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OMB Director Gives Revised Budget Projections

Aired August 22, 2001 - 10:11   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LEON HARRIS, CNN ANCHOR: In Washington, where success is relative and perception is often reality, Democrats are seeing red over a budget surplus that remains squarely in the black.

Let's get the latest on the surplus by going now live to Washington, where we are going to get Mitch Davis, who is the head of the Office of Management and Budget, and he is going to tell us what the figures are now.

MITCH DAVIS, OMB DIRECTOR: Let me just say a few quick thing. The report we issued this morning confirms that the nation has entered an era of solid surpluses, surpluses on the order of $160 billion, despite an economy that has been weak now for over a year and in decline for that time. This is the second largest surplus in American history. In the face of that weak economy, a phenomenon that should strike all Americans as very positive.

The 10-year forecast that we have projected is $3.1 trillion and again, an astonishing number, vastly more than the amount of publicly held debt that it will be possible to repay over that time period. And this number reflects new commitments since the April budget of $198 billion, in the first installment of the president's program to repair and rebuild our national defenses. And also a revised, and increased estimate, for Medicare reform, including prescription drug coverage for our senior citizens up from $153 billion to $190 billion. Let me make certain you note that the 153 was over 10 years, the 190 only over eight years. So an upward revision from the area of 15 billion a year to something like (AUDIO GAP)

HARRIS: We are having as you can obviously tell some sort of audio problem there, in the White House press briefing room, and apparently it's got Mitchell Daniels surprised and a little stunned as well. Let's go to our Major Garrett, who is White House correspondent who is standing by right now in Crawford, Texas -- Major.

MAJOR GARRETT, CNN WHITE HOUSE CORRESPONDENT: Yes, I can, how are you?

HARRIS: All right. I hope can you hear us better than we can hear Mitchell Daniels. I guess you can't. Major, are you there? Hello, Major.

I guess we don't have Major Garrett either. We don't have Washington and we don't have Crawford, Texas. Let's see, what do we have?

All right, let's go to Bill Schneider, who is standing by, or sitting be I believe in Washington. There you go.

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: You are correct, and I can even hear you.

HARRIS: A miracle of miracles.

OK, good to see you, Bill.

Bill, before you get a chance to say anything and before we get a chance to hear you, we're going to back to the White House and see if we can listen now.

DAVIS: Billion dollars in upward revision for Medicare reform and prescription drug coverage. Again, that new figure of 190 billion divides only over eight years as opposed to 10. In 2002, we forecast a growing, a larger surplus, $173 billion. I think very noteworthy that in 2002, we will pass an important landmark, interest costs, the debt burden on the federal Treasury will drop below a dime on the dollar, down to 9 cents of each dollar of federal revenue. That's the lowest interest burden in quarter century, since 1976, and it's headed down very quickly.

Finally, I would simply note 245 economic growth is the key continuing this very strong fiscal picture. It is growth that produces surpluses, not vice versa, and returned economic growth will be the focus of the president, and the administration, in the months ahead. Economists have agreed unanimously that the single best hope the economy has for a quick recovery is the tax relief, which is now in the process of beginning, but we'll all be very watchful on economic trend data, on which our surpluses, the trust funds of our entitlement programs and all our hopes for continued meeting of the nation's priorities ultimately depends.

Questions?

And I'm advised you need to wait for a microphone to ask your question.

Down here in front.

QUESTION: On the interest cost thing, the year in which there is enough money to repay debt which exceeds practically redeemable debt gets pushed back in the budget 2010 to 2008, which produces slower payment than anticipated. Doesn't that hurt, in reference to reform Medicare and Social Security, in terms of slower debt pay-down than previously estimated?

DAVIS: No, really not at all. The, I think, very important fact that all the debt that can practically be repaid will be repaid within the space of this budget period is one that remains very central to our future success, and it's completely independent of Medicare, as are the trust funds themselves, completely independent of the size of the surpluses. What matters to Medicare is economic growth that continues to grow those trust funds. They'll grow by 30-some billion dollars this year alone, and more fundamentally, reform of the programs, as the president has proposed.

I want to try to pick people who are close to a microphone in the back there.

QUESTION: Francine Keefe (ph) for "The Christian Science Monitor."

I'm confused as to whether the budget surplus is 2 billion or 1 billion. And also, how does -- I'm not familiar enough with this. How does the 3.1 trillion estimate compare to your April forecast?

DAVIS: The OMB budget surplus is 2 billion, Francine. We did clarify because the Postal Service is losing a lot of money, 1.3 billion dollars this year, for those who are particularly interested in a precisely accurate accounting of the Social Security surplus, you wouldn't want to penalize the social Security Surplus with the $1 billion dollar experienced by the Postal Service.

So the OMB budget surplus is 2, but the surplus above and beyond Social Security is 1. On the 3.1 trillion dollars, this reflects the affects of first of all tax relief. Tax relief as passed by the Congress was smaller than that contemplated by the president. So the affects of tax relief on the April forecast have been brought down somewhat. It also reflects the new investments I mentioned in defense, in Medicare, in particular. And what it does show is that there remains, after the government has paid all the debt that it can practically pay, we will continue -- we continue to see a trillion dollars plus of uncommitted funds, and these could be used for entitlement reform, growth of necessary programs, further restoration of defense, and so forth.

I think you better ask it into a microphone for the benefit of our...

QUESTION: Sorry, I still have the question of what was the actual forecast in April for 10 years?

DAVIS: The forecast was 5.6 before the president's tax relief and these other programs were subtracted.

Yes, right here.

QUESTION: Yes, Rob Lever (ph) of AFP.

The prior administration, if I'm not mistaken, projected paying down the entire federal debt by about 2011, if I'm not mistaken. Is that something that you believe we cannot afford now, or is that a conscious decision, a policy decision, that you feel it is more prudent to maintain that and use funds for other programs?

DAVIS: It was never a serious proposal. It would have involved wiping out the saving bond program, state and local bonds, which are -- they're required investments to protect taxpayers in the states and localities, and it overlooked the fact that beyond the point you would be paying exorbitant premiums, prepayment premiums to wealthy bond holders -- 40 percent of whom are, incidentally, foreign banks. So it was never a serious policy proposal, and upon closer inspection one finds the happy outcome that between 2 and 2.2 trillion can paid off. This will pay debt down to levels we haven't seen in a century, since about 1917. And this is really the most that I think any administration would ever finally do in the real world.

HARRIS: We're getting a rather positive picture of the nation's budget situation here this morning from OMB budget director Mitchell Daniels, who, I should correct myself, is in the Eisenhower Executive Office Building this morning; he's not at White House. And he has given us rather positive report this morning about the budget, and about the surplus.

Let's go now and check in with our Major Garrett who's standing by in Crawford, Texas, who I believe can hear us now.

Major, good morning.

MAJOR GARRETT, CNN WHITE HOUSE CORRESPONDENT: Absolutely Leon, I can hear you. Sorry about that a few moment ago.

Mitch Daniels, of course, is putting the most positive outlook on this budget situation. But there is a very definite "that was then, this is now quality" to the Bush administration reassessment of the budget numbers.

What was projected in February? Well, budget surpluses of $125 billion. What is it now? Two billion, that's when you account for the excess social security revenue. That's the money that both President Bush and Congressional Democrats and Congressional Republicans have agreed not to spend.

So, what's left over when Washington, all of Washington, President Bush and Congress, come back to town? About $2 billion of extra spending over and above what President Bush has already budgeted. That is why there's going to be a big argument. Democrats had hoped there would be larger surpluses to pay for boosts in education, health care and other types of spending, that is clearly not going to be there now. So, there's going to be a rather significant argument about how much to spend and exactly where, and where do these surpluses go.

The Bush administration blames most of the reduction in the surpluses on the bad economy, but clearly the tax cut factors in there as well. If you're talking about a shrinkage in budget surpluses of about $120 billion, the Bush administration says 80 billion of that shrinkage comes from the slowing economy, 40 billion from the Bush tax cut. Leon.

HARRIS: All right, thanks. Major Garrett, standing by in Crawford, Texas -- Daryn.

DARYN KAGAN, CNN ANCHOR: All right, for some more analysis on this, let's bring in our Bill Schneider, who is in Washington D.C. Bill, good morning.

SCHNEIDER: Good morning.

KAGAN: This is all plenty of opportunity for a lot of finger- pointing between Republicans and Democrats and how they look at numbers?

SCHNEIDER: That's right, the Democrats are saying that Bush's tax cut was irresponsible, it was reckless, far too large, gave too much money to the wealthy and it's left us with very little money to spend on urgent national needs, including the president's priorities, like defense and education, and therefore, the White House may have to end up getting into the Social Security trust fund. Does that mean Social Security money is going to be taken away? Well, not exactly. That's money that both parties agreed not to spend so that it could be used to reduce the national debt. And they're going to be pointing fingers and saying you are the one that touched the famous lockbox.

KAGAN: And could this intensify as the fiscal number comes to a close in September? Oops, we are a little ahead of ourselves there.

SCHNEIDER: Yes, it will intensify. There are 11 appropriation bills that have to be passed in order for the government to keep running. Remember, the government shut down about six years ago. Well, we don't want to see that again, and that's because they couldn't reach agreement, and they're going to have to reach agreement by October 1st or sometime shortly thereafter just to keep the government going, and that means it's going to mean a couple of months of squabbling.

KAGAN: All the more reason to invite you back and have you with us.

Bill Schneider in Washington, thank you so much.

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