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PAUL SOLMAN: Well, we’re joined now by two economic policy makers who have long experience in stand-offs like this. One is Roger Porter. He was President Bush’s assistant for economic and domestic policy and also served in the Reagan administration. He’s a professor of business and government at Harvard’s Kennedy School. And Robert Reischauer was director of the Congressional Budget Office we’re hearing so much about from 1989 through February of this year. He’s a senior fellow at the Brookings Institution in Washington. Gentlemen, thank you both for coming in. Mr. Porter, could we start with the basics here. I mean, why does the government need a bill in order to keep on running?
ROGER PORTER, Former Bush Policy Adviser: Well, each year the Constitution requires that any monies that are going to be spent by the government have to be appropriated by the Congress. And thus far only three of the thirteen appropriations bills have been passed by the Congress and signed by the President. So those departments are open for business. The other ones are, as the phrase goes, shut down.
PAUL SOLMAN: And that’s what we saw on the taped piece, that–
MR. PORTER: That’s correct.
PAUL SOLMAN: –they’re starting to pass these appropriations bills. So why do we–why do we need this? I mean, why do we–this has to happen–because the–can’t the President just spend the money?
MR. PORTER: The President is not authorized and it would be illegal for him simply to go out and spend money that had not been appropriated by the Congress.
PAUL SOLMAN: All right. So, Mr. Reischauer, has this happened in the past? If so, how often, and what happened?
ROBERT REISCHAUER, Former CBO Director: This really isn’t that unusual. There have been ten shutdowns in the last fifteen years of pieces or large segments of the federal government. Two occurred twice in one year. Most of these have involved shutdowns of a day, at the most usually over the weekend, some just a few hours. The most recent one we had was in 1990, and that one lasted three days, but it was over the Columbus Day Weekend, so the impacts were relatively slight.
PAUL SOLMAN: Any impacts at all? I mean, you say slight. Anything bad happen as a result?
MR. REISCHAUER: Well, a lot of tourists were disappointed because they couldn’t go to the Smithsonian Museum or go to the national park monuments that they wanted to see, but other than that, most of the activity of the federal government wasn’t expected to take place.
MR. PORTER: And when the shutdown ended, of course, federal employees were not only brought back but all of their pay was reinstated, so none of them in, in those terms lost money.
PAUL SOLMAN: You were both involved in this. How strenuously did you try to avert the crisis back in 1990, and were you like–were you nervous, that, oh, my goodness, the government will shut down for goodness knows how long?
MR. PORTER: In my experience, the participants on both ends of the avenue were very serious and were very interested in trying to reach an agreement in which the shutdown could be averted, but they are also people who end up having a lot of principles that they are trying to defend and, therefore, they’re unwilling to compromise on those principles simply to reach an agreement.
PAUL SOLMAN: But were you nervous at the time? Did you think, oh, my goodness?
MR. PORTER: Well, I was relieved when it was over.
PAUL SOLMAN: And you, Mr. Reischauer, did you feel that there was a game of chicken going on back then that, that might result in something terrible happening?
MR. REISCHAUER: Well, the circumstances were really quite different then. What happened was a summit agreement was reached with the administration and the Democratic leadership of Congress on September 30th. That was then put to a floor vote in the House on the night of October 5th, and the liberals and the conservative wings of Congress defeated it, and so there was no budget resolution. The continuing resolution, a temporary funding measure, was provided to the President and he vetoed it. He vetoed it because he said without a budget resolution, I’m not going to go forward. Once that veto was put in place, the Congress worked very hard over the weekend to fashion a budget resolution that would pass the Congress, and they did. That was completed Sunday night. By Monday morning, the President had a budget resolution on his desk. He signed it at 7 AM so the workers turning on their radio in the morning realized that they were supposed to go to work, and it was business as usual. But the leadership in the Congress and the President were really on the same side in this one.
PAUL SOLMAN: So why is it so different this time around, Mr. Porter?
MR. PORTER: Well, this time around you’ve got a much more disciplined set of parties in the Congress. The Republicans under the leadership of Newt Gingrich and Bob Dole are really a very disciplined group.
PAUL SOLMAN: Does this surprise you?
MR. PORTER: No. I’m not surprised by that. They feel that they got a very strong message sent by the public in 1994.
PAUL SOLMAN: Right.
MR. PORTER: And that they have an agenda that they are trying to put in place, and to this point, they have been frustrated by the lack of ability to engage the administration in a genuine debate about what is going to happen with respect to the pattern of spending in the future. And what this latest iteration is about is an attempt on their part to try to get the framework of that debate set. Today Sen. Dole and Speaker Gingrich offered to pass a continuing resolution if it included two provisions, one, that that President would commit to a process that would produce a balanced budget by the year 2002, and that the assumptions that would be used as part of that process would be the economic assumptions developed and adopted by the Congressional Budget Office.
PAUL SOLMAN: Mr. Reischauer, do you think Mr. Porter is being fair to the President with this presentation of the situation as it stands?
MR. REISCHAUER: Well, I think there’s a few other additions that I would put in about the differences with 1990. We are at the preliminary stages of a presidential election cycle. We have an incumbent running for reelection. We have the Majority Leader of the Republican Party in the Senate also a candidate, so this is heavy politics compared to what was happening in 1990. Also, it’s worth remembering we were in the middle of an international crisis then. We had 500,000 troops in the Gulf are about to go to war. The leadership, the President and the Congress were in a sense together on this, and the issue wasn’t portrayed so much as a moral crusade, which is the way the Republicans have portrayed deficit reduction this time. They are shooting for zero deficit, not a specific amount of deficit reduction. It makes the differences a lot easier to bridge.
PAUL SOLMAN: Do you think that this is an ideological, a major ideological dispute going on here, or political posturing, some of both?
MR. PORTER: There’s probably some of both, but I think largely it is a debate about what ought to be the role and extent of government intervention in the economy, how much of the total pie of goods and services in the country ought the government control, what ought to be levels of government spending, and that is in part what the debate is about. There’s some posturing. It is–Bob is absolutely clear and correct that it is a political year and that there are a lot of political overtones this time around, unlike there was in 1990, and the same is true with the international situation. But I think there is also a strong profound philosophical debate that is going on, and the sides are pretty firmly committed.
PAUL SOLMAN: So you don’t think what we hear on the NewsHour, for example, people being cynical about this, that that’s really a misreading or a partial misreading of what’s going on?
MR. PORTER: I don’t see it as cynical. I see it as a genuine debate.
PAUL SOLMAN: And Robert Reischauer, you agree with that, that this is a really serious debate going on?
MR. REISCHAUER: Oh, I agree completely. We are talking about fundamental changes in the way our government does business and the size of government and types of activities it can undertake. And this is the kind of debate that should lead to a fight, a really donnybrook, if you will.
PAUL SOLMAN: But the argument we heard in the beginning of the show, Dole talking about the argument over budget projections, in fact, budget projections involving the Congressional Budget Office that you ran for so many years, that’s what we’re hearing about. That’s just a, a tactic, a gambit in this fight. Is that what’s going on?
MR. REISCHAUER: Well, the President and the Congress have defined the objective as balancing the budget, reaching zero deficit in some year. One has to figure out, you know, how a big a cut you need to reach that target. If you use the Congressional Budget Office estimates, it takes a lot more cutting to get to zero than if you use the President’s assumptions, and–
PAUL SOLMAN: This is the Congressional Budget Office has more–less rosy assumptions about the future?
MR. REISCHAUER: Less rosy is probably a good way of summarizing it, just slightly more pessimistic view of how fast Medicare and Medicaid will grow, how fast the economy will grow, what the inflation rate will be over the next seven years.
PAUL SOLMAN: So, therefore, the budget deficit would be less if you used the President’s projections than if you used the–
MR. REISCHAUER: And if you did that, then you would have less cutting to do, it would be an easier job, it would be roughly $100 billion easier load to bear.
MR. PORTER: One thing that is driving this, of course, is that to the extent that optimistic assumptions have been used in the past to prevent some of the heavy lifting having to occur, we–
PAUL SOLMAN: The heavy cutting.
MR. PORTER: The heavy cutting or heavy restraining of the rate of growth of spending. We’re going to continue to spend more money under any of these scenarios; it just depends on what that rate of growth is going to be. And, in fact, the Republicans are arguing, and I think ultimately will prevail on this, that we ought to use a set of assumptions that are realistic as opposed to overly-optimistic and not essentially assume the problem away.
PAUL SOLMAN: But I gather, Mr. Reischauer, that it’s really very difficult to determine which set of projections is the right one anyway?
MR. REISCHAUER: Oh, there’s a tremendous amount of uncertainty about what the economy will look like seven years from now, what the programs will be spending if we don’t change them. There’s no question about that. But historically, both OMB and CBO have been a tad optimistic, and if one really wants to achieve a balanced budget or have any plausible hope of doing so, I think the prudent thing to do is to use the more conservative set of estimates.
MR. PORTER: I would agree.
PAUL SOLMAN: And we’ll leave that agreement right there where it’s hard to come by on this show sometimes. Gentlemen both, thank you for joining us.
MR. PORTER: Thank you.