TOPICS > Politics

Newsmaker Interview with White House Chief of Staff, Leon Panetta

November 9, 1995 at 12:00 AM EDT

JIM LEHRER: Now, an interview with a principal player in the story, White House Chief of Staff Leon Panetta. Mr. Panetta, welcome.

LEON PANETTA: Jim, nice to be with you.

JIM LEHRER: So, the President is not going to sign any of these versions, and neither one of these issues as now written, is that correct?

MR. PANETTA: That’s correct. We’ve indicated that the President would veto the continuing resolution as it passed the House, and he would veto the debt ceiling extension as it passed the House, because of their efforts to include elements of their budget which are unacceptable to the President. The President has basically said, I’m not going to be blackmailed between choosing whether or not we shut down the government or create a default and choosing priorities like cutting Medicare, Medicaid, and some of the other elements of the Republican budget. He just can’t–he cannot accept that position from the Republicans.

JIM LEHRER: It’s not negotiable?

MR. PANETTA: That, that is not negotiable with regards to what we should do on the debt ceiling. The President’s made clear to the leadership, look, let’s do what’s responsible here. Let’s remove the issue of default of the federal government outside of the issue of differences over where we should go with the budget; let’s protect the full faith and credit of the United States; let’s not raise the issue of default; let’s not use the debt ceiling to put all other kinds of issues on in order to force me into making these choices; let’s just do that clean. Let’s pass a clean extension of a continuing resolution so that we can keep the government going, and then, you know, if there’s a discussion to be made on differences with regard to the budget, that’s the time to do it. But you cannot do this in an atmosphere in which the Republicans are basically saying to the President, you’ve got a choice here, Mr. President, you can either bring down the government, stop it, bring down the economy by not–by having a default, or you’ve got to accept our priorities with regards to Medicare, Medicaid, education cuts, environment cuts, and tax cuts. I mean, it makes no sense. This President is not, nor should any President, frankly, Republican or Democrat, be put in the position where that kind of blackmail can prevail. You just cannot do that.

JIM LEHRER: Blackmail is a word you’ve used a couple of times today. You also used the word terrorism. Is it that serious a matter?

MR. PANETTA: Well, the problem is this. The problem is when–when a party that is in power in the Congress is saying to the President and saying to the country, we frankly–we can’t get our issues across openly and in a full debate in terms of bringing our issues to the American people–after all, that’s the way you get things done in our process. If you believe deeply in their particular budget priorities, bring those issues to the American people, debate them openly. Let’s talk about those issues. That’s the way it’s done here in Washington. But instead, because obviously, the American people do not support the direction that they’re taking–and it’s obvious every day in terms of how the American people are responding to the Medicare cuts, the deep Medicaid cuts, cuts in education, particularly on student loans, the whole issue of tax increases on working families, this is not acceptable in terms of the American people. So what do you do when you’re in that situation? Then you start to resort to threats, and that’s exactly what they’re saying here. They’re basically threatening the President and the country by saying we will force a default, we will force a shutdown in the federal government if you do not accept our priorities. And that’s where we are. Very frankly, it’s economic terrorism, and that’s unacceptable.

JIM LEHRER: Let’s take these things one at a time. What would be the impact of the failure to raise the debt limit ceiling?


JIM LEHRER: The default–in other words, the default issue.

MR. PANETTA: Right. If you don’t do it. And I think everybody needs to understand that the reason you’re doing that is so that you can pay the bills that have already been incurred. This is not a question of incurring new debt. This is a question of paying the bills that the United States has already incurred and that the Congress has basically appropriated and approved in legislation, so that’s the issue. If you, in fact, fail to increase the debt ceiling to allow us to pay our bills and force the United States into a default, then clearly what will happen is the United States will not be able to meet its bills. That will obviously have an impact in terms of interest rates.

JIM LEHRER: They’ll go up?

MR. PANETTA: Obviously, there will be an impact on interest rates that will go up because we have failed to meet our debts, and, therefore, in order to be able to in any way have any kind of credit, we’ll have to increase interest rates. That’ll increase deficits. Variable interest rates, which are tied to Treasury bill rates, will also go up. That affects millions of people who have mortgages with variable interest rates. It’s also going to affect obviously some retirement plans that are related to those kinds of variable rates. Beyond that, obviously, the signal that we send to the world and to the markets that we have not able to meet our full faith and credit, I think, is a disaster. And so–and that’s a bill, incidentally. What happens when you fail to do that is not something that just impacts tomorrow and the day after tomorrow or next month. It’s something that you’re going to have to pay a bill on for the next twenty years, because people are going to say once the United States has, in fact, defaulted, then our credit has been seriously damaged in the world.

JIM LEHRER: And then that would be worse than–you would agree then that would be worse than the other part of this equation, which would be the shutdown of the government Tuesday if that continuing resolution is not enacted, correct?

MR. PANETTA: I think that’s fair to say, Jim.

JIM LEHRER: That is what, 800,000 federal employees have been furloughed, offices, various offices, various federal facilities would be closed down till it was resolved?

MR. PANETTA: Yes. What you have to do is once, once you run out of your legal appropriations–and, again, what I would point out is the reason we’re here is because the Congress has not completed all of their work on appropriations bills. There’s only two bills that the President has signed out of thirteen. They have not sent these bills down to the White House, have not completed their work, which is all supposed to be done by October 1. As I might point out, all of the bills were passed by October 1 in the last session of Congress. That’s not happened. So, obviously, if you run out and you don’t have your appropriations, you’re required under law to essentially shut down, and a number of agencies will be required to do that. There are some that are exempted by virtue of the mission they perform, which is important either to our national security or important to property or life, but generally, what you will see is about 800,000 employees who will be furloughed. There will be offices that will be closed down. The Social Security claims–for example, anyone who turns 65 and wants to file for Social Security, that claim will not be able to be processed. The same thing is true with regards to veterans’ claims. You will see a gradual shutting down of offices as we begin to run lower and lower in terms of appropriations.

JIM LEHRER: And it’s the President’s view that those, those consequences of these two issues do not outweigh his position on the budget? In other words, the veto is still more important than those two issues?

MR. PANETTA: The President–the President deeply believes that the budget issues that he’s confronting are fundamental in terms of the direction of this country, and that there are very fundamental differences here between where the Republicans want to take the country and where this President wants to take the country. Their budget, as I said, basically makes major cuts in Medicare, takes almost $180 billion out of the Medicaid system, having a tremendous impact in terms of people and the elderly who rely on Medicaid. It takes almost $36 billion out of education. It cuts many of the funds that support environmental efforts, and in particular, it raises taxes on working families about $148 billion. Now, the President just doesn’t believe that’s what we ought to do in terms of balancing the budget. He’s got a balanced budget proposal. It protects Medicare, protects Medicaid, does not raise taxes on working families, keeps our investment in education. For goodness sakes, if we care about where this country is going, let’s keep it in the right place. We’ve got a strong economy right now. This economy is doing very well. We’re producing a lot of jobs. We did a $500 billion deficit reduction package that is working for this country. It’s reducing the deficit. That’s what we ought to continue to do.

JIM LEHRER: Are you and the President concerned at all, Mr. Panetta, about what this looks like or may look like to the American people, that they look in Washington and they see that the President and the Congress are allowing all of these terrible things, could allow these terrible things to happen on Tuesday, Wednesday, and Thursday of next week, that it confirms their worst thoughts, according to the polls, that they already have about their government in Washington?

MR. PANETTA: Well, there is no question, Jim, that there are people that look at Washington with a large degree of cynicism as to what happens in this town, and that’s understandable. But they also understand that there are some major decisions involved here with regards to the budget. The budget is not just a numbers game. It is about people, and it is about priorities, and it’s where this President wants to take the country, or where Newt Gingrich wants to take the country. That’s the choice. The President feels very deeply that, you know, if those differences–we want to debate those differences, and we want to decide those differences, then that’s fine. Let’s do it in the context of a debate on the budget, but for goodness sakes, don’t say to the President of the United States and the people of this country that you are either going to have to face a default or a shutting down of the federal government, or you have to accept our priorities. That is not a legitimate choice that this President or any President ought to accept.

JIM LEHRER: All right, Mr. Panetta, thank you very much.

MR. PANETTA: Thank you, Jim.