Press Briefing by Ari Fleischer

The James S. Brady Briefing Room

12:29 P.M. EST

MR. FLEISCHER: Good afternoon. I've got several announcements I would like to make in terms of some visits the President will be having with some foreign leaders who are coming to Washington and several personnel items as well.

President Bush will welcome Chancellor Schroeder to Washington for a working visit on March 29th. The President will welcome President Mubarak of Egypt to Washington for a working visit on April the 2nd. The President will welcome King Abdullah of Jordan for a working visit on April 10th. Also, this week the President will welcome President Flores of El Salvador on Friday, March 2nd.

In terms of personnel here at the White House, the President intends to nominate Hector Baretto to be Administrator of the Small Business Administration. The President intends to nominate Marvin F. Sembler -- Mel Sembler -- to be President of the Export/Import Bank of the United States. And the President intends to nominate Glenn Hubbard to be a member of the Council of Economic Advisors and, if confirmed, Mr. Hubbard will serve as Chairman of the Council of Economic Advisors.

Finally, I can't help but notice, in the pool report this weekend, there was an indication that the White House Press Secretary threw a snowball at the press. I would like to assure everybody that there was a generalized area where the press was standing. If the snowball landed anywhere near it, it was obviously unintentional. (Laughter.)

Q:It couldn't have landed anywhere near it because it was thrown by the Press Secretary. (Laughter.)

Q:Oooh.

Q:Do you promise not to snow us in the future? (Laughter.)

Q:You need to start that Roger Clemens workout, Ari.

MR. FLEISCHER: I did fear I was almost going to hit that First Sergeant who was in charge of you. I'm trying to get him to this podium; I like his style.

Q:Do you have any more information on Hubbard, who he is?

MR. FLEISCHER: Yes, we have paper coming out on all of this, so you should have that shortly. He is presently the Russell Carlson Professor of Economics and Finance at Columbia University. He served previously as Deputy Assistant Secretary at the Department of the Treasury from 1991 to 1993. He is a graduate of the University of Central Florida, received his masters degree and Ph.D. from Harvard University.

Q:Some in the nation feel that George W. Bush was never a legitimate President, and now there is word from Florida that indeed, he's legitimate, with 140 votes over Gore. What is the administration saying about this, his legitimacy now is confirmed?

MR. FLEISCHER: April, we've never thought it's been in doubt. I think the overwhelming majority of the American people have moved on and never thought it was in doubt. And it doesn't change anything of this White House about what we're doing. This election's been settled a long time ago.

Q:But there is still a rift. How can you heal that? We'll these results help to heal this rift, especially in the minority community, particularly the African American community?

MR. FLEISCHER: I think regardless of the margin of the election, which was, as I indicated, settled quite some time ago, the President is well aware, as we just talked previously, about the difficulties in some parts of our American community. And he is going to continue in his efforts to reach out and bring people together. I think you'll hear a little bit about that in the speech tomorrow night. And it's going to be an ongoing part of his administration to continue to build one nation and bring people together.

Q:So race will be a part of his speech to the joint session --

MR. FLEISCHER: His remarks tomorrow night will touch on bringing our American community together, and that we are one nation, just as he discussed in the inaugural address.

Q:Can you give us any more details on the new federalism initiative that the President talked about, in general?

MR. FLEISCHER: We should have copies of that coming around for everybody once the President signs it. It creates a new working group that will be a White House working group, together with members of the Cabinet -- many Cabinet Secretaries being involved. We will explore on a very detailed level what steps the federal government can take to streamline regulations to make it easier on the states to carry out reforms within state programs.

One example, for instance -- and this now has to be fixed by law, but the federal education proposals that the President is making. There are some 60 education programs that the federal government runs that will be consolidated into five, streamlining it, more flexibility for the states to carry out the accountability and reforms in education. That's an example that requires law.

What the working group the President announced today will focus on are what similar consolidations, streamlinings, waivers can be carried out through executive order. And we are going to work very closely with governors of both parties on that executive order.

Q:This is the start of a process which at some point in the future will yield specific streamlining?

MR. FLEISCHER: Precisely right. That's a fair take.

Q:There is a sense among some governors that Medicare reform is not going to be accomplished and may not even get through the Congress in the next couple of years. At the same time, there are many states that are experiencing a double hit of a decline in tax revenues as Medicare and Medicaid costs are going up. Inevitably, those two will crash headlong into each other and create a crisis in those states. Is the President not concerned that we need to have Medicare reform, meaningful Medicare reform, within the next couple of years?

MR. FLEISCHER: He absolutely is. You put your finger on it. Medicare is a fast rising -- the costs of Medicare are rising fast. I know there was a new report out in the last couple days about the cost of prescription drugs may be increasing more than previously thought.

All that indicates the need to have a focus on reforming Medicare. Medicare is still essentially a 1965 program with its Part A for hospitals, Part B for doctors, which is a reflection of how most people received their medical care in 1965. You either went to the hospital or you went to the doctor. Today, you have a whole change in health care delivery. You have skilled nursing facilities, you have home health care. All of that, frankly, is the fastest-rising portion of Medicare. You have prescription drugs, which really were not in widespread use back in 1965.

And the Medicare program still is a 1965 model, all of which suggests that to get needed medical services to our seniors and to modernize Medicare, we have to have a government that is willing to reform the Medicare program and the President remains committed to it.

Q:Any proposed reforms, Ari? And will he do it this year?

MR. FLEISCHER: He will.

Q:Two questions. First of all, do you know how long the speech will last tomorrow night?

MR. FLEISCHER: Don't have it yet. The President will do his first TelePrompTer practice a little bit later this afternoon, and that's when I'll have my first guess at how long it will be.

Q:Do you generally expect it to be as long as a full State of the Union?

MR. FLEISCHER: Let me wait to see how long he takes on a TelePrompTer, and then, of course, we'll have to add frequent applause to it.

Q:Can I ask you an energy question? You might have to look into this. Does the President have a particular impression or reaction on nuclear energy research? This is in light of the fact that Cornell University, which gets sizeable energy grants -- federal grants for its reactor, says it's going to decommission its nuclear reactors. And I just wondered if you have a program on this?

MR. FLEISCHER: If I recall, the President's energy program had one small provision in it that dealt with some streamlining of procedures for nuclear licensing. I would want to check that. There was one small area in there dealing with things nuclear. We've handed out the fact sheet on that previously, so --

Q:It's still the same?

MR. FLEISCHER: Yes, it's the same proposal. Of course, we still have our working group that is focused on a national energy policy. So you've got the proposal he discussed during the campaign, which will be the core of that. And we'll have to wait and see what they come up with in the working group.

Q:Ari, could I just come back to Medicare for a second? To accomplish Medicare reform it's going to take money. The Democratic National Committee has come out with a poll saying that 77 percent of the American people feel that President Bush's proposed tax cut is too big. And while you might dismiss that as a partisan poll, it squares with what a lot of other polls find, that a tax cut is a low priority for people, that they have other priorities, and that they are concerned that the size of President Bush's tax cut will squeeze those other priorities. How concerned is the President about the lack of popular enthusiasm?

MR. FLEISCHER: Well, let me take your question in the order that you answered it. On Medicare, and that reform takes money, I don't think anybody in government should begin with the premise that it takes money. They should focus on what reforms are necessary to deliver a program that works, and works well. Several of the proposals up on the Hill, frankly, do not require additional money. There are additional costs associated with reforms; there are also savings in the reforms. And so you want to take a look at the proposal in context, in its entirety. So that premise I don't think is shared by all.

To go with the segue -- as for the tax cut, two points. One is, the President has proposed it and is fighting for it because he thinks it's the right thing to do, not what the polls say. But I differ with your interpretation of the polls. The tax question in the polls is one of the most easily asked questions to get whatever result you want. And if you ask in a poll what should be the top priority, tax cuts, Social Security, Medicare, it's a false choice, because it suggests there's only one priority in the use of the surplus.

And as we know, the surplus can be used for multiple priorities. And all you have to do is ask the question, of the following priorities, how would you divide the surplus? And what you'll see is, frankly, the American people will divide the surplus very much like the President has, with the biggest share of it going to debt reduction, with $2.6 trillion saved for Social Security, with only about a quarter of it used for tax relief. So all you have to do is ask the question in a more accurate way, and you'll find that the American people are very supportive of what President Bush has proposed.

Q:So the answer is --

MR. FLEISCHER: If you say to people, you only have one choice for the surplus, you're giving people a false choice. And many of those questions ask it basically in that manner. They say, of the following, what would be your top use? And you get that top use, and it in effect ignores that there are other valid uses.

Q:There is, however, a limited amount of dollars in that surplus. Listen, the President's message is that we can have it all. We can have the debt reduction, we can have his big tax cut, we can have education, defense and other increases. We're in that kind of time frame in our history where we can have it all.

MR. FLEISCHER: Well, frankly, we are a fortunate nation that we can wrestle with the reality of budget surpluses for as far as the eye can see. That is what the estimates tell us. We have money in the bank. There is an operating budget surplus, set aside all of Social Security's money.

The federal government today enjoys a very large surplus, money in the bank, money that will likely be spent on more government programs. And I remind you that the surplus would be some $600 billion over the next 10 years, had it not been spent by both parties in the Congress and by the previous administration last year.

So with a $5.6 trillion surplus, we do have room for a lot of options. And the President's options are -- his recommendations to the Congress are, pay down the debt an historic amount, save Social Security, set aside all the money for Social Security for debt reduction and Social Security, and fund the necessary priorities, including an 11 percent increase in the education budget, fund defense, fund our priorities. And the money that's left over, absolutely return to the taxpayers, because they deserve it.

Q:Two questions about this new federalism thing. First of all, can you give us a specific example, not of a law that you would have to change, but of a set of rules and regulations that's too nettlesome for states to deal with now?

Number two, at the stakeout, Governor Engler said he was under the impression that this new federalism approach could help states deal with the energy crisis that may visit their states later on this summer and maybe deal with the access, from changing the regulations to allow them to accommodate more energy use in their states. Do you agree with that assessment?

MR. FLEISCHER: I think the proof is in the pudding on that one in terms of the letter that Governor Davis sent to President Clinton asking the President to expedite permitting, which is under the discretion of the President, to help solve California's energy problems. So there you have a case on energy in the state that is most affected by energy where a state asked the federal government to take unilateral action to loosen regulatory procedures, to expedite permitting, which has now helped keep California's energy on line. So that is one crystal clear example.

Another example, I think, where you have seen a recent road block to reform, frankly, was in the state of Texas when the state of Texas asked the federal government to change some provisions of the welfare law, where Texas wanted to have some aspects of welfare delivery privatized, allow private sector competition for the delivery of services. And the previous administration denied the waiver. The state of Texas, on a bipartisan basis, thought that it would be a savings to the taxpayers and a more efficient delivery of care and help for those in need. The government said, no. That's an example.

Q:Ari, can you talk a little bit about the preparation that has gone into the speech? When did the President get a draft? How much time has he spent on it?

MR. FLEISCHER: He spent a healthy part of the weekend, right after Prime Minister Blair left. Karen Hughes went up to Camp David, and the President worked through the speech extensively throughout the weekend. He had been working on it throughout last week. His first TelePrompTer reading with the speech, formally, with the screens, will be today. He's been working through, reading through the various drafts of it though for the past several days.

Q:Ari, on the tax issue, on the tax code specifically, the tax code has 44,000 pages. Nobody understands it or can see through, and it's packed with special interests. I wonder if the President will clear up the tax code also, besides a tax cut?

MR. FLEISCHER: Well, there are a couple provisions in the President's proposal that do represent major simplification of the code. And one is lowering the rates and limiting the number of brackets, reducing them from five to four. If you recall, in 1986, in the tax reform act, they eliminated a lot of loopholes and deductions, and in its place, created two new brackets, a 15 percent and a 28 percent. And then the 1990 budget agreement and then again in 1993, new rates started to spring out. And so we have a system now, we have five tax brackets. The President's proposal reduces that closer to the 1986 tax reform level.

The other big area of simplification, which is major, is repeal of the death tax. The estate tax, the death tax, is one of the largest loop holes in the code, that invites CPAs and lawyers to figure out ends around, which complicate the tax code. If there is anybody who has a lot to lose in the President's budget proposal, it's tax lawyers and accountants. If you repeal the death tax, a lot of them are going to lose their ability to carry out their livelihood, which is to help people avoid paying taxes.

Q:If you're not afraid of going against special interests, including those that supported him like big tobacco, big pharmaceuticals --

MR. FLEISCHER: Well, I certainly think a lot of CPAs and tax lawyers support President Bush. If you repeal the death tax, a lot of them are going to find their livelihood redirected.

Q:Senator Murkowski, I understand, introduced or announced a package of energy-related legislation today. I think it includes some of the ANWR stuff. Do you have a view for that?

MR. FLEISCHER: The President believes that that's a very good start. And we look forward to working with Senator Murkowski and others on his energy proposals. I know Senator Murkowski's proposal, like President Bush's approach, would open up a small sliver of ANWR for development of oil in Alaska. And the amount of oil that would come into the United States as a result of opening ANWR represents 20 years of imports from Saudi Arabia. We can replace 20 years worth of Saudi Arabian imports here at home, if ANWR is opened. And that's in Senator Murkowski's legislation.

Q:On taxes, does the President's proposal shift any of the income tax burden across quintiles?

MR. FLEISCHER: It does, because it takes 6 million Americans off the tax rolls. Six million low-income Americans will no longer pay income taxes. So as a matter of who shares the burden, shoulders the burden of the tax code, any time you take 6 million people off, the people who are left shoulder the burden. And that means as a percentage of taxes paid, upper-income Americans, while still receiving a tax cut, will actually pay a higher percentage of all the taxes paid.

Q:-- what the numbers are on proportions?

MR. FLEISCHER: Don't know off the top of my head.

Q:Is he going to be specific at all tomorrow night in terms of cuts, or is he just going to talk broadly about the need for some spending cuts?

MR. FLEISCHER: There will be a lot of specifics on the speech tomorrow. And I just urge you to tune in.

Q:He will address specific programs that are going to be cut, or specific cuts of different agencies, or --

MR. FLEISCHER: He'll address a lot of specific areas in the speech tomorrow. And let me stop right there with that.

Q:Ari, on Medicare, if I could.

MR. FLEISCHER: Let's get some new people, and then we'll get to you. You don't get four before somebody else has one.

Q:I've had one.

MR. FLEISCHER: Mimi?

Q:On the polls you were talking about, answering Terry's question, polls that show that the public wants to split up the pie the same way the new President does, are those internal White House polls, or other polls --

MR. FLEISCHER: No, it's just polls I remember seeing over the years. Typically the way the question is asked in the polls is, what would be your top choice for reducing -- the use of the surplus, as if there's only one choice with surplus money.

Q:I understand, I just want to know which polls --

MR. FLEISCHER: No, it's just public polls that I've seen before. Typically the way the question is asked, if the surplus was $100, and you had the following problems to divide it up, debt relief, Social Security, Medicare, tax cuts, how would you divide it? And you find people on their own suggest dividing it in a way not too dissimilar from the way President Bush has.

Q:Are we going to get an advanced text?

MR. FLEISCHER: Of the speech? Yes, at some point tomorrow. I can't guarantee how --

Q:During the day, or --

MR. FLEISCHER: Ask me tomorrow.

Q:Ari, beyond the race relations themes that you alluded to earlier, will the speech in any way reflect or acknowledge the nature of the outcome of the election?

MR. FLEISCHER: No.

Q:Why not?

MR. FLEISCHER: Because I think the American people have moved on. The American people have recognized that in President Bush, our nation has a leader who is focused on the substantive agenda of our nation, improving education, cutting taxes, rebuilding the military. And I think the American people are pleased to have a President focus on the future.

Q:Will he talk about electoral reform at all, which is a reference to the --

MR. FLEISCHER: Stay tuned for the speech. I don't want to process of eliminate or get into everything he is going to say. He will have things to say for himself.

Q:Ari, on the length of the address, as a matter of principle, is it going to be shorter than President Clinton's were, which tended to get longer and longer as the presidency went on?

MR. FLEISCHER: No, his speeches are the length they are because it's what he has to say. It has nothing to do with whether something is shorter or longer than any of his predecessors.

Q:Will he talk about Social Security at all, or perhaps propose --

MR. FLEISCHER: I think that's likely.

Q:What about the commission proposal? Will that come up?

MR. FLEISCHER: Stay tuned for the President.

Q:When will the President send his Medicare reform proposals up to Capitol Hill, and will they be modeled on the governors' program, which devolves to the states a lot of discretion in spending and in the actual structure of the program?

MR. FLEISCHER: Nothing -- that's Medicaid, I think you're asking about. Medicare is not a state program. Medicaid. You asked about Medicare, if he would send Medicare up.

Q:Medicare-Medicaid reform.

MR. FLEISCHER: Okay. There is nothing announceable at this moment.

Q:But what about the idea of devolving to the states more discretion with the Medicaid part of the program?

MR. FLEISCHER: That's one of the reasons he announced his new federalism initiative today. That process is just beginning to take a look with the governors and other local officials, too. And that also is going to help mayors, help other local officials in terms of any of the rules or regulations. There is a movement by a lot of governors to look at waivers under Medicaid. Secretary Thompson has talked about that and that is one area that this group will look at strongly.

Q:Does the President like their plan?

MR. FLEISCHER: Their plan is general. The plan is supporting waivers. That's why we're at the beginning of the process.

Q:On taxes, I don't know if you mentioned the insurance lobby, but they are, of course, lobbying very strongly against the inheritance tax reduction. Have you seen them having much influence with this administration or with the Congress so far?

MR. FLEISCHER: It gets to Peter's question. There are a lot of powerful special interests who are lining up now to protect attacks that, frankly, because of all the loopholes and end-arounds, creates a lot of work. And the President is going to continue to fight for its repeal. He thinks it's a wrong tax. He thinks it's wrong to tax people after they've worked their whole lives, to make them pay taxes again when they die.

He is aware of this effort launched by several millionaires and billionaires to keep the estate tax in place. He disagrees. And certainly, if the estate tax is repealed, as the President will continue to fight for, any individual American has the right to continue to send in extra money if they so choose.

Q:On estate taxes, is there any room for compromise in terms of the idea of repealing it, but taxing the capital gains --

MR. FLEISCHER: I think the President deserves to have his day in court and that's what he intends to do. He is going to present his case tomorrow night. He is going to present it in the budget on Wednesday and he is going to continue to fight for it.

He believes that there should be no death tax. He thinks it is wrong; he thinks it is not good policy to make people visit the IRS and the undertaker on the same day. And he is going to fight to repeal that tax.

Q:-- tax on the same day, just when it's sold.

MR. FLEISCHER: Actually, the stepped-up basis on capital gains takes place on the day you die. So there's a lot of that.

Q:But, Ari, do you honestly think it's okay for Bill Gates and the like to transfer -- and there aren't going to be loopholes -- to transfer all of his wealth to his kids? There's so much money there.

MR. FLEISCHER: We think it's wrong for the government to take people's money simply because they die, no matter who they are.

Q:I want to get to the spending side of the budget. A number of Republicans have started speaking gingerly about their concern over cuts. And I want to sort of broaden the question a little bit. Those of us who were here during the deficit years saw how difficult it was for Congress to make cuts even when we were in deficit. Now we're in a completely different environment. And I'm wondering what -- how is the President going to get even these Republican members to go along with cuts in a surplus environment?

MR. FLEISCHER: Like other items in his budget, because he believes in it, he will fight for it and the process again is just beginning. I think there are a lot of people who do support cutting programs and making sure we get waste out of the government. Certainly, in a budget with $1.9 trillion being spent, something can go. Something is duplicative. Something has filled its useful purpose and has already been done, carried out and now it simply lingers.

But there are many proposals, many areas in the federal budget, that have powerful constituency is behind them, from both parties. Often, they are regional as opposed to political. And it is not an easy task, but it is the right task and that is why he is committed to it.

In this area, I submit to you, he will be joined by a lot of allies. It's something that Senator McCain talked about very often on the campaign trail. And in the last Congress, they went on a bipartisan spending spree. Spending went up 8 percent last year alone on domestic discretionary programs, more than 6,000 earmarks, which are special provisions that are directed to be put into individual members districts.

Is it easy to get them out? No. Is it the right thing to get them out? Yes. And that's why the President will commit himself to doing it. But we're aware there's going to be bipartisan thoughts on that effort.

Q:One of the reasons for that is that there is a kind of truism when you're running for office that you aren't serious on an issue unless you're spending money on it. Is that one of the things you're fighting if you're going to be suggesting cuts in things like energy efficiency, renewable energy, that kind of thing?

MR. FLEISCHER: I think there's an equal truism that you're not serious about limiting the size and power of the federal government if you're not willing to take on sacred cows.

Q:Ari, in terms of -- on the other side of that coin, on budget increases, there's been reports that the NIH will be slated for an increase of some significance. Can you give any details on that? Will that be the only increase on a discretionary domestic program?

MR. FLEISCHER: The President announced last week that he would increase the budget for the National Institutes of Health by believe it's $2.8 billion from this fiscal year to the next fiscal year.

Q:Has he given any specifics, though, on where that will go?

MR. FLEISCHER: No, it goes to the NIH, broadly.

Q:Within NIH?

MR. FLEISCHER: Within NIH they have discretion, per regulatory authority and overview from HHS, on where it will go. That's part of the normal budgeting process within the agencies.

Q:As the President approaches the issue of debt reduction, can you walk us through some of the specific numbers as the administration sees it, on this question of redeemable debt and debt that can and should be paid down and what timeline that the administration is looking at, what debt is sort of non-paid off, and doesn't get us to zero, but is nevertheless important?

MR. FLEISCHER: This gets us into Terry's question about is the surplus at such a size that our nation is in a fortunate position where we can have several options served and served well. And we are. The way debt works is you have certain debt obligations that are long-term, some that are short-term, some that are foreign nations, some that are U.S. savings bonds that many of our grandparents, for example, held or still hold, and many of us perhaps hold.

The thrift savings plan, which is a program for federal workers that they can invest in their retirements, much like a lot of pension programs, where you can invest in markets. It's a tremendously popular program. And there are an awful lot of people who have their money, for their retirement savings, invested in government bonds. It would not be in the interest of either those soon to be retirees or in the government to retire those bonds. It would be a reneging on the commitment made to those

workers that they could invest in these bonds and therefore have a secure retirement. That's an example of debt that it would not be prudent to pay off.

Very often, too, there is a premium or a penalty paid for early pay-down of debt. The example I would give you on that, to put it in somewhat -- there are some mortgages, for example, that if you pay them off too soon, you pay a penalty, you pay a premium. And so there is a lot of debt, though, that can be paid off and paid off fast. And that's what this budget will do. This budget will pay off the debt that can and should be paid off at an historic rate.

Q:According to CBO right now, it's about $3.1 billion that is publicly held debt. Of that $3.1 billion, what does the administration consider in bounds and readily available for payout over a distant period of time?

MR. FLEISCHER: That will be in the budget submission on Wednesday, but it is a very large share of that.

Q:A very large share?

MR. FLEISCHER: Yes. In other words, after this budget is submitted, the share of federal debt will be at its lowest level in about a century. And the only debt -- I've got a Cabinet meeting I need to get to in a couple minutes -- the only debt that remains would be debt that it is not in the interest of the country or the taxpayers or the bondholders to have paid off. It's a remarkable time in our nation's history that we can be at this point.

Q:So what you're saying is it will create more budgetary flexibility than might be originally viewed, if you thought the goal was getting down to debt zero?

MR. FLEISCHER: That's correct.

Okay, can we take two more and then I need to get to this meeting?

Q:Can you tell us what's the President's position regarding the Puerto Rican island, Vieques, and whether or not he had the opportunity to talk to --

MR. FLEISCHER: There is nothing new on that point. I don't know if he has had any conversations directly with her since the meetings. And let me ask you to refer to Mary Ellen to see if there is an update on that. But I know he has been talking with the Department of the Navy, the Department of Defense. And if there is anything further, I think Mary Ellen can get it for you.

Thank you.

END 12:58 P.M. EST