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MARGARET WARNER: Prospects for ending the budget stalemate may be looking up today, after an afternoon meeting at the White House between the President, Majority Leader Robert Dole, and House Speaker Newt Gingrich. Welcome back. Norm, is this the beginning of a breakthrough?
NORMAN ORNSTEIN, American Enterprise Institute: I think it’s the beginning of a slow and torturous process where they finally may start negotiating. With the principals involved, the stakes are higher, and it’s clear now that if they don’t reach an agreement, they’re going to look even worse than they have up to now, if that’s possible, so I suspect we’ll see some movement soon.
MARGARET WARNER: Do you agree?
SUSAN DENTZER, U.S. News & World Report: I agree with that fundamentally, Margaret, and I think they’re operating now on the shark principle. Sharks have to keep moving forward, or they die, and by the same token, these discussions have to keep moving forward, or they die. But as we know, they have yet to agree fundamentally on whether they’re going to use and how they’re going to use the Congressional Budget Office economic assumptions versus the Office of Management & Budget, which is to say the administration’s economic assumptions, all of these things, are yet to be decided, and much more fundamentally, some serious policy differences, which really are going to be the things that ultimately drive deficit reduction have yet to be hammered out.
MARGARET WARNER: Okay. But before we get to those, if this is the beginning of a breakthrough, Norm, why do you think it finally happened now, as opposed to last week, or next week?
MR. ORNSTEIN: Well, one of the great problems here and ironies here is that I suspect the same deal that they could ultimately get a couple of weeks from now will end up having a much more sour impact out in the country than if they’d reached it a few weeks ago. But the stakes are very high here, Margaret, and we’re still–think back to those negotiations with the three parties over Bosnia, how long it took to get them to the table, to get just the right moment when you’re willing to make the slight concessions. Everybody’s trying to save face here and save policy priorities, and frankly, it’s taken them an enormous amount of time just to kind of figure out how they can put their elements on the table. The dispute over the numbers is basically this: The President wants to say, let’s talk the Medicare numbers, we’ll get the Medicaid numbers, we’ll get the discretionary numbers, and then when we’re done, we’ll see how much more we need, and then I can turn to the Republicans and say, now, you can either have more of your tax cut, or we can massage the assumptions a little bit. The Republicans want to say, you make the concessions on Medicare and Medicaid, and on discretionary spending, and then you’re going to have to bring something else to the table like the Consumer Price Index, and the onus will be on you. So once they decide how to decide, we can move more quickly. But it’s going to be like so many other negotiations where you get to the end point and you wonder why they couldn’t have done it so easily weeks earlier.
MARGARET WARNER: And why do you think they couldn’t have done it weeks earlier?
MS. DENTZER: Well, Norm’s right. It’s a question fundamentally of deciding what your priorities are. If your priority is fundamentally to get a balanced budget or something close to that in seven years, that’s one thing. If your priority is to do that and also have a large tax cut, that’s another thing. If your priority is to have a large tax cut that also drives up the budget deficit for a year, which keep in mind, the Republican plan as it is now would actually have a deficit rise for the first year in four years before it would then fall in order to accommodate the tax cut, you have to sort out what your priorities really are, and that goes for the administration, as well as for the Republicans. Once they can agree what their priorities really are, I think they will come much closer to the very obvious set of solutions that Norm mentioned.
MARGARET WARNER: So why–rather, how significant is it? You had Newt Gingrich come out and Al Gore come out, Vice President Gore. They both used the same word “constructive” to describe the talks. But they still had this disagreement, as Susan pointed out, Norm, on whether they’re going to use CBO scoring. I mean, Gingrich said everything discussed tomorrow will be scored by CBO. Gore called that a slight misunderstanding. I mean, what is going on here?
MR. ORNSTEIN: You know, they have gone to these meetings, and I’m sure it’s like the old Japanese movie “Rashiman,” where everybody has a radically different view of what happens. Nuances of the discussion are, are clearly a part of this. Also, remember that the longer you go on with this, Margaret, the more it becomes a question of saving face. Neither side wants to be the one that basically comes out a loser in this, and part of it is that all of us will be asking the question: Who made the concessions, who’s the winner, and who’s the loser, and not say, hey, we’re all winners here. So a lot of this discussion is who’s going to make the first concession, and it’s one of the reasons why those moderates in the Senate and the House who were on the show last night become so key, because they made the excuse to be able to say, well, neither of us made a concession, we just turned to an independent group.
MARGARET WARNER: Well, and, in fact, I guess Vice President Gore said that some of these moderates’ proposals will be on the table tomorrow. Do you think–have they played this large a role, do you think?
MS. DENTZER: There’s no question that they will be a fundamental part of whatever solution is achieved here. One very obvious approach is to dial back radically, scale back radically, or, of course, phone or get rid of altogether the tax cuts. That’s something that conservative Democrats and moderate Republicans can agree on. And let’s keep in mind that the Senate waged an internal battle over that, the Senate Republicans over that. There are many over there who simply have no desire necessarily to have a so-called fiscal dividend of tax cuts paid out before the bottom line earnings come in and the way of deficit reduction. Those kinds of things are going to be very central to the solution, but I would also say it’s important to step back and recall that really they can squabble over CBO assumptions and who thinks what the non- accelerating inflationary rate of unemployment was going to be in the year 2002 and all these other detailed economic things that maybe some people in the Congress are competent to discuss, but I doubt it. The fundamental issue is going to be coming to grips with policy differences, and we have some very serious policy changes on the table here. We have the White House having proposed to cap entitlements in Medicaid, that is to say the program for the poor and that pays for long-term care, and even willing to talk about some kind of a cap on Medicare. These are very significant differences. When the Bush administration proposed capping entitlements, the Democrats at the time would have nothing to do with it. So it’s important for both sides to start focusing on these fundamental policy changes and not necessarily hide behind what Norm says they’re going to hide behind, which is who won whose economic assumptions have prevailed here, et cetera.
MR. ORNSTEIN: No. We’re very close on Medicare, and Medicaid will get there, and discretionary domestic spending, we’re not very far apart either. We’ve got two real stumbling blocks here, I believe. The tax cuts is one. The other is bringing in the Consumer Price Index a little bit more and adjusting the inflation number downward, which means fundamentally changing Social Security and Medicare in another way. If they can’t reach agreement on those, including putting them on the table, seeing who’s willing to put them on the table, then we’re not going to get anywhere. And those are the ones that people should be watching more closely.
MARGARET WARNER: Okay. But, Norm, if the potential give is on the tax cut, can Speaker Gingrich bring along these freshman Republicans who seem adamant about, you know, maintaining a huge tax cut?
MR. ORNSTEIN: You’ve got two questions here. One is whether he’s willing to lead fifty or sixty of his Republicans of the two hundred and thirty-five to the side who won’t go along with anything. But the other reality is there are ways of dealing with the tax cut that give you your cake and allow you to eat it too. You can have a tax cut that lasts until 1998, and then gets stopped or continues if you’ve really made great progress on deficit reduction. You can take the capital gains cut and a child credit and scale ’em back but keep those two things in place and let them say we got the fundamental things that we want. So there’s room for maneuvering there if you can save face and be sure you get it on the table so that you’re not the one making the concession. It sounds like a bunch of kids playing, but the fact is every tough negotiation, from sports figures to Bosnian presidents, takes place under the same kind of conditions where everybody’s trying to make sure they can declare victory in the end.
MARGARET WARNER: We only have a very short time left, so before we go, let me ask you this. Both Vice President Gore and Speaker Gingrich, particularly Speaker Gingrich, predicted that this will be settled by the end of the year. What’s your prognosis?
MS. DENTZER: Well, the question is what does settlement mean, does settlement mean that they’ve agreed really on the basic outlines of a deal? I suspect if that’s what settlement means, they will get there, but keep in mind these are very, very difficult issues that have to be hammered out. If, in fact, you decide to cap the rate of growth of Medicaid, you have to decide what to cap it to, what you peg it to, formula kinds of discussions that took weeks. Look how long it’s taken for the, the White House and the Congress not to agree on the details of welfare reform. Multiply that by about 10, and you get a sense of how long it really will take to get this deal signed, sealed, and delivered, signed by the President into law.
MARGARET WARNER: Let me get, Norm, your prognosis quickly.
MR. ORNSTEIN: I think we’ll get the guidelines of a deal by the end of the year, but it’ll take ’em all the way through January probably to get the details.
MARGARET WARNER: Great. Thank you both. I’m sure we’ll be back.
MS. DENTZER: Thanks, Margaret.