mr. Sperling, and what Mr. Kuttner just said. He said the President just gave it away to the Republicans, gave away the store, capital gains, the whole thing.

GENE SPERLING: I'm kind of torn between which of the two I disagree more with. Bob Kuttner's a friend. He's done a lot to advocate the interest of working class Americans, but, you know, John Kasich and I are here. We're here dealing with reality, which is we have a Democratic President, Republican Congress, and we decided to try to work together and get something done. And we have $24 billion here for low income children, 5 million children. That's a lot of children to get health care coverage. We have nearly $20 billion to families making under $30,000 for the child tax credit.

We restore $12 billion for over 350,000 legal immigrants. All of that stock, all of that helped lower income families--would not have happened if this President was not willing to engage in a bipartisan budget agreement. So you want to get those things done. You have to work with the other side. I think it was a good deal for the President, a good deal for progressives, but I obviously had to have some of the wins and some of the priorities of people that have some different philosophies. That's how you get things done.

JIM LEHRER: Speaking of the other side, Congressman Kasich, Mr. Niskanen said it would have been easier to balance the budget without doing anything.

REP. JOHN KASICH: Well, in the amazing words of Ronald Reagan, to some of the critics of this agreement, "There you go again." Look, there are no new--the problem is the gentleman is factually incorrect. First of all, we cut the President's budget by about $9 billion in the first year and by about $115 billion over these five years. He said that we actually spent more than what the President requested. He is wrong. Secondly, he said there were new entitlement programs. That is false.

There are no new entitlement programs in this. He said we would balance the budget by 1998. According to the last Congressional Budget Office numbers, the deficit in 2002 would be about $100 billion if we did nothing. In addition, he says, there were no significant changes in any entitlements. Medicare alone is $430 billion. And, as I pointed out throughout this week, hospitals are making about 15 percent profit on every person that they treat. So it is absolutely--

JIM LEHRER: You're not squeezing it. This doesn't squeeze them.

REP. JOHN KASICH: We're not squeezing them. That's why they didn't come up here and raise Cain. We're going to have to do more with the individuals in the next round, but boy, this is far from squeezing them in Medicaid. We've given the governors more authority. They're going to be able to cover more people. They're not going to have to have this Boren Amendment, which negotiates the rates that we pay hospitals, dictated from Washington.

And, in fact, we have a balanced budget, and for the first time I've actually heard a conservative say he doesn't like the capital gains tax cut. Look, what you have is the first balanced budget with conservative economics. It will hold the growth of the programs that run Washington to the growth of ½ percent a year, as compared to a growth rate of 6 percent a year over the last decade, and the entitlement savings are the greatest in history, so we've done something that hasn't been done in modern times. We are balancing the budget and providing tax relief, and I think it's good and our guests ought to be happy. This is a reason to be in a good mood.

JIM LEHRER: All right. But, Mr. Sperling, Mr. Niskanen said this does not reduce the size of government.

REP. JOHN KASICH: Well, sure it does. Let me tell you what it does.

JIM LEHRER: Okay. Let me ask--let me let Mr. Sperling speak to that. Just a minute, Congressman.

GENE SPERLING: With all respect to Mr. Niskanen, someone on my staff looked back and found that five years ago on August 3rd, as we were about to pass the 1993 deficit reduction plan, the deficit was $290 billion. He said the deficit would go up; a recession was likely; and would probably be at $400 billion. Well, the deficit's come down dramatically.

That deficit reduction has worked. And our projections show that even with a better economy, the deficit will go down a little lower than we expected this year, and then will shift back up. Without this deficit reduction plan, I don't think we can get the confidence in the economy to keep interest rates low and the expansion going. So I think there's been a clear connection between deficit reduction, lower interest rates, and a stronger economy, and it makes sense for Democrats and Republicans to come together and keep the strong economy going.

JIM LEHRER: All right. And speaking of going, we can't go any further. Thank you both very much for explaining this and being with tonight. And our thanks also to Mr. Niskanen and Mr. Kuttner.