Leon Panetta on a Possible Budget Deal
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ELIZABETH FARNSWORTH: Welcome, Mr. Panetta.
LEON PANETTA, White House Chief of Staff: Nice to be with you, Elizabeth.
ELIZABETH FARNSWORTH: What’s your reaction to that very bright picture painted by the Speaker? He says that in several weeks there could be an agreement that had a down payment on balancing the budget, a child tax credit, and a–an extension of the debt ceiling, a raise of the debt ceiling.
MR. PANETTA: Well, I guess the best word for it is what the President said which is that he’s intrigued by the offer that the Speaker’s making. I think there’s a lot that lies ahead of us. I don’t think we ought to assume that this is by any means done. I think there’s negotiation that lies ahead of us. Our first preference has always been, as the President said last night, that we ought not to give up on the effort to balance the budget, that has a result of the negotiations we have almost $711 billion in identified savings that is more than enough to balance the budget and do it in a way that doesn’t undercut Medicare or Medicaid or education and the environment, doesn’t raise taxes on working families, that that really ought to be a goal we can work together and give the American people, and we ought to then pass a clean debt ceiling. But the Speaker has made an offer here. I think it’s one that the White House will consider, because in the end, we certainly do not want to have a situation where we do not extend the debt limit.
ELIZABETH FARNSWORTH: What about this idea of incremental changes? The Speaker said that they basically have given up on a big budget agreement in seven years, a big balanced budget in seven years, and that they can have a down payment on a balanced budget with incremental changes. What do you–what do you make of that?
MR. PANETTA: Well, as, as a former budget chairman, I just have to be very cautious about that kind of approach. You know, one of the things I found out in the time I’ve worked on budget and budget proposals is that sometimes it’s easier to cast one vote on a large package that makes a lot of tough decisions because it’s one package that gets you a balanced budget or gets you a significant deficit reduction, whereas, if you start to incrementalize, and start to kind of cut these packages up in pieces, sometimes it’s much more difficult, one, because you don’t have the rules, particularly on the Senate side, that can help you move some of this legislation through, it can be filibustered, amendments can be added. It’s not that easy to do incremental packages. If you’re going to do a package of deficit savings, at least in my experience has been you ought to do it as one package.
ELIZABETH FARNSWORTH: So specifically on the continuing resolution that the Speaker said would be voted on tomorrow, the stopgap spending measure that would prevent the government from partially shutting down again, he said that perhaps it would kill twelve or fifteen small programs and this “impression” was that the President would sign it. Is that your impression?
MR. PANETTA: Well, there are negotiations going on now to try to see if we can work out a continuing resolution. The programs that would be zeroed out are programs that the President has recommended to be zeroed out so they would be programs that the President would accept to face that status.
ELIZABETH FARNSWORTH: Like–excuse me for interrupting, but like what?
MR. PANETTA: Uh, well, there are a number of other minor programs that have been identified for elimination. Right now, I can’t pull any out of my hat, but there are some that were included in our budget proposal that we’ve identified for the Congress as proposals that we would be willing to zero out, and if they’re willing to put those into the proposal and willing to do a CR that doesn’t go after the, the President’s priorities or gut his priorities but basically continues pretty much the current formula, then that’s, that’s something that I think we can work through.
ELIZABETH FARNSWORTH: And would the programs be funded at 75 percent of their level last year, or at what level?
MR. PANETTA: Well, I assume that this is a 30-day extension on a continuing resolution, that we’re looking at pretty much the current formula that we have in these CR’s, which is that you’re basically looking at some kind of overall formula, either based on the House or Senate appropriations bills, and a 75 percent floor. I believe that generally that’s the kind of formula that’s being worked with.
ELIZABETH FARNSWORTH: And that would be acceptable. I know Sen. Kennedy had said that would wreck havoc with school admissions departments because of the tremendous cut in, I guess, student aid.
MR. PANETTA: Well, I think as Sen. Kennedy has pointed out and is right to point out, this is a hell of a way to do business, frankly, to continue to do continuing resolutions with 75 percent levels. Don’t forget the reason for this is that we don’t have appropriations bills in a number of areas that have been put in place. Obviously, the President has vetoed many of those bills because they don’t reflect his priorities, but in some cases we have not–for example, in Labor, Health, and Education, we have not even received their bill in appropriations, so we are in a situation which is unprecedented in the sense that we have not completed, the Congress has not completed all of the appropriations bills for fiscal year ’96, so that brings us to this point. Now we’re kind of in these what I would call haphazard approaches to trying to keep the government funded on a 30-day basis. I really think the best thing we could do, frankly, is work out a more long-term solution to the ’96 budget, fund these programs through October 1, the way they’re supposed to be, and let’s get–let’s get to work on the ’97 budget, which is where we’re supposed to be.
ELIZABETH FARNSWORTH: Well, it sounds like you would like to continue negotiating on the overall budget and not move incrementally the way the Speaker wants to.
MR. PANETTA: Well, again, I think, you know, we’re willing to consider the Speaker’s offer and look at what he’s talking about and see whether or not we can work something through based on his offer, but I just have to tell you my, my concern is, No. 1, I thought the battle of the last six or seven months was about trying to achieve a balanced budget in seven years, scored by the Congressional Budget Office. After the negotiations we’ve had in the Oval Office, we have enough savings on the table to get us to a seven-year balanced budget as scored by the Congressional Budget Office. Why shouldn’t we do that? Why shouldn’t we get that achieved? Why should we back away from that major achievement? If we are now going to turn to a process of incremental packages, savings packages, my concern is this: No. 1, we have to then negotiate on separate incremental packages; they have to be worked out in a way that’s acceptable, but unfortunately will not provide the rules protection that you get, particularly on the Senate side, when you have to deal with these kinds of packages. I mean, if you–for example, you do tax packages on an incremental basis, you can have all kinds of amendments added on the Senate side. If you do a particular spending savings in Medicare or in Medicaid, or in these other controversial areas, and you bring ‘em to the floor of the Senate, they could be filibustered. So I’m just very concerned that when you start to incrementalize these savings, it may not be that easy to achieve the savings that the Speaker’s talking about.
ELIZABETH FARNSWORTH: Well, the Speaker said the reason that he–if I interpret him correctly–but he couldn’t–that he didn’t want to move forward in these negotiations for the seven-year balanced budget, is that the administration won’t reform the entitlement programs. He said that’s not who they are. Is that true?
MR. PANETTA: Well, it–
ELIZABETH FARNSWORTH: Speaking of welfare here–
MR. PANETTA: No, I think it’s–
ELIZABETH FARNSWORTH: –another program.
MR. PANETTA: Well, obviously, and I think the real answer to that question is we obviously don’t want to reform these entitlements in the same way that the Speaker does. The Speaker, for example, on Medicare has proposed reforms, or at least the House and Senate have proposed reforms, the Republicans, that we think would undermine Medicare, that would let it wither on the vine, that would undercut the basic program that serves the elderly in this country. Should we control costs? Yes, we should. Can we do it and allow some choice in the process as the President has suggested? Yes, we can do that. There are some reforms that we can put in place, but do we want to take it to the point where we really undercut Medicare and provide premium increases for the elderly? No, we don’t. The same thing is true on Medicaid. Are there savings we can achieve in Medicaid? Yes. Do we want to get rid of the entitlement on Medicaid that guarantees health care for the disabled, for people in nursing homes? No, we don’t. Republicans want to get rid of that guarantee, so, yes, there are some fundamental differences here, but nevertheless, as I said, we’ve identified savings totalling over $700 billion without getting into these issues. As the President has said, let’s grasp those savings. If there are other reforms down the road, we can fight those out, but give the country a seven-year balanced budget. That’s what we’ve been promising them. That’s what we’ve been battling over. We are there now. Let’s try to get that job done.
ELIZABETH FARNSWORTH: Okay, in the couple of minutes we have left, I want to come back to this debt ceiling extension because just this afternoon Moody’s Investor Service threatened to actually downgrade the credit rating of some U.S. bonds that it said could be at risk of default. You have said that you wanted a, a debt ceiling extension which did not have any conditions or add-ons.
MR. PANETTA: That’s right.
ELIZABETH FARNSWORTH: But would you accept some? I mean, is there anything you’d accept? Because the Speaker seems to–he seemed to be saying, we can’t pass that if we don’t have some things on it.
MR. PANETTA: Well, I guess I would just ask all members to pay attention to that report from Moody’s, and based on that, I think it is their responsibility to pass a clean debt ceiling as quickly as we can. We ought not to be in a position where this country in any way is threatened with defaulting on its good faith and credit. That just should not be the case. And members should have passed this extension of the debt limit back in November. Now, obviously, that, that’s the first order of business. If there is an approach here that the Speaker thinks can get the debt limit extended and he’s got some recommendations, we’re prepared to consider those. But the key here is get–let’s get the debt limit extended so that we do not wind up in a situation where our economy is devastated because we haven’t had the responsible leadership we should have in the Congress to get this job done.
ELIZABETH FARNSWORTH: For example, would you consider the tax credit for families with children, which seems to be very important, according to what he said tonight?
MR. PANETTA: Well, again, I think without commenting on the particulars, I mean, there have been a lot of rumors today whether we do cap gains, whether we do tax credits for children, whether we do other approaches. I think we just have to wait and see what exactly their offer is, and as the President has said, we’ll consider it.
ELIZABETH FARNSWORTH: Okay. Mr. Panetta, thank you for being with us.
MR. PANETTA: Thank you.