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Welcome to "Ask the White House" -- an online interactive forum where you can submit questions to Administration officials and friends of the White House. Visit the "Ask the White House" archives to read other discussions with White House officials.

Steve McMillin
Deputy Director, Office of Management and Budget

July 19, 2007

Steve McMillin
Hi all – Good to be with you this afternoon. Today, the President is in Nashville, Tennessee talking about the good news on deficit reduction, and the importance of spending restraint in Washington so we can continue our progress towards a balanced budget. We are meeting the government’s most pressing needs, while ensuring that American families can keep more of what they earn.

The Administration’s mid-year budget update showed that we’re making good progress in driving down the deficit to half of what it was three years ago - and just 1.5 percent of our total economy. The Federal budget deficit is now estimated to fall to $205 billion in 2007, a reduction of $43 billion or 18 percent from last year.

Pro-growth economic policies, including tax relief, has been good for American taxpayers and the American economy, allowing small businesses, entrepreneurs and American workers to save more of their hard-earned money. And, this has helped fuel our economic growth, resulting in higher than expected tax receipts and driving down the federal deficit.

We are on a path to achieving the President’s goal of a balanced budget by 2012, with a $33 billion surplus. Achieving this goal, though, is dependent on Congress exercising spending restraint. Right now, Congress is not on track to hold spending to reasonable and responsible levels. The President is committed to keeping spending in check and will veto spending bills if they jeopardize deficit reduction and a balanced budget.

I look forward to answering your questions.

Sam, from Downingtown, PA writes:
What does the administration plan to do to get rid of the billions of dollars of debt that we are in?

Steve McMillin
That’s a great question. A week ago the OMB had its Mid-Session Review at which we announced that the deficit is down 18 percent from its February figure of $248 billion to $205 billion. If the President’s pro-growth policies remain in place and the Congress restrains its spending habits, we will have a budget surplus of $33 billion by 2012 . We have lowered the deficit primarily with increased tax receipts from our strong and growing economy. It is imperative if we want to balance the budget that we continue the President’s tax cuts and to keep discretionary spending to a responsible level. In addition, the President proposed to reduce or eliminate 141 programs, which would save $12 billion in 2008. The President proposed sensible changes to these important entitlement programs, such as Medicare and Medicaid, that would save $92 billion over five years and $301 billion over ten years.

Frank, from Stratford Ct writes:
How does the current administrations budget compare with Clintons budget?

Steve McMillin
President Bush's budgets have proposed increases in defense spending, held down or cut the growth of domestic discretionary spending, and have kept taxes low. President Clinton's budgets generally proposed higher domestic discretionary spending increases, smaller increases or even reductions in Department of Defense funding, and substantial tax increases that took effect early in his Administration.

Under the last budget President Clinton signed into law (FY 2001), non-security discretionary spending rose by 15%. The President's Budget would allow this category to increase by less than 1% in his FY 2008 Budget.

Under the Clinton Administration’s policies, tax collections peaked in 2000 at 20.9% of GDP. The only other time taxes reached this high a level relative to our economy was in 1944, during World War II. Under President Bush’s policies, including reductions in marginal tax rates, the marriage penalty, capital gains and dividend tax rates, and increased incentives for small business investment, taxes are estimated to be 18.8% of GDP this year, above the 40-year average of 18.3% of GDP.

Whitley, from San Pablo, CA writes:
What effects do you see the KORUS FTA having on the American economy? And do you think that it will have trouble being ratified in Congress with the President's 'fast track powers' expired?

Steve McMillin
Our trade relationship with South Korea is already strong - $78 billion in two-way trade last year. South Korea is the US’s 7th largest trading partner. By eliminating the tariffs and nontariff barriers that currently block trade between our two countries, the FTA will make that relationship much stronger. The result will be an expansion of new commerce between our two countries, enhancing both countries’ prosperity.

For the U.S., it will open new opportunities in Korea that American companies have never had. It will allow American manufacturers, farmers, banks, insurance companies, a whole array of companies to sell into Korea’s fast growing markets. We estimate that the US economy will benefit to the tune of $17 to $44 billion a year.

What is more, the KORUS FTA will help the United States deepen and strengthen its trade and investment ties to one of the most economically dynamic parts of the world.

The agreement was concluded and signed in time to be taken up under Trade Promotion Authority, which is designed to streamline Congressional consideration of free trade agreements. So, the expiration of this authority for future trade agreements will not affect this one. This is the most commercially significant FTA the United States has concluded in nearly 20 years. The more public and their elected representatives know about KORUS FTA, the more likely they will be to support it.

Michael, from NYC writes:
During a previous Ask the White House session on economy, regarding War and Emergency spending you stated "It is important to budget for these kinds of costs in advance, especially while we still have deficits, since every dollar of additional emergency spending must be borrowed by the Treasury, adding to our national debt." From whom does the United States Treasury borrow money from, and what are the terms of repayment?

Steve McMillin
The United States Treasury borrows money by selling Treasury securities. The U.S. Treasury sells bills, notes, bonds, and Treasury Inflation-Protected Securities (TIPS) to institutional and individual investors through public auctions and through direct sales.

Treasury auctions occur regularly and have a set schedule, and the rates and yields are set through competitive bidding.

Because Treasury securities are universally recognized as being the lowest-risk, highest quality, and most tradeable securities in the world, a wide variety of investors, including individuals, banks, businesses, pension funds, the Federal Reserve banking system, state and local governments, and foreign institutions hold Treasury Securities.

Even individuals like you or I can directly purchase U.S. Treasury securities through

Frances, from NY writes:
What's the projected budget for public infrastructure spending, and how are we going to fund this?

Steve McMillin
The budget projects that the federal government spends approximately $221 billion on major public physical capital investment, including defense activities and grants to State and local government. That number does not include what states and localities spend on similar activities.

The financing comes from a variety of sources, including the general treasury -- your tax dollars -- and specific charges on the users of that infrastructure. For user-financed infrastructure, such as highways, the federal government needs to carefully monitor and restrain growth in spending in order to avoid gas tax increases and disruption of our construction program.

John, from Texas writes:
Since we're in a war the defense budget must be getting huge boosts to cover operations. But is the State Department getting a comparable surge so it can handle its increased responsibilities?

Steve McMillin
The State Department is an integral part of our government’s efforts in the global war on terror. Like the military, additional funding has been provided to meet deployment and sustainment needs of State Department personnel (for example, temporary diplomatic facilities and new embassies, logistics support for diplomatic personnel, increased pay and benefits such as danger pay, guards and armored vehicles for force protection) and to hire people, including contractors, and to support reconstruction efforts that support peace and stability. All of these costs are reflected in the President’s Budget, to the same extent as war costs of the Department of Defense.

Michael, from Powell, Tn writes:
In what areas has the President tried to cut federal spending? THank you.

Steve McMillin
Spending restraint in combination with sustained economic expansion is critical to deficit reduction. While making necessary investments in the Global War on Terror and homeland security, the President has worked with the Congress to successfully reduce the growth in non-security domestic spending, including entitlement programs

The 2008 Budget builds on this record of spending discipline by holding the growth in non-security domestic spending to one percent, well below the rate of inflation. It proposes terminations or reductions of 141 discretionary programs, which would reduce spending by $12.0 billion in 2008.

The biggest challenge to our nation’s long-term fiscal health is the unsustainable growth in important programs like Medicare, Medicaid, and Social Security. Without reform, these entitlement programs will crowd out all other spending by 2040, including for defense, education and other domestic priorities. The President also proposed sensible changes to important entitlement programs, such as Medicare and Medicaid, which would save $92 billion over five years and $301 billion over ten years. More importantly, the President’s mandatory spending proposals would begin to address the long-term problem of entitlements by reducing Medicare’s unfunded obligations by 25 percent.

Kelly, from Boston writes:
Given likely rise in gas prices and heating oil prices, there is already a tremendous strain on families with limitedlow-income budgets. Is the elimination of the Communit Services Block Grant and the Commodity Supplemental Food program, in addition to the reduction in funding for heating assistance to 5.6 million low-income families wise? What programs does the federal budget fund that will provide essential assistance, heat, and minimum livable conditions for children, pregnant mothers,low-income families, and the elderly (the target populations for these programs)?

Steve McMillin
Federal spending on social safety net programs has increased significantly under this Administration, within a responsible overall budget. Both discretionary and mandatory spending is up since 2001. A high priority of this Administration is to maintain and expand resources for high performing programs, and scale back programs that lack proven results.

While the Budget eliminates funding for programs that are not results-oriented, like the Community Services Block Grant (CSBG), the President continues to support many programs that aim to reduce poverty, such as TANF, Head Start, and WIC. The average grantee does not rely on CSBG as its primary funding source and CSBG dollars make up less than 10% of the average grantee’s budget. CSBG funds are distributed on a formula basis with the same static group of grantees receiving dollars each year. For this reason, most grantees are not challenged to maximize their performance.

The President remains committed to the national nutrition programs by providing funds to serve all eligible people who apply for Food Stamps, free or reduced price school meals, and WIC. Funding for the Commodity Supplemental Food program (CSFP) was eliminated because this program provides the same services as the nation’s two largest and most effective nutrition programs – Food Stamps and WIC. It’s worth noting that Food Stamps and WIC have two important advantages over CSFP. Food Stamps and WIC are available to all eligible people who apply nationwide, while CSFP only operates on a limited basis in select areas.

In addition, Food Stamps and WIC provide generally larger, more flexible benefits than CSFP. To help move CSFP participants onto Food Stamps and WIC the President has proposed increasing funding for these programs. For WIC, there is a $183 million increase over 2007 to serve all eligible individuals who apply, including those exiting CSFP, and there is an additional $24 million for outreach and temporary benefits to move more elderly CSFP participants onto Food Stamps.

Steve McMillin
Great questions today. Thank you all for participating.

For further information on the Mid-Session Review Report or any other questions you may have, visit our website at

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