The White House
President George W. Bush
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For Immediate Release
Office of the Press Secretary
April 9, 2001

Press Briefing by OMB Director Mitch Daniels on the Budget

Listen to the President's Remarks

1:17 P.M. EDT

MS. BUCHAN: We are going to do an on-the-record briefing with Mitch Daniels, the Director of the Office of Management and Budget. He'll make a few opening remarks and then be happy to take your questions.

MR. DANIELS: Thanks, Claire. Let me first say to Congressman Spratt, because I heard a question asked about the timeliness of our delivery this morning, that his aide was actually the first to receive the budget at 8:30 a.m., waiting at the loading dock, I'm advised. I can only assume that the eloquence of the prose and the content of the budget was so captivating that he forgot to deliver it to the Congressman. But, in fact, the Congressman's office, I'm happy to say, given his importance in the process, was the first in Washington to receive our materials this morning.

Let me just say a few things by way of introduction, and welcome your questions. The President's budget is alive and well, two-thirds of the way through the process to what we think is successful completion. There's work yet to be done. The House version, of course, we find fully adequate. The Senate version, in addition to being short on tax relief for the American people is long or excessive on the spending side. And we'll want to work in the conference committee to try to remedy that.

Just to give you one data point, as best anyone can tell, and the Senate itself cannot tell you this morning, or today, what it tried to spend last Friday, but it's at least in the order of 8 percent, perhaps more. And at 8 percent, which was last year's discretionary spending growth, if that behavior pattern were continued year on year through these 10 years, they would spend about $3 trillion of the surplus, above and beyond what the President has recommended.

So if we needed further evidence that money left in Washington will be spent in Washington, or further evidence that the real threat to debt reduction and to our long-term fiscal health is from government spending, Friday supplied that evidence.

Beyond that, I'll simply say that we're pleased that the President's budget -- recommending moderate spending growth, what we think is affordable spending growth, and enabling the funding of every campaigning commitment he made, and enabling a reordering of the nation's priorities along the lines of those he laid out in his campaign -- is moving toward -- we think -- toward successful completion, after the conference reports back to both bodies. And we thank the Senate for its hard work. We thank the House, of course, especially, and we look forward to the final chapter.


Q You just said that the budget enabled the funding of every campaign commitment the President made. Back in April, he promised $100 million for a debt-for-nature swap that you guys are not giving any new funding to, and as I understand it, diverting $13 million from USAID funds, their conservation funds, just to basically flat-line the program.

MR. DANIELS: Well, $13 million is $13 million. It will be put in there. As you know, there are carryover funds, because this program has had real practical problems finding a place in the world so far where an actual swap can take place. The commitment, of course, was not for one year. Like many of the commitments the President made, it was either for an extended period of time or an unspecified period. So this is a down payment, and at this point, it's probably a bigger down payment than we think can be used in this next year.

Q But the people who actually propose the legislation -- and these are Republicans, this is a Republican initiative -- Portman and Lugar are saying that that's not the case; that the money that you're talking about has already been earmarked for other programs, it's a brand new program that's only just started getting funding in 1999, and that's the reason that you can say that the money hasn't been spent yet.

MR. DANIELS: Well, let's just hope that the new funds, which are twice as much as was able to be used last year, will be used. And then we can continue the commitment in future years. But this is, like everything else the President proposed, is something we have honored and will continue to, to the extent that it proves practical to do so.

Q So when he said $100 million, he only met $13 million the first year?

MR. DANIELS: He meant $100 million as quickly as it can be used, which clearly would not be this year. If it makes you feel better, we could put $100 million there, and then $94 million would be sitting in an unexpended account a year from now if the experience of the last year did not change.

Q On the 4 percent overall increase, the Center on Budget and Policy Priorities does an analysis that says, if you take out defense, international affairs and the disaster relief reserve fund, that it's really a .4 percent increase for domestic discretionary spending, .4 percent, not 4 percent, which is, of course, is well below inflation. Is that correct?

MR. DANIELS: No, it's not. For openers, they should recognize that the emergency funds were abstracted from the domestic accounts in which they occurred last year, so that's really more of an accounting move. And beyond that, I simply refer you to the tables which will indicate growth on the order that we reported it.

Q The basic argument on the other side is that you've been forced to cut valuable programs -- the COPS program, or training in children's hospitals, or energy efficiency and renewable energy resource programs -- in order to squeeze in the tax cut, because the tax cut for the rich, they would say, is so big you've got to make these painful cuts. What is your answer to that?

MR. DANIELS: It's completely fallacious. I think fatuous might be a better word. First of all, please note that after proposing the President's tax relief we had a trillion dollars left over in uncommitted funds. The President did propose a piece of that for Medicare prescription drugs, but that left $842 billion completely uncommitted. I'm not counting here the $600 billion of Social Security surpluses, also left uncommitted.

So there was ample room, more than enough room, it is more than enough room for the President's tax relief. As I mentioned, if you let spending keep running at 8 percent, discretionary, like the Senate just voted, at a minimum, you would consume about 2x the amount that the President's tax relief calls for.

Since you brought up three of the bogus assertions of recent days, let me deal with them. The COPS program, first of all, does continue. We spend $855 million on it. And certain pieces of it increase, for border prosecutors and so forth. Funding is shifted to an urgent problem, which is schools -- police at schools.

The only piece of this nearly billion-dollar program which is redeployed to these new uses is the hiring program, which has been completed. It was entirely explicit at the beginning that this was to be a three-year program. I have, if anyone would like to use it -- or see it -- the grant application that every single department in America received when they applied for funds, which says in six places that this is for three years only, and that they are responsible to continue the officers. So every officer funded here over these years will be continued and will remain on the streets by the terms of that grant.

Q Mitch, one area where there have been explicit reductions is environmental protection and some natural resources programs. I believe, overall, about $2.3 billion down there. Can you explain as a broad principle what was the reasoning behind those actual reductions?

MR. DANIELS: Actually, I can explain that environmental spending has been maintained in this budget. We were extremely careful about doing that. The President's directive was very clear. There were 397 earmarked unrequested programs in the budget of the EPA, and many of them we have suggested should come out. Please remember that of the redirected funds in this budget, about a third are in the category of earmarks and unrequested programs, things the Clinton administration never asked for, and things that frequently come under the porcine label.

On the environmental front, the core programs of EPA will be absolutely maintained. The 17,500 employees now working there, that head count will be maintained, so that enforcement will be continued, and I hope enhanced. In fact, we have rotated $25 million of new money out to states to enhance their own enforcement and oversight activities.

Q Do you have a total figure on the earmarked programs that have been axed in this budget?

MR. DANIELS: Eight billion dollars.

Q Eight billion dollars for how many programs?

MR. DANIELS: Well, there were 6,454 earmarks and I think that the number of programs roughly tracks. About half of those were identified as one-time items -- generally a bridge built once need not be built again -- or earmarks above and beyond anything that President Clinton had requested. So about half of the $16 billion in total earmarks were marked for deletion.

Q Mr. Daniels, is it just coincidental that OMB and CBO have precisely the same surplus number for 10 years, $5.6 trillion? That just seems remarkably --

MR. DANIELS I think we're $34 billion off, actually.

Q It seems remarkable that you came up with exactly the same answer after calculating everything over a full 10-year period. That's just --

MR. DANIELS: It's interesting, isn't it? You know, these things are done, I assure you, entirely independently. It doesn't mean they're right, of course. The private sector analyses are not far different. And it's because we acknowledge that there's necessarily a lot of imprecision around these out-year forecasts, that we tried to leave a lot of flexibility in this budget and a lot of room in case we are in error.

Q On the standard on earmarks for elimination, you mentioned those that the President did not request, I mean President Clinton. Was that the core standard that you applied to judge whether an earmark was valid or invalid, whether it had been requested by the Clinton administration? I ask that because many earmarks were the idea, concept of many Republicans in Congress, and they did not share the same budget priorities as President Clinton. So I'm just wondering if the Clinton standard was the only one you used to judge the earmarks?

MR. DANIELS: The principle standards were looking for unrequested funds, and also those funds of a one-time character. Q Requested by President Clinton?

MR. DANIELS: Either-or, yes. Unrequested by President Clinton, yes.

Q How realistic do you think it is to count so much on earmarks not being replaced? I mean, isn't this sort of the normal way Congress operates, and if it's one time, it will be replaced by a bridge somewhere else?

MR. DANIELS: Well, we did not propose to strip them all out, which I think would have been an unrealistic assumption. Member projects, so-called, have been a part of the congressional process for a long time. And we're not so naive as to believe they can be ended overnight.

However, I would not say that last year or the year before were normal years, because the number of these earmarks has exploded, more than tripling in the last two years. And so we took what we thought was a common-sense approach, scaling them back perhaps as much as a half. We're going to have to work with our friends on the Hill to suggest that while a degree of earmarking is a natural part of the process, that it has gotten somewhat out of hand, and we'd like to see it reigned back in.

Q Just to be clear on the COPS program, the funding for the cops that have been hired, that continues to pay their salaries, correct?

MR. DANIELS: Actually the -- that's correct -- 75,000 is all that has actually been hired. The program, like many others, has trouble absorbing as much money as Congress sometimes throws at it. We believe that when the remaining funds are expended -- and, of course, all three-year commitments are honored -- about 115,000 police will actually have been employed. And as I indicated, every single one of them, under an utterly explicit understanding, both at the level of congressional enactment and at the level of the individual grant, that this is three years start-up funding, and that there is an obligation on the part of the locality seeking that funding to keep that police officer employed thereafter. So the benefits of the program will continue, and we simply took the Congress at its word -- silly us.

Q Keep the police officers funded with local funding, right?

MR. DANIELS: After 3 years. That's correct.

Q On Medicare, the Republicans have, I think, doubled your request for a prescription drug program, I think up to something like $300 billion. Does that sound like a more realistic figure for a prescription drug program than what you've proposed?

MR. DANIELS: First, they didn't double it, they simply left room, as it says, up to $300 billion. And, no, it doesn't sound more realistic. If you want a really bad prescription drug program, I can write you one at $400 billion or $500 billion of cost, I suppose. But the President submitted what we think is a pretty good estimate, particularly when -- at $153 billion -- particularly when you note that we assume reform, and they don't.

And it will be, I think, one of the President's principles that Medicare prescription drug coverage be added in the context of reform of that program and not simply layered on the top of a program which is going broke.

Q Even if it's not Helping Hand that turns out of the Congress, even if it's some other kind of general reform, you think that $153 billion is enough?

MR. DANIELS: Yes. The House passed a bill last year with no reform that was scored right around $160 billion by CBO. And therefore, we think that $153 billion is somewhere in the ballpark. Nobody really knows, and it would depend on the context of the program, but ours is a good-faith number. And all the Senate did was indicate that they don't know either and indicated that they might need to leave room up to something like $300 billion.

Q How do you justify reducing energy discretionary spending to $1.6 trillion from $1.9 trillion, when the President is talking about increasing supplies, talking about reviving nuclear power --

MR. DANIELS: Well, first of all, the solution to our energy problems as a nation will not be found in the budget of the U.S. Department of Energy. And we should be careful to separate those two subjects. Half the budget of the Department of Energy, as you know, is defense-related; it's not related to energy at all.

The Department of Energy budget will be 8 percent bigger than it was just two years ago. And here again the answer lies in earmarks, in one-time funding. For instance, a very large expenditure last year was on the after-effects of the Cerro Grande fire. We had a big debate at OMB and decided not to start another fire this year. And therefore, we did not renew that particular $500 million expenditure.

Q -- started the fire last -- (laughter) -- are you acknowledging that?

MR. DANIELS: We've been accused of worse.

Q Speaking about energy, I noticed you still include the ANWR revenue. But even the House budget, which you praise so highly, doesn't have that. So is there really any realistic chance of --

MR. DANIELS: Well, it's silent on the subject. And as you know, it's a 2004 assumption, and we believe very sincerely that that program ought to go forward and that, in the context of a national energy policy, will go forward. And we think it's a pretty good idea to then to devote those revenues to alternative energy research about that time.

Q When the President released the budget blueprint, that triggered a number of letters from state holders, from Congress offices to you and to the President. Have you pulled back from any of your proposals in between the time you released at and this budget, or was this already on the printing press by the time that was released?

MR. DANIELS: No. If you read the blueprint, you'll find those elements in the budget.

Q Given what the Senate did and where it is on spending, and how far apart you are right now, are you picking a fight here with not just the Senate, but the members of Congress who have their own earmarks? Is this, with your able and energetic defense, a little bit of a combative stance with Congress on the level of spending?

MR. DANIELS: No, I think Congress expects that a conference report will come back at something very different. I have a sort of tolerant attitude about all the activity of last week, sort of a boys will be boys notion to this thing. These are pretty much free votes and I think most members, if you ask them, should spend and go up between 8 and 10 percent next year, most would say, oh, no, I didn't mean that. So I think they're looking for the conference committee to stop them before they kill again.

Q Is that your scoring, that they added 8 to 10 percent --

MR. DANIELS: It looks like at least 8, but again, they can't tell us yet what they voted for, in every detail. The amendments we can add up are in the 8-percent range, and then there are some unaccounted for.

Q Are those the Democratic amendments or the Republican amendments?

MR. DANIELS: Well, I'm not sure I can assign providence to each of these. Some of these were collaborative ventures.

Q Mitch, you mentioned a moment ago that some of those were free votes. Eventually votes will not be free and real bills with real money will come to this White House. Is there any message you'd care to send to congressional staff still here in Washington during the recess about the veto likelihood of appropriations bills that either are too high or carry too many earmarks?

MR. DANIELS: I'm very careful not to use the V word, and I hope we'll not need to. From the very beginning, in fact, from the very explorations before we wrote the blueprint, we visited with members of both parties in Congress and indicated that while the President thought that the trajectory of recent years was too much, too much spending at 8 percent last year, 6 percent average over the last three years, we wanted to know what was reasonable.

And it seemed to me, based on the survey we took, that something in the nature of what the President proposed would be seen as reasonable. This is a budget that grows, and on a very large base, almost $2 trillion -- and it grows $103 billion total, counting mandatory spending, and the discretionary third of that, as you know, by about $26 billion -- a lot of needs can be met with that kind of growth.

And so the message, I believe, is let's work together. Let's have a good debate about the priorities. And the President has frequently said he never expects to get every single proposal that he sends enacted, but let's have a debate about priorities within that reasonable total. And then we won't have to discuss the extreme measures.

Q You mentioned the 8-percent increase in spending by the Senate. I think the single biggest item there was the IDEA funding, the special education funding sought by Senator Jeffords, which, as I understand it, is merely providing the money for a mandate that the government has already committed itself to provide. Is the administration willing to say that that's wasteful spending, that you're going to fight to keep out of the budget in conference?

MR. DANIELS: I'm not going to apply a label to it. I will point out that the President has just proposed the biggest increase in special education funding in history, over a billion dollars of new money. We worked very hard to do that. The point is well made that Congress made a pledge -- by the way, this was 26 years ago, this is not a new issue. The President's budget advances the ball toward the eventual goal of 40-percent federal share by more than any recent offering has.

Q But $1 billion versus $180 billion over 10 years -- I mean, there's really no comparison between the gap in funding and what's been done.

MR. DANIELS: The IDEA program, it will be up for reauthorization next year. I know that our administration will be very actively engaged in that process. This is a program with exploding costs and exploding enrollment, and it would be a good idea to look at reform of the program at the same time we discuss what the long-term federal investment ought to be.

Q How concerned are you -- one other thing Democrats continually mention is that this was built on a house of cards, because the surplus won't materialize because the economy is going to tank. How concerned are you that the economy is going to tank and that will affect your surpluses?

MR. DANIELS: Well, we're not concerned about the economy tanking. We think that the economy is struggling along at the moment with unacceptably low growth, but at least it's still growing. The heart of your question really is how secure are these long-term forecasts. And the answer to that is, that they are necessarily uncertain. They could just as easily be wrong on the low side as the high side.

I refer you to CBO for whom $5.6 trillion is the midpoint estimate. They have estimates as high as $8 trillion. And what I can tell you about the economy is that even a substantial recession in this year, which does not seem to be in prospect, would hardly move the needle over 10 years. In order to really change the 10-year projection, you would have to have a sustained, slow-growth period on the order of 1 or 2 percent lower growth than the 3.2 percent that we forecast.

So if you look at our revenue projections, you will see we have essentially assumed a slow growth or even recessionary economy over the next few years, just out of conservative approach.

Q Mitch, if, in fact, your estimates of surpluses are below the mark and there is more money on a yearly basis, can you describe for us the priorities of the administration as to what's to be done with that extra money? Is it to be devoted entirely to tax cuts? Is there a formulation -- one-third, one-third, one-third more -- whatever? What would happen, based on your conversations with those involved, in charting the future with that extra money?

MR. DANIELS: I think it's premature to say. It's a very valid question because, again, the chances are at least as good that revenues and surpluses will be higher than expected, not lower. They've been higher for five straight years. And that pattern could continue. So it's a question that could arise.

I think you know that the President's priorities are to reduce national debt as far and as fast as is practical to reform Social Security and Medicare, and to strengthen our national defense. All of these could be part of future budgets if the means are there to do it. But, of course, beyond some level, he thinks these funds ought to belong -- do belong to the taxpayers who earned them.

Q The House and Senate budget resolutions call for pay parity between the military and civil service, but the budget, of course, spent 3.6 for civil servants. What was the decision behind that?

MR. DANIELS: We think it's the appropriate level. It's really derived from a 4.1 percent increase, recognizing that there's a half a percent additional relief coming from a lower charge for health benefits. So we think that the 3.6 percent net is the right and appropriate number.

THE PRESS: Thank you.

END 1:44 P.M. EDT

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