Budget Deal Reached
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KWAME HOLMAN: Tourists far outnumbered members of Congress at the capitol today–not unusual for a Friday. But a few members is all that’s been needed over the last several weeks of tense high-level budget negotiations between top Congressional leaders and White House officials.
The past 24 hours have been especially hectic and late this morning White House Chief of Staff Erskine Bowles still wasn’t sure he had a deal with Republicans. But after a flurry of on-again/off-again reports of final agreement throughout the mid-day, the news media were summoned to the Capitol rotunda, having been told an agreement had been reached. But the parties decided President Clinton would get to announce the deal first. He spoke, surrounded by Senate Democrats, in Baltimore.
PRESIDENT CLINTON: We have reached agreement in broad but fairly specific terms that I am satisfied will do that with the Republican leaders today that would balance the budget by 2002, continue to increase our investments in education and science and technology and medical research, require us to continue to show great discipline in other areas and to continue to downsize some government operations.
KWAME HOLMAN: A short while later Senate Majority Leader Trent Lott spoke in the capitol rotunda.
SEN. TRENT LOTT, Majority Leader: Last November, when the American people reelected Republican majorities in both our House of Representatives, while returning President Clinton to the White House, they sent a message to official Washington. The message was clear: Work together to finish the job to balancing the budget and ending the era of big government. We listened to the American people.
KWAME HOLMAN: The broad outline of the budget deal has been public since yesterday and is aimed at reaching the long-held bipartisan goal of balancing the federal budget by the year 2002. Over the five years of the plan much of that balance would come from reductions in entitlement spending. Medicare, the health insurance program for senior citizens, would be reduced by $115 billion. Medicaid, the similar program for the poor and disabled, would be reduced $24 billion. Other, as yet unnamed mandatory spending programs, would be cut $61 billion, for a total reduction in entitlement spending of $200 billion.
Defense spending would be targeted for an $85 billion reduction, and spending on other domestic programs would be cut $68 billion. But negotiators also agreed to spend more in other areas, including education programs favored by President Clinton, school construction, health insurance for children in lower-income families, and to restore some welfare benefits to legal immigrants. The new spending would total $32 billion.
And finally negotiators settled on tax cuts, including a $500-per-child tax credit for families, a reduction in the capital gains tax rate, as well as the federal estate tax. Taken together the tax cuts total $85 billion. The high-level negotiators may have wanted to hold this event with most members out of town because major factions in Congress, especially Democrats, signaled opposition to the plan as late as yesterday. But today one of those critics, Senate Minority Leader Tom Daschle, stood shoulder-to-shoulder with the President. Other Democrats say they need more time to examine the final plan before taking a position.
ELIZABETH FARNSWORTH: Now, two of the key budget negotiators and to Paul Solman.
PAUL SOLMAN: Those two negotiators with us represent the Clinton administration and the Republican Congressional leadership. Franklin Raines is the White House Budget Director, Pete Domenici of New Mexico chairs the Senate Budget Committee. And welcome to you both. Mr. Raines, what’s the most significant aspect of the budget deal from your point of view?
FRANKLIN RAINES, Budget Director: I think the most significant aspect is that we have finally put the nail in the coffin of the theory that deficits don’t matter and that we can have deficits and have long-term economic prosperity. That was the theory of the 80’s. That’s now dead. The theory of the 90’s, a theory that the President has been pursuing, is we need to balance our budget, increase our national savings, and that that will lead to prosperity. And today was a great double-header. We had not only a budget agreement to continue our expansion, we also had unemployment drop to 4.9 percent, a level that I thought I’d never see in my lifetime again.
PAUL SOLMAN: The highlight for you, Sen. Domenici, do you agree with Mr. Raines here?
SEN. PETE DOMENICI, Budget Committee Chairman: Well, I think the biggest highlight for me was that Republicans and a White House that is led by a Democratic President agreed to do the people’s business together, and in a very, very constructive, honorable, forthright way did it. It could not have been put together with one side winning everything, and I believe we came up with a package that essentially meets the test of what many Republicans think should be in it, and yet, the President won and prevailed on a number of things that he wants as priorities.
So from my standpoint the fact that we could work together, Democrat, Republican, and the President, and get this done is “the” most important thing. Secondly, it is probably from all of my time around really going to have a balanced budget, and last, the mix is very good. The mix is very good. About $250 billion over 10 years in real tax cuts, including the three you mentioned, plus another, which is the President’s education tax program for higher education.
And on priority items, if you added them, you forgot one. Transportation is in there, but anyway, $250 billion in permanent tax cuts and a gross number of about 850 in entitlement reforms, that is reduction in all kinds of entitlements, that means you’ve got big government under control.
PAUL SOLMAN: Senator, how solid are the specifics here? We heard a bunch just now in Kwame’s piece. And you’ve mentioned a few. Are they lock–engraved in stone? I mean, aren’t there a lot of steps still to go?
SEN. PETE DOMENICI: Well, look, in the United States Congress you have to come up with a budget, and that’s the–that tells you about major function of government, and you’ve got to take a bill that we call a reconciliation bill, and they pass all of these. We have reached agreement and understanding that many of these specific priorities of the President are going to actually be in an annex of some sort, where we say this is what we intend, but the most important thing is the President and the leaders have indicated they’re going to respect the priorities set forth. And they will be reflected in this budget.
PAUL SOLMAN: Is that binding, Mr. Raines, binding on you, do you feel?
FRANKLIN RAINES: We feel that this agreement is binding on–on all parties. It’s an agreement that Sen. Domenici mentioned was really negotiated in good faith over a long period of time, and many nights and mornings went into it, and so we do feel that the agreement reached at the table are binding on all the parties to the agreement and that we’ll work together to put them in place.
PAUL SOLMAN: Any lingering disagreements, Mr. Raines, or wouldn’t you say if there were?
FRANKLIN RAINES: I think the biggest disagreement was whether or not the–the water in Sen. Domenici’s refrigerator we had to drink during these meetings was cold as it could have been, but–
PAUL SOLMAN: That’s bipartisanship, I guess.
FRANKLIN RAINES: It’s remarkable actually. There are things that we could not reach agreement on, and we–
PAUL SOLMAN: Such as–
FRANKLIN RAINES: Well, we had issues on–they related to welfare reform, where I think we were able to resolve the great bulk of them, but you never get all of the things that you’re looking for in a negotiation like this. No, no two sides will write a tax bill exactly the same, or have exactly the same priorities. What’s remarkable here it that we were able to find a very broad middle in which the values reflected in this agreement are American values. They’re not Democratic or Republican values; they’re American values. And I think that the American people will recognize that in this agreement, and I think that will give it some durability.
PAUL SOLMAN: Well, what did you have to give up that you would rather not have? I mean, what was the thing that hurt most to give up?
FRANKLIN RAINES: From our side I think the–we had a number of proposals in the President’s initiatives that related to school construction, that related to a number of initiatives that we felt quite strongly about. But when we got down to the amount of money left to–to implement them, we couldn’t do everything.
PAUL SOLMAN: And, Sen. Domenici, from your point, from your side, what are the concessions you had to make?
SEN. PETE DOMENICI: Oh, I don’t think there’s any question but that on some of the President’s new initiatives, both with reference to legal aliens who reside here, who need help, and with reference to how much money we ought to use to cover 5 million children who are not covered, I think the toughest thing for us was that we thought we were giving too much, and that we’re going to look very carefully to see if it actually costs that much when we put it in place. But–
PAUL SOLMAN: Allowing too much spending?
SEN. PETE DOMENICI: Yes. But let me say for the American people that listen to your program, the difference in this–in this negotiation and others, besides it being bipartisan, was that the President sent negotiators who had a mission, in my opinion. They weren’t there to play games; they weren’t there to do me in or John Kasich in or John Spratt in, or anybody in this negotiation in. We went there with the same motives. Our goal was to get something done. You could not have had more honest, more integrity in these negotiations, and I am–I told the President 30 minutes ago that he sent the right people and I hope we were the right people because America won, showing that we can actually work together.
PAUL SOLMAN: You know, you’ve talked about the belt tightening. What sacrifices are Americans going to have to make, presuming–presumably we’re going to have to make some–but who’s going to have to make them?
SEN. PETE DOMENICI: Well, look, I’m going to let Frank go through the budget, but I will tell you this–
PAUL SOLMAN: Yes.
SEN. PETE DOMENICI: –about 50 percent of the budget, contrary to what some people think, 50 percent or more of the President’s budget in all kinds of areas are going to be either frozen or cut below a freeze. A lot of them are going up, and that’s the part we’re hearing a lot about. But he had a budget that a lot of America’s programs were not going to be growing very much. The ones that he thinks are important are going to grow a lot, but, overall, they had a pretty restrained budget as to about 60 percent of the ongoing projects.
I believe the other part–the entitlement programs–when it came to saving Medicare–I believe we did the right thing. We reformed it in ways that it’s not going to hurt the seniors but eventually seniors are going to pay a little bit more money for home health care, which we’re moving out of the trust fund, so as to help make it solvent for a long time. That’s a little tough.
PAUL SOLMAN: Is that only seniors above a certain income level, or–
SEN. PETE DOMENICI: It’s probably going to be across the board, and we’re trying to figure out how to do it by bringing it in over a seven-year period so it does not hurt anybody very much. And I understand most senior groups that we’ve worked with support this approach.
PAUL SOLMAN: Mr. Raines, he threw it to you a little bit. Who is going to get hurt here? Somebody presumably gets–at least is less helped than others.
FRANKLIN RAINES: Well, one of the things I think that was missed early on in this debate on the budget was that the President’s budget was a pretty tough budget. It had serious reductions in expenses, and he made cuts in order to invest in other places. And so I think you will find is that we’ve got fewer subsidies for corporations in this budget. We’re asking them to pay more of their own way for services provided by the government.
We have trimmed back the size of the federal government. We’re down almost 300,000 employees, and we’ll keep the pressure on. The government is now one of–its lowest in several decades in–in its number of people. We have–we tried to increase the efficiency of the government, and we’ve got a lot of efforts there in the Veterans Administration, in the Defense Department to do that. But we are going to see a tight budget as a result of this, but it’s a tight budget that has real investment because it’s tightened up where we needed to, but that provided money to invest elsewhere.
PAUL SOLMAN: You know last year the administration was calling the Republican Medicare proposal “savage cuts.” Now you basically split the difference with them. Do you regret–I know you weren’t there at the time–but do you regret your colleagues having called these things savage cuts?
FRANKLIN RAINES: Well, you’ve got to remember that at the time when this great debate was going on, there were some pretty extreme proposals out there. People had proposed very large numbers–in Medicare $270 billion in changes, and those were big. We’re talking about $115 billion over five years. It reflects the policies that we supported, and I think it does the job of preserving Medicare, modernize the program, ensure that the trust fund is extended into the next decade. So I think we’ve gone from talk of revolution to talk about how we can make this government work for the American people.
PAUL SOLMAN: Sen. Domenici.
SEN. PETE DOMENICI: Let me say about Medicare.
PAUL SOLMAN: Please, go ahead.
SEN. PETE DOMENICI: I believe–I believe it was unfortunate as to the last proposal Republicans made last year. The President used it in his campaign–but–in the way that he did–because we could have said something about his program this year which looked very much like ours last year, but we chose not to do that. And we went to the bargaining table. We made a deal. And that means that the President and the Republicans and Democrats, who wanted to support the President, will not have Medicare as a political quid pro.
We fixed it in a way that is not going to make it solvent for twenty or thirty years. Seniors have to know we’re going to have to do more someday, but essentially what we did by way of new options for people to take new kinds of coverage and such things as moving that home health care in small amounts out of the trust fund, those are the kinds of things that have made it solvent over time, while we–without hurting anybody. And I think we’re reaching a pretty good agreement in that regard.
PAUL SOLMAN: Senator, hasn’t the economy really balanced the budget for you? I mean, all this–this growth and the growth in revenues?
SEN. PETE DOMENICI: No question about it. As–as many of us have said, the best time to balance a budget is when you are prosperous and growing, and it’s turned out that the revenue side of this ledger, what American corporations are paying in taxes, and I assume some of this has to do with the stock market, a lot of these taxes that are being paid, but the revenues on the corporate side are coming in very heavy, much more than we expected, much more in line with what the President’s economist said, maybe even better than they said, and that’s helped us immensely. But don’t make light of the fact that we’ve been able to get $250 billion in permanent tax cuts and reduce the flow of entitlements, have combined all of them together, somewhere around the 700 to 850 billion dollars, that’s not a little bit.
PAUL SOLMAN: Okay. Well, gentlemen, thanks both very much.