Leap Year: The ’97 Budget
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ELIZABETH FARNSWORTH: For the White House perspective, we talk now with Alice Rivlin, Director of the Office of Management & Budget. Thank you for being with us, Ms. Rivlin.
ALICE RIVLIN, Director, OMB: Delighted to be here.
ELIZABETH FARNSWORTH: You heard what Congressman Kasich said. He said this administration is addicted to Washington spending, Washington taxes, and does not trust the American people. What is in the budget that would refute that?
MS. RIVLIN: Oh, I think that’s just ridiculous. This budget gets to balance over seven years using the Congress’s own numbers. That requires very severe cuts. We have cut $124 billion from Medicare over the seven-year period, $59 billion from Medicaid, a whopping $300 billion from discretionary spending over that period. These are very serious cuts. We’ve done it in a way that allows a modest tax cut for working American families, especially families with children, and we get the budget to balance. That’s what they said they wanted. They said let’s balance the budget in seven years. This is a Presidential budget which does that. We just need to enact these savings and get on with the job.
ELIZABETH FARNSWORTH: This afternoon, the Republicans said that the spending cuts are delayed too long and that you’re too sparing of the main entitlement programs. This has basically been their criticism throughout, is that not true?
MS. RIVLIN: No. I think that’s not true at all. Their spending cuts are approximately the same in terms of phasing. When you’re cutting a budget, you can’t do it all at once. You have to phase in the savings. You’re basically cutting a rate of growth of spending and when you do that, the savings accumulate, so they tend to be toward the end of the period. Our budget has about 60 percent of the savings in the last two years of the period which is exactly the same that their budget has. The differences are not in the phasing. The differences are in the size of the tax cut. They want a much bigger tax cut, and in order to finance that, they have to cut more deeply into programs like Medicare and Medicaid. That’s been the issue all along. We have enough savings to balance the budget without cutting deeply into those programs, so the President is saying, let’s get on with it, let’s do it, let’s balance the budget, and then we can argue later on whether we want to make bigger cuts in Medicare and Medicaid in order to finance a bigger tax cut.
ELIZABETH FARNSWORTH: Let’s take a look at some of the specifics in the budget. The savings are to come from various areas. I’m just going to pick three, some large reductions in defense, which the Republicans in a press conference today criticized. Could you describe the kinds of cut in defense that you want.
MS. RIVLIN: No. We are not cutting defense. This is the same plan that the administration has had from the beginning. We’re at the end of the period of phasing down after the Cold War, and we’re beginning, as the nation moves forward, to modernize our force, which is the strongest force in the world. So in the next few years, we will actually be adding money to defense. The reason it looks as though defense comes down in our budget is the, the Republican Congress added to the defense budget last year some major spending that the Defense Department didn’t even want.
ELIZABETH FARNSWORTH: How about in Medicare? There are cuts in Medicare. Now who will feel the pain in that?
MS. RIVLIN: Mostly the providers of Medicare services. We have proposed that the provider reimbursement rates for hospitals and doctors and the other providers of Medicare services be ratcheted down, that they not rise as much as they would otherwise rise. So doctors and hospitals won’t get quite as much from Medicare as they would have gotten, but we think it’ll be enough to provide very good services. We don’t want Medicare to become a second class program, but we do not think that the beneficiaries should carry a heavier share of the load. We hold the premium, the Part B premium in Medicare at 25 percent of the cost, which is where it is now.
ELIZABETH FARNSWORTH: How about Medicaid? There are cuts there. Who feels the pain that?
MS. RIVLIN: In Medicaid, we think that if we give the governors a lot more flexibility, which is what they say they want, allow them to move Medicaid patients into managed care without seeking waiver from the federal government, that they can save money. We would put a cap on the expansion of Medicaid, a cap per person, so that it stops rising quite as rapidly, and we would save money over the next seven years.
ELIZABETH FARNSWORTH: And no capital gains cut. That’s a major difference with the Republicans. Explain your thinking on that.
MS. RIVLIN: Well, we simply don’t believe that a cut in the capital gains tax rates is a good idea. It has never been part of the President’s plan.
ELIZABETH FARNSWORTH: Where does this fit in now to what I think you referred to today in a press conference as the three ring circus, the negotiations to keep the government from shutting down Friday, the long-term attempt to get a seven-year deal, and then this ’97 budget, what has priority?
MS. RIVLIN: Well, I think all three things are important. Perhaps the most urgent order of business is the finish of the appropriations for the year that we are in now, fiscal year 1996, which is half over. There remain serious differences between the President and the Congress, especially the House of Representatives. The Senate has put back in some of the education spending that we wanted restored and some of the environment spending, so we’re hopeful that we can work out a deal with the Congress over the next few days or the next week that will finish up fiscal year 1996, that wehave the new budget for fiscal year 1997, and the third ring, if you will, is the overall deal. The Congress and the President were talking actively in December and January about reaching agreement on a whole package of seven-year cuts in the budget to bring the budget to balance in 2002. They got very close, and we are hopeful that starting tomorrow, when the leaders come back to the White House, that we can reopen this negotiation and finish it up. There are enough savings that we all agree on to balance the budget and even give a modest tax cut, so the President is saying, let’s just do it. Let’s not wait till after the election, let’s balance the budget now.
ELIZABETH FARNSWORTH: Do you think the dynamic will change now that Sen. Dole is the, the presumed candidate?
MS. RIVLIN: I hope so. I don’t know what’s in Sen. Dole’s head, but the responsible thing to do, it seems to us, for the leadership of the nation is to stop bickering and get on with the job. We hope that the Senate and House Leaders will see it that way and join the President in a balanced budget over the next seven years.
ELIZABETH FARNSWORTH: Well, thank you very much for being with us.
MS. RIVLIN: Thank you.