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Ornstein Interview: The Budget Negotiations Since Thanksgiving

November 29, 1995 at 12:00 AM EDT


JIM LEHRER: Good evening, sir.

NORMAN ORNSTEIN: Good evening.

JIM LEHRER: So, where do matters stand as of now?

MR. ORNSTEIN: Well, what they have basically done in the time since they reached an agreement before the Thanksgiving recess was to leave for Thanksgiving recess and come back and, in effect, discuss literally the shape of the table around which they would negotiate. It’s looking more and more like those Vietnam peace talks in Paris 22 years ago, and how they would go about the process of organizing these discussions. What’s happening now is preliminaries, Jim, to see who has the upper hand and what the agenda is here. And basically they first tried, the Republicans tried to get the President to submit a new budget that would come to balance in seven years.

JIM LEHRER: In other words, his version, and so they could then compare it to their version, which they’ve already passed, right?

MR. ORNSTEIN: Exactly. They said we won here, we got you to agree to a balanced budget in seven years, show us your budget and then we’ll work the two out together. The President’s response was, we won, we got you to agree that we would protect the programs of Medicare, Medicaid, the environment, and education; tell us how you would change your budget, and we’ll see if we can make it work in seven years. So it’s preliminaries now, and frankly, it’s going to take at least a few more days before we can actually get down to serious discussions of how we can narrow the differences between the two approaches.

JIM LEHRER: Now, what I read today was that there were, they still have not come to agreement on what numbers to use, what economic numbers to use. Explain all of that, please, sir.

MR. ORNSTEIN: Part of the agreement to sit down and negotiate was that they would update the economic numbers and use numbers from the Congressional Budget Office. Now, a budget is, of course, how much money you take in and then how much you spend out. In the case of the federal budget, that is all highly dependent on the state of the economy. If the economy grows faster, you bring in more tax revenues. People have more money. You spend less money because you have less unemployment, people are requiring less from the federal government.

JIM LEHRER: Less services?

MR. ORNSTEIN: Less services.

JIM LEHRER: Social services. Okay.

MR. ORNSTEIN: And since we’re talking here about an economy that’s almost $7 trillion and a federal budget that now is about $1.6 trillion, very small differences for this next year, but especially if you compound over seven years, result in huge differences and amounts.

JIM LEHRER: Like what?

MR. ORNSTEIN: The congressional budget as originally proposed used numbers from the Congressional Budget Office, their own budget operation, they projected that over the seven-year period to 2002, the economy, the Gross Domestic Product, the GDP, would grow on an average of about 2.3 percent a year. The President’s budget, coming from the Office of Management & Budget, his own office, projected growth during that same period of time of between 2.4 and 2.5 percent, 2.3, 2.5 doesn’t seem like a lot. Over seven years those differences amount to well over $200 billion. Small differences in inflation, the Republican budget projected somewhat higher inflation, that means smaller tax revenues that are indexed to inflation and more outlays, and that means a difference of hundreds of billions as well. So the numbers here matter.

JIM LEHRER: And they matter in a practical sense, because then if they take the most optimistic numbers, then the Democrats would argue and the President would argue, well, we don’t have to cut so much, right, because there will be more–

MR. ORNSTEIN: Exactly so.

JIM LEHRER: –more revenue.

MR. ORNSTEIN: Now, there are two reasons why the Republicans want to use more pessimistic numbers. One is a substantive one that, after all, you’re, in effect, betting on the come here, if you use optimistic numbers and the economy doesn’t pan out, then you aren’t going to get the balanced budget that you promised. So you might as well use a prudent set of numbers. But the second reason is that that puts more pressure on for cutting spending. Now, what we know is that the Congressional Budget Office numbers that projected for this coming year and the existing year in which we’re in seem to be very pessimistic based on the results that we now have. So they’re already making adjustments to move up a little bit.

JIM LEHRER: Now, did they–did the Republicans agree in this deal, the deal that was signed and brought ’em to the table now, to adjust those figures in any way?

MR. ORNSTEIN: What the Republicans agreed to do, they say, is to use the newest set of numbers from the Congressional Budget Office, because these are continuously updated. We weren’t expecting to get a new set of numbers until next February. Now, presumably, they’re going to push forward their numbers, and what the White House has gotten in return to agreeing to use the Congressional Budget Office’s numbers is that they will update them with the advice and, they say, the active participation of their own people, as well as some outside figures. And the private sector has generally been more optimistic than either the Congressional Budget Office or the White House. So if you–if you move just a little bit, if they accept the notion, for example, that we’ll grow on average 2.4 percent over the next seven years, it probably means a hundred to two hundred billion dollars less that they have to take out of the spending stream. And that moves them considerably further towards reaching their goal of an agreement by December 15th.

JIM LEHRER: On personalities, who’s actually doing the heavy negotiating thus far?

MR. ORNSTEIN: A part of the dispute was who would be at the table. The Republicans wanted a small number, four on each side, and they wanted basically to have just the White House representing the Democrats, Republicans in Congress, White House. The Democrats said, well what about Democrats in Congress, and that’s something Republicans didn’t particularly want. It took away that symmetry for them and it meant a different group. Basically, they’ve compromised. They’re going to be a somewhat larger group. They’ll be representatives of the three different contingents. And what we know is there will be some leadership representatives there. Dick Armey, the Majority Leader in the House, will be there; Trent Lott, the Whip in the Senate, will be there. We will have representatives of the Democratic leaders in Congress, including Byron Dorgan of North Dakota and somebody from the House side. And we’ll have more principals, the budget principals, John Kasich and Pete Domenici, the chairs of the two committees, the ranking members of the two committees, Democrats Martin Szabo and Jim Exon.

JIM LEHRER: Who for the White House? Who for the White House?

MR. ORNSTEIN: And clearly it is Leon Panetta and Alice Rivlin, the budget director, who will be the major figures here. Bob Rubin, the Treasury Secretary, and possibly Laura Tyson will participate. This is the first step. What will happen here presumably, if it all moves forward, is we’ll reach a general agreement, and then they’ll turn to other larger groups of people who are more specialized in these areas, congressional committee chairs and agency heads, to work out details.

JIM LEHRER: Too early to even predict a possible outcome, is it not, so early?

MR. ORNSTEIN: It is early to predict an outcome. Much of what we’ve heard which is pessimistic today is posturing. But it is extremely unlikely that we will actually have a deal signed, sealed, and delivered by December 15th. The wags around Capitol Hill have been saying that the date to look toward is December 22nd, which is when the schools in the local districts get out for Christmas, and when most of the members will have pressure to get away. But, frankly, the optimists would say by December 15th what they will get is an agreement that they’re moving far enough along that we can continue to extend, keep government going.

JIM LEHRER: Keep the government going–

MR. ORNSTEIN: Operating.

JIM LEHRER: –while they talk some more.

MR. ORNSTEIN: While they talk some more.

JIM LEHRER: All right, Norm. Thanks a lot.