JIM LEHRER: More now from President Clinton's budget director, Franklin Raines, and Senate Budget Committee Chairman Pete Domenici, Republican of New Mexico. Senator, in general terms, what do you think of the President's budget?
SEN. PETE DOMENICI, Chairman, Budget Committee: Well, first, I think it's a giant contradiction. It's an enigma. It's a magnificent political document. Now, having said that, let me first say if we did nothing, the President doesn't even send us a budget, we will--under his economics--we will have a balanced budget.
So it's not the budget that makes the balance; it's what we did last year in reaching agreement that makes the balance. Now, secondly, it seems quite strange to me that last year we made an agreement that said spending would not go up for all of the appropriated accounts of government. We set caps and said that's the limit.
Now, here we've got a president in an election year that says, wait a minute, I want smaller government, lower taxes, more power back to us, to our cities, and this budget says raise taxes, regardless of what kind, for next year, their own budget document says that taxes--the tax take will be the highest since 1945, 20.6 percent of Gross Domestic Product, a giant increase. So it's up, instead of down, the taxes. Then he said smaller government. There's 9,300 more employees in this budget, and believe it or not, there's $150 billion in new programs of one type or another.
Now, if that's smaller government, under the rubric of an agreement that got you to balance it, then what is big government? And last but not least, let me suggest if the President can find all this money to spend--and I don't understand how we're going to get it because 106--we're using different numbers--we think the correct one is 106 is taxes and fees--the balance of the 150 comes from some manipulations--some are right--some are very questionable.
But then he spends it all. Now, if he could do that, we could cut taxes for the American people by the amount of his new spending and just think what they would--how they would feel. Instead of programs they'd get money; instead of more home care they'd get a reduction in their taxes. So this is a classic battle between a spending president and a taxing president, and Republicans that say we had a deal, less government, less taxes.
JIM LEHRER: First, Mr. Raines, to that general point, that this violates the deal, the original budget deal in general terms, and to the Senator's general point, and then we'll go back through his list of specifics.
FRANKLIN RAINES, White House Budget Director: Well, this budget is consistent with the deal that we negotiated last year. Specifically, it's consistent because it was the chairman who particularly said we're going to apply the Budget Enforcement Act and its rules to this budget agreement, and we are abiding by those rules in proposing that investments that are offset by cuts and revenue elsewhere. So this is very consistent, except in one respect, and I have to admit, we do deviate from the agreement in one respect. We balance the budget three years earlier than the agreement calls for.
JIM LEHRER: All right, then, let's go through his specifics, Mr. Raines. There--not only are taxes not cut; they are increased. There's more taxes--tax money coming in as a result--in this budget.
FRANKLIN RAINES: We propose about $24 billion of tax cuts that are paid for by a comparable amount of closing of loopholes. These are tax cuts to support child care, to support the building of schools and reconstruction of schools, to support energy efficiency, so we can deal with climate change. We are paying for those tax cuts by closing loopholes. Those are the taxes--in our proposal, but we do have a proposal to raise the cost of tobacco, to make cigarettes more expensive so that teenagers will smoke less. And we admit that. We want to raise the cost of tobacco. We don't want that money to go to the tobacco companies. We believe it should go to the federal government and the states to support things such as an increase in research for NIH, to support an expansion of child care, and to reduce class size.
JIM LEHRER: So, do you have a problem with raising the tobacco tax?
SEN. PETE DOMENICI: No, I don't. Look, we'll probably raise the tobacco tax, but let me make a point. They raise the tobacco tax, and then they assume--just get this--that we're going to pick up $65 billion, which they are going to then spend on new programs, from the settlement. And I may favor the settlement, but the truth of the matter is it's a very big concern that we'll ever pass that. And, if we do, we have to take that from the states and say we're going to use it. So chances of ever getting that money are pretty slim.
JIM LEHRER: So you don't think that should be figured into the budget?
SEN. PETE DOMENICI: Absolutely not.
JIM LEHRER: That's $65.5 billion.
SEN. PETE DOMENICI: Which means there hardly any room for the new programs they're talking about.
JIM LEHRER: Mr. Raines, what about that, why should that be counted now?
FRANKLIN RAINES: Well, we are counting it now because the President's required to set forth his entire legislative proposal in the budget. But as the Senator said, and I agree with, the budget's balanced without any of the proposals that we have made. With these proposals we have proposed investments, and we've proposed offsets for those investments. I disagree that we're not going to see tobacco legislation pass. Indeed, every day more and more support is there for tobacco legislation. The "Wall Street Journal" today had an excellent article pointing out that support is growing for tobacco legislation, and it's growing for a simple reason. There's nothing else we can do that will have an impact on the public health more dramatic than increasing the cost of cigarettes.
SEN. PETE DOMENICI: That's not relevant.
JIM LEHRER: What about the Senator's basic point, Mr. Raines, that the President's budget increases the size of the federal government, rather than shrinks it?
FRANKLIN RAINES: Well, by everything that I can measure we are shrinking the size of government, as a percentage of the Gross Domestic Product, we are shrinking government, whether you're looking at total spending or discretionary spending, or just domestic spending. We have shrunk the government in terms of people. The government has been shrinking and while the private sector is growing. And, indeed, if you look at the average person, the average--the median income person--you look at their tax rate, their taxes are now lower than they were when Ronald Reagan's tax cuts became fully effective in 1984. They are lower. And if you look at people who are at half the median, we virtually wiped out their taxes.
JIM LEHRER: Senator.
SEN. PETE DOMENICI: Look, let me see if I can, for your readers, give you a description of what we got. We got a budget, and it's got agreed-upon limitations from a five-year agreement. And then we got the President coming along and producing a rump budget. It's kind of a rump budget, because it says, okay, that's all well and good, but we can tax the American people and we can spend $150 billion new money and we figured out a way so it doesn't count in that budget. And it shouldn't have any impact on America.
JIM LEHRER: I don't understand that. In other words, you're saying--Mr. Raines, can you help me on this--help us understand what--in terms of seeing it differently. You're saying $150 billion--
SEN. PETE DOMENICI: New spending.
JIM LEHRER: New spending. You dispute that, Mr. Raines?
FRANKLIN RAINES: No. Our spending isn't that high. Our spending is approximately $120 billion, but it is all paid for. That is the important point. Now, we can have a dispute. I can understand the other side saying, well, gee, we just don't think the government ought to be doing anything about child care. We don't think they ought to be reducing class size. We think that we're spending enough money on health research. Those are all respectable positions. And we can debate that. But there is no question that we've balanced the budget three years early and we've paid for every dollar of proposal we've made.
JIM LEHRER: So what, Senator, you believe that that--if it's $120 billion or $150 billion, it should not be spent on any program, much less the kinds that the President wants--
SEN. PETE DOMENICI: Let me do it another way by using some exaggerated numbers.
JIM LEHRER: Okay. All right.
SEN. PETE DOMENICI: You have a budget. It's in balance, and nothing the President did brought this balance any earlier. The agreement last year brought the budget earlier, so he made a point--the only thing different is they balanced the budget three years early but they didn't do anything to get that. That's the effect of the economy. But, now, look at this: Here we have a budget, and there are no new programs, and taxes are what they were last year.
Along comes the President and he says, oh, oh, I got a way--I'm going to raise taxes $300 billion, and I'm going to spend it. That's neutral--$300 [billion] in taxes, $300 [billion] spending. The budget's still balanced. Have you spent more on government? Of course. Have you taxed the people more? Of course. But if it's one for one, you don't change the deficit, but you--
JIM LEHRER: Okay.
SEN. PETE DOMENICI: --you pull down the people with more taxes, and you put more government.
JIM LEHRER: I follow the concept. Mr. Raines, is that what you have done?
FRANKLIN RAINES: Well, actually, government is shrinking, even with this budget, government is shrinking as a percentage of the economy. It's been shrinking since the President came in office. One thing to keep in mind: Every budget presented by this President has had a small--lower percentage of the economy going to government than any budget presented by President Reagan or President Bush. Every budget he's presented--
SEN. PETE DOMENICI: Wait a minute.
FRANKLIN RAINES: --has spent less of the economy than any budget proposed by President Reagan or President Bush.
SEN. PETE DOMENICI: Don't get off the air before I tell you.
JIM LEHRER: All right.
SEN. PETE DOMENICI: Of course it has because defense has been cut. I mean, 95 percent of the personnel reductions that this administration brags about as we cut people out of government, they're all defense reductions.
FRANKLIN RAINES: I'll go even further. Every budget presented by this President has had less domestic spending--
SEN. PETE DOMENICI: Okay.
FRANKLIN RAINES: --than any budget presented by President Reagan.
SEN. PETE DOMENICI: But this budget has 9,300 new federal employees right there, and I think my last description is right. What I just told you is, the President has a new way to say we're not breaking a budget; we're just raising taxes, and we got a whole nice list of new things everybody'd like, and we're going to spend the money on it.
JIM LEHRER: What about the President's point that nothing happens with a surplus until Social Security is reformed, do you buy that? Do you support that?
SEN. PETE DOMENICI: Look, according to the numbers we are going to have to use, we're a little bit different than theirs, there is no surplus for three years. So this is--this is a wonderful concept. There just is no surplus that we have to work with according to our Congressional Budget Office for three years. So in my way of thinking about it, a lot of talk about Social Security and the surplus is wonderful, but we ought to have Social Security fixed.
JIM LEHRER: Whether there's a surplus or not?
SEN. PETE DOMENICI: No. We ought to have it fixed before three years are up. It ought to be fixed in about 18 months.
JIM LEHRER: Mr. Raines, what about that?
FRANKLIN RAINES: We agree with that. That's the President plan, that we agree that there won't be any substantial surpluses for several years, and that--during that time we need to have a national dialogue this year ending in a White House conference in December, and then beginning negotiations to pass comprehensive Social Security reform next year, so we can get it done during 1999, before any surpluses arrive. Our point is there are people out there who are saying, let's have big tax cuts, and we will pay for them out of the surplus, and we're saying, no one should spend the surplus for anything, whether it's something we want or something they want; no one should spend the surplus for anything until we fix Social Security.
JIM LEHRER: Senator Domenici, Mr. Raines mentioned President Reagan, President Bush, now President Clinton. Every time a President offers a budget, there's always somebody in Congress who pronounces it dead on arrival. We have people on this program saying that each time. What do you pronounce on this one?
SEN. PETE DOMENICI: Well, look, I pronounce it, as I have, an enigma, a contradiction in terms, and we're going to present the case to the American people. It is classic this time. It's a spend and tax president, and it's Republicans who want less government and holding the line because we made a deal. Now, frankly, our approach is not easy, but I believe it's right.
JIM LEHRER: Mr. Raines.
FRANKLIN RAINES: Well, a year ago Sen. Domenici and I were on this program and we were discussing the President's budget last year, and people said, well, this can't be, you'll never get this approved, you know, how could you be calling for bipartisan budget negotiations; it'll never happen. Well, about six months later the President signed a balanced budget agreement, balanced budget bill, and a tax cut bill. And I think we're going to go through the same thing here. The reason it happened last year wasn't because we were so smart; it's because the American people said they wanted to balance a budget. And that's why the President and Congress acted. I believe the American people will say they want to keep the budget balanced, and they would like to see these initiatives in child care and in health care, in research, and I think that's going to lead the Congress to adopt the President's program.
JIM LEHRER: Okay, gentlemen, thank you both very much.
FRANKLIN RAINES: Thank you.
SEN. PETE DOMENICI: Thank you.