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Sizing Up the Budget

February 5, 2002 at 12:00 AM EDT
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GWEN IFILL: The new White House budget lays out the nuts and bolts of the Bush Administration’s two-front war.

For the war on terror, the President is asking for a $48 billion increase; almost 15 percent for the Pentagon. That’s the biggest jump in defense spending since Ronald Reagan’s 1981 budget.

On the domestic front, the Administration wants to double spending for homeland defense, including $11 billion to beef up border crossings, $5 billion to improve airport security, and $6 billion to prevent biological attacks. The President defended his request for homeland security money today at a rally in Pittsburgh.

PRESIDENT GEORGE W. BUSH: It’s money that will enable me to say that we’re doing everything we can to protect America at home. But I want to remind you all the surest way to protect America at home is to find the enemy where it hides and bring them to justice. The surest way to protect America is to unleash the mighty arm of our United States military and find the killers wherever they hide and rout them out and bring them to justice.

GWEN IFILL: The White House also wants to spend $591 billion over the next ten years for tax cuts including money to help the unemployed buy health insurance and to promote charitable giving. But there are tradeoffs in the $2 trillion plan.

To pay for the wartime budget, other programs take a hit, like job training. The plan eliminates eight programs to save $500 million. And highways, road-building programs, popular in many states, would lose $9 billion. The Army Corps of Engineers would lose almost $13 billion for new projects like dams and bridges.

Other tradeoffs: Cuts for the international space station, for low-income heating aid, and for teaching hospitals, which get much of their support from Medicare.

The President’s budget would also run a106 billion deficit this year, and continue in the red until at least 2005. One casualty: Pledges to wall off Social Security surpluses. The lockbox to protect that program is now wide open, with nearly $1 trillion from the Social Security surplus now tapped for other government programs. Democrat John Spratt, a member of the House Budget Committee, said Social Security should not be financing the war.

REP. JOHN SPRATT: We’re going to support the parts that have to do with fighting the war on terrorism, and protecting the American homeland. We are going to ask for justification. We’re not going to be standing, we’re not going to nickel and dime you, but obviously we’ve got a job to do; we’re going to ask hard questions and we’re going to raise a debate, too, as to whether or not it is right, proper, and fair to use the surpluses in Social Security Trust Fund to pay for the war, to pay for homeland security. Is this the proper means of financing it?

GWEN IFILL: For more of that debate, we’re joined by the White House Budget Director, Mitchell Daniels; and Senator Kent Conrad, Democrat from North Dakota, and chairman of the Senate Budget Committee.

Mr. Daniels let’s start by picking up where John Spratt left off — the question of the deficit and whether this is the best way for the government to be proceeding right now. What’s your response?

MITCHELL DANIELS: Gwen nobody likes a deficit less than the President or me for that matter. But events have put us in a very different situation. This budget makes choices in favor of the first priority of government, which is the defeat of terror, the defense of Americans in their homeland and it also calls for action to bring back economic recovery sooner through a stimulus package. Some would say that’s not necessary. We’d rather have a budget that’s in or close to balance and not do that. The President would prefer to act on jobs; frankly over the long term getting a good recovery going soon is the best way to get back into surplus is which is where we all want to be.

GWEN IFILL: Senator Conrad are these necessary war time budget evils?

SEN. KENT CONRAD: Well in part they are. Certainly we share the priorities of defending this nation. We all understand our first obligation is to protect our country and defend the homeland. That’s not where we have a disagreement. What we do disagree on is the Administration putting us on a course to take over two trillion dollars over the next ten years out of the Social Security and Medicare Trust Funds and to use those monies to finance a tax cut and other government expenditures. We think that’s especially unwise because the baby boom generation starts to retire in just six years and raiding every trust fund in site puts country in a very deep hole.

GWEN IFILL: Mr. Daniels even some members of your own party like Tom DeLay, the House Republican Whip, have worried that this idea of perpetuating deficits even in the short-term could be a problem, could start the country on the wrong path. What are you telling Republicans about this?

MITCHELL DANIELS: The President has always said there are always a few reasons, but there are at least three why a deficit might be temporarily justified: War, recession and emergency. We have them all. Now, Senator Conrad was a little careless with language as sometimes happen and talks about money coming out of the trust funds — not at all true. The trust funds contain bonds and they will contain exactly as many as they would have if we had a huge surplus this year. What he’s saying is he would rather take monies — those monies and use them to pay down debt. We agree that that’s a good thing to do. But it’s not as urgent as winning the war on terror and defending the homeland and stimulating the economy. That’s an honest debate but it should not be confused with loose and fallacious talks of raids. Those monies will be used for one thing or another and in the current emergency we think debt reduction regrettably as to wait a little while.

GWEN IFILL: Senator Conrad is that what you’re saying?

SEN. KENT CONRAD: No, I want to be very clear. When you take money that is raised from payroll taxes on the pretext that will support Social Security and Medicare, you take those funds and instead of using them for Social Security and Medicare, you use the to pay for tax cuts, you use them to pay for other government programs. I believe that constitutes a raid. It reduces our ability to meet the long-term obligations of this government, and it’s precisely the same kind of policy that got Enron into trouble. The fundamental problem of Enron is that they hid debt from their creditors, from their investors and perhaps even from themselves. I see the federal government doing much the same thing. It isn’t acknowledging the fundamental debt that it is building and the results will be serious. We’ll have a big price to pay in the future by not facing up to this debt by taking money from trust funds to pay for the other functions of government.

GWEN IFILL: Mr. Daniels, obviously, I want you to respond to this allegation that you’re hiding debt but also I would like for you to answer how does, how do you work it out that the surpluses will return in 2005 or 6? It seems so different from last year at this time when we were talking about how to spend the surplus; now we’re talking about how one gets back to surplus.

MITCHELL DANIELS: Well things are different of course. No one last year forecast the recession, which we now know was well underway. That alone took us well below the Social Security surplus Senator Conrad is concerned about. I don’t know who he blames for that but if there was never a tax relief bill last year, if we had not spent one penny more on any of the needs of the American people, we would still be as he puts it raiding Social Security. He wants to raid it too; he just wants to use the money to pay down debt. We always use it for one purpose or another. He’s a leader of the Senate and will have his opportunity soon to write his own budget and he at that point can show how he would do it differently and how he would use the money in that other way to pay down debt, what he would not spend on new priorities.

GWEN IFILL: Which brings me neatly to my next question Senator Conrad: what would the Democrats propose doing instead?

SEN. KENT CONRAD: Well, we had a very clear budget proposal last year and in that budget proposal we set aside every penny of Social Security and Medicare funds for those trust funds. In addition we used another $900 billion of general government funds to strengthen our long-term position with Social Security. So that was a difference in priorities. Instead the President wanted more money for a tax cut. That’s what put us on the course that we are currently following. That’s going to go deep into the trust funds over the next decade and use the money to pay for other tax cuts, more tax cuts, and pay for other government programs. I just think it’s profoundly mistaken and is going to dig a very deep hole for this country.

GWEN IFILL: Mr. Daniels, Secretary Rumsfeld was on this program last night. One of the things he suggested is that one cannot have guns and butter — that these kinds of choices must be made. At the same time some of the folks at Pentagon are saying that the $48 billion increase the President proposes isn’t near enough. How do you begin to sort all of that out?

MITCHELL DANIELS: Work with Secretary Rumsfeld — a perfect Secretary of Defense for these times. He’s both as he’s proven a tremendous war leader in prosecuting the war against terror in determining what it takes and applying those resources and a first rate manager who is telling his department very publicly that it must transform itself to immediate the needs of the 21st century, that he still hears too much old thinking around there. So make no mistake, the President’s instruction was clear: this budget must who do what it takes to win the war on terror and to defend Americans here at home. Everything else will have to be tightly scrutinized as it was. I think you’ll hear lots of complaining from people whose pet projects will be asked to slow down or grow very slowly so that we can win a two front war.

GWEN IFILL: Including folks in the Pentagon perhaps?

MITCHELL DANIELS: I would hope on close inspection that folks there and advocates of defense will feel very good about this major step forward. It’s certainly true our defenses had been allowed to erode; we spent the peace dividend of the 80s a couple of times over in the last decade and let our defenses run down again. And now they must be rebuilt while we fight a war and that will cost money.

GWEN IFILL: Senator Conrad, we’ve talked about where the surplus has gone, what the deficits are going to be, but what about the butter that is getting cut out of this budget for highways and job training and issues like that, do Democrats have any intention trying to restore any of that?

SEN. KENT CONRAD: First of all I think it’s very important we make clear that we stand shoulder to shoulder with the President on this question of the resources necessary to defend this nation. Our adversaries should have no doubt that there is no daylight between us on that issue and I commended the President today for his leadership in this war effort and I commended the director, Mr. Daniels, for the way he and the rest of the administration have conducted themselves in that regard. But look, yes there are other places where we may have some differences but by far the biggest one is this fundamental question of the fiscal future of the nation. Does it really make sense to take two trillion dollars out of the trust funds of Social Security and Medicare to pay for tax cuts and more tax cuts and to pay for other government programs? That’s where we have the biggest difference.

GWEN IFILL: Will you attempt to restore any of the money for some of the domestic programs that we named in our opening piece?

SEN. KENT CONRAD: I think the one place that clearly needs to be addressed and we’re already hearing on a bipartisan basis is the $9 billion in road building cuts. Nobody anticipated that. I don’t think anybody favors it and my state it would mean a cut of as much as 30 percent according to our state highway engineer. I think there is a strong feeling that we’ve got to find a way to reduce that cut.

GWEN IFILL: Mr. Daniels you have said that Medicare is broken. How does this budget begin to fix it?

MITCHELL DANIELS: It proposes first of all immediate help on the biggest problem with Medicare, which is the lack of prescription drug coverage and yet again the President is proposing a near-term option to help people at the lower end of the income scale not have to make an unacceptable choice between medication and other necessities and then it proposes $190 billion for comprehensive reform of Medicare to include prescription drugs but also to widen choice and to help Medicare beneficiaries receive higher quality health care.

GWEN IFILL: And, Senator Conrad, as the two of you seem to disagree so fundamentally on so many items was the budget aside from the war on terror is this budget aside from that basically dead on arrival in Capitol Hill?

SEN. KENT CONRAD: No. I think any time you’re in a wartime situation what the President requests in large measure he will receive. But let me just say on Medicare, what Mr. Daniels didn’t tell you is to strengthen Medicare they’re raiding it. They’re going to take every penny of the Social Security and Medicare Trust Fund surpluses and in this case the Medicare Trust Fund surpluses — every penny and use it for tax cuts and to pay for other programs that. That doesn’t strengthen it — that weakens it.

GWEN IFILL: Do you want to respond Mr. Daniels?

MITCHELL DANIELS: I guess it will finally come down to one question. The Senator and we certainly appreciate his vigorous support of our defense efforts. And I know he supports for instance new farm spending that we have included room for in this budget. If he’s for all of those things, and then is dissatisfied that we don’t have enough money to continue paying down lots of debt, which is what this whole Social Security rhetoric is about, then it comes to one issue: You would have to want higher taxation of the American people. We think that’s a bad idea. Americans are being taxed today at rates still well above historical averages and in a weak economy we think it’s especially risky to talk about let alone a jack up today’s level of taxation. But that’s finally what I suppose an alternative budget would have to come to.

GWEN IFILL: Final question for both of you gentlemen. You talk about the weak economy. Today Senator Daschle announced that tomorrow they plan to pull the economic stimulus bill that the President was asking the Congress for from the Senate floor tomorrow, your response Mr. Daniels?

MITCHELL DANIELS: It’s very disappointing news. I hope still – I know the President will hope that this bill can be retrieved. There are plenty of encouraging signs and there are some people saying let’s just forget about it, but the President would rather act and would rather try to make sure that recovery comes swiftly and surely and so I hope that today’s is only a temporary setback. This bill should have passed in December. It had the votes in the Senate to pass; it already had passed the House. And I think it could pass today if Senator Daschle could get himself organized.

GWEN IFILL: Senator Conrad is it a temporary setback or is it dead?

SEN. KENT CONRAD: I hope it’s temporary setback because I do think an economic recovery package would be useful for the country. But, look, Senator Daschle is not taking down this bill. He has said to the Republicans, look, we have got to bring it to conclusion. They have been stalling; they’ve been filibustering and he is saying tomorrow is the time to choose. Do we go forward or will he have to take it off the floor so we can get to other priority business?

GWEN IFILL: Okay we’ll all be watching to see what happens tomorrow. Thank you very much for joining us.