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Budget Details

April 9, 2001 at 12:00 AM EST
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RAY SUAREZ: Four experts help us through the fine print of the Bush budget: Eileen Appelbaum of the Economic Policy Institute, Stan Collender of the public affairs firm Fleishman-Hillard, Joan Woodward of the investment firm Goldman Sachs, and Daniel Mitchell of the Heritage Foundation. Joan Woodward, let’s start with you. You’ve had a little chance to look at this thing now. What are some of the main points for you that really show you the thrust of the Bush administration in preparing this budget?

JOAN WOODWARD: Well, clearly President Bush has laid out his priorities for fiscal policy in the next ten years. The cornerstone of that agenda really is his $1.6 trillion tax cut over the next ten years. We already saw Congress scale it back a little bit last week to about $1.3 trillion.

Bush has some significant increases for the National Institutes of Health, a very big chunk of money again doubled by the Senate this year for Medicare prescription drug benefit for senior citizens, another campaign promise. So I would say he lived up to his campaign promises here. We have some additional spending; we have some significant tax cuts. And now the Congress will decide on the finer appropriations points to be funded throughout….

RAY SUAREZ: Are there any cuts that take effect with the 2002 fiscal year? You mentioned tax cuts as one of the main features. What happens right away?

JOAN WOODWARD: Interestingly, Bush’s tax cut is not immediate. During the campaign he did not propose tax cuts this year. The House of Representatives has taken his tax plan and made it retroactive for January 1, 2001 — at least the low rate going from 15 to 10 percent. But we don’t see any initial cuts in 2001. This is a budget for 2002.

RAY SUAREZ: Eileen Appelbaum, when you take a look at it, what do you see?

EILEEN APPELBAUM: Well, what I see is a standstill budget. I see a situation in which we have a great opportunity at the present time to think about what kind of a country we want to have, what our vision is for the future in terms of rural economic development, in terms of economic development in the inner city, in terms of affordable quality daycare, which so many working families need, and in terms of retraining programs for workers who are displaced from the old economy to find a place in the new economy.

And there’s none of this in the Bush tax program. If I had to sum it up, I would say this is a budget policy of death by a thousand cuts. There are small cuts in many, many programs. There are large cuts, I think in energy, environment, which I find really shocking, and some increases in health and medicine. But these are very unevenly distributed. We have cutbacks as well as increases in these areas.

RAY SUAREZ: Dan Mitchell, your mile posts in this budget document?

DANIEL MITCHELL: Well, I’m glad he’s followed through with his promise for tax relief, but I actually think we’re spending too much in this budget, almost $2 trillion. It was only, what, 1987 when we reached the $1 trillion mark. I think the federal government is much too big. I’m glad that he’s increasing spending by less than Clinton proposed, but it’s still a big increase, 5.6 percent overall, much faster than inflation. So these Cassandra sky is falling warnings that we’re getting from people about deep cuts, show them to me, I wish they were there.

RAY SUAREZ: So, slowing down from the Clinton rate of increase, or the last Clinton budget’s rate of increase just doesn’t do it for you. Where were there cuts missing that you would have liked to have seen?

DANIEL MITCHELL: I think it’s an improvement that we go from 8 percent increases down to 4 to 5 percent increases. But when I look at all the programs that are larded throughout the federal budget, I guess I disagree with Joan. I don’t think we should be spending more on education, I don’t think the federal government has a good track record. The more federal government spending there has been over the last 30 years, the worse student performance has been. I don’t want more bureaucracy in Washington, and so, I’m in favor of limiting the growth of spending to as small amount as possible, and maybe some day when my fantasies are achieved we’ll actually reduce government.

RAY SUAREZ: Stan Collender?

STAN COLLENDER: No one is going to use the phrase dead on arrival, but this budget has already been rejected by Congress. The Senate last week made it very clear that they weren’t going to take a tax cut as big as the president included in his budget today. They also made it clear they wanted spending to be higher. And while the budget works numerically, it just doesn’t work politically. Almost certainly, Dan, what you’re likely to see is Congress, both Republicans and Democrats, adding to the spending in the president’s budget … and that just makes all the surplus numbers very much out of whack going forward. Now, maybe this was his strategically good move by the president to come in relatively low, knowing that Congress is going to add to it. But this budget, if it’s not dead on arrival, it may be dead before printing.

RAY SUAREZ: Since both Houses of Congress have already passed resolutions that contradict the spirit of this document, what is its utility now that it’s rolling out of government printing office, what is it meant to do when the president says here’s how I’d like to spend the money?

DANIEL MITCHELL: I guess the first thing I would say is that the House and Senate have given Bush about 85 to 90 percent of the tax cut he wanted and we’re not done with the process yet. So I don’t think it’s accurate to say it’s dead on arrival. Of course there’s going to be negotiation. But hopefully the president, as the only elected official who represents the country as a whole, will try to stop Congress from engaging in parochial pork barrel spending, which as Stan pointed out, yes, they’re going to be very tempted to do that. They’re going to want to shovel as much money to their constituencies as possible, but hopefully the president will say you can spend what you want, but keep it within this level.

STAN COLLENDER: Dan, what’s he going to do? He can’t veto these bills, because he’ll be vetoing bills from a Republican Congress; it would clearly look like the gang that couldn’t shoot straight. Either he negotiates and probably gives Congress more spending that they want and that they’re going to need to get through some of these narrow majorities, or we’re going to end up with stalemates and who knows what, shutdowns come fall.

DANIEL MITCHELL: If I had to predict, we’re not going to keep the four percent. I’m just saying that that would be better for the country.

RAY SUAREZ: Eileen Appelbaum.

EILEEN APPELBAUM: I think we have to pay attention to the fact what the increases we’re talking about are nominal increases, and that in real terms and in terms of being able to provide existing levels of services to a growing population, we’re going to be hard pressed in a lot of areas. Take something simple, just like AIDS, we’ve frozen the budget for AIDS grants. And yet we know that there are 40,000 new cases of AIDS every year, and we know that we have life-saving drugs available that are increasingly expensive. You freeze that budget, you know that you’re going to cut services that are meaningful, that people are waiting for, and that are important.

RAY SUAREZ: But aren’t there also increases in there? You mentioned AIDS, but NIH gets a very large bump up in funding as does education.

EILEEN APPELBAUM: Sure, but all of the spending on R and D in this country, all of the increase is going to health. We are cutting R and D spending in energy, in space exploration, in science and transportation, and all of the other areas of research that we need to have a strong economy.

RAY SUAREZ: Joan Woodward.

JOAN WOODWARD: I don’t know if I would agree with that. I think the Bush budget here is, and I would agree with Dan that Congress has already given Bush about 80, 85 percent of what he wants just last week, even before the Congress saw the details in this budget. Now the Congress will debate over this very small chunk of the pie with regard to appropriations bills, which is where you see the pork; historically you’ve seen a water project, and the highway projects in different districts, but again we’re talking about a very small slice of the budget. The NIH funding we’re talking about has already been increased by Congress in the budget resolution.

The Senate, the 2.8 billion number is now 3.5, and going to the conference with the House we’re going to even see, I think, an increase in that number. So Bush is — you know — setting priorities, this is what a new president does, this is why you have elections. He’s putting out his budget based on his campaign promises; there were a few new items coming into the tax arena today. Still further we see more tax items coming in with pension reform and increasing the 401 K from 10,500, increasing the Roth IRA. There’s overwhelming bipartisan support in Congress for a lot of these pension retirement savings items that were not included in the Bush 1.6 trillion. So I even think there will be an increase from the Senate passed version of the tax cut.

RAY SUAREZ: The ranking Democrat on the Budget Committee has suggested that the president will get arguments from both parties on the Hill, from what’s in this budget. What are some of the candidates for bringing on those battles?

STAN COLLENDER: Well, there are two right up front, one is agricultural. I don’t think there’s any doubt about that. You’ll see Republicans from the heartland pushing very, very hard for additional spending there beyond what the president proposed. And another one just right off the top of my head would be some of the international trade issues and some of the money for economic development. You can see the Chamber of Commerce, which was pushing very hard to support the Bush tax cut also having trouble with some of the cuts that would help some big corporations in exports.

RAY SUAREZ: Where does the opposition…

EILEEN APPELBAUM: I was going to say, I think energy and environment is another big area where there’s going to be a battle. I think the American public have made it clear that they care about the super fund sites, they care about nuclear waste management, they care about pollution abatement, they care about clean coal technologies. If we’re not going to have Kyoto and we’re not going to have mandated reductions in carbon emissions, how can we not be spending the money that we need to spend to make sure that existing technologies that are already known to the Department of Energy and that it planned, it had planned at least to bring to the attention of businesses to advise them on how they could implement them effectively, we’re cutting that program. How can we go forward thinking about energy, thinking about the environment with these kinds of cutbacks? We’re left with nothing. And I think the people have made it pretty clear, the American people have made it pretty clear that these are high priority items for them.

DANIEL MITCHELL: Well, given that the president is proposing to spend $2 trillion, that’s a lot of nothing out there. I guess what I’m hoping is that the president will be the person who says to all the different constituency groups out there, you may want more spending in Program A, but if you want to do that, propose some off setting reductions in Program B. Because, otherwise, we’ll have a situation where every single program — which of course has a constituency — will demand more spending. And if no one is there looking at the big picture, looking after America’s national economic interest, spending will go out of control and we will slowly degenerate and become more like France, with a stagnant economy, no private sector job growth, and just becoming an uncompetitive. America is benefiting because we’re more free market than other countries, and we want to stay in that.

RAY SUAREZ: Respond to Eileen Appelbaum’s point, that the public, tell researchers, yeah, we care about the environment and there’s a flat funded EPA, for instance. This budget includes revenue from drilling in ANWR when that question hasn’t even been settled, for instance.

DANIEL MITCHELL: Well, I think the public opinion poll that matters most takes place on election day, or election day plus 40 days or whatever it took to determine our president. That’s the one that really matters, where people actually put their money where their mouth is. When you go out and ask these public opinion surveys, do you want, you know, more health care, more day care, more this, more that, people always say yes because it’s presented as a freebie. When you ask them are you willing to pay X for that, are you willing to pay Y for that, are you willing to sacrifice this to get this program, then all of a sudden you get a different situation. And that’s what we see in elections, people actually voting and making their opinion known when it really counts.

RAY SUAREZ: Very quick response.

EILEEN APPELBAUM: But the public has said they don’t want a large tax cut, they said that during the election, they said it after the election. We have to make these kinds of choices, we have to give up clean energy in order to finance a 1.6 trillion tax cut that we know is going to cost 2 trillion plus.

RAY SUAREZ: We have 30 seconds.

JOAN WOODWARD: Well, I’ll tell you, it seems to me that the Kyoto treaty was killed by the U.S. Senate in 95-0 two years ago when there was a vote, and Senators are elected by the people. Bush basically just stated the obvious, I will not endorse or go forward on Kyoto treaty. It wasn’t killed by this president, it was killed by the United States Senate a couple years ago. So.

RAY SUAREZ: Guests, thank you all, good to see you.