Press Briefing by Office of Management and Budget Director Peter Orszag to Discuss Fiscal Year 2010 Budget Appendix and Terminations, Reductions, and Savings

Via Conference Call

11:35 A.M. EDT

DIRECTOR ORSZAG: Good morning. As many of you know, we face an unsustainable fiscal path out over time. I've said before and I'll say again this morning that the single most important thing that affects that long-term fiscal path is health care, which is why we are so committed to getting health care reform done this year in a way that brings down costs not only for the federal government but also for families.

The dominance of health care to our fiscal future does not, however, mean that we should be indifferent to making the rest of government work better. Just like a broken window has been shown to lead to increased crime because of the signal it sends, perpetuating inefficient programs with a shrug of the shoulders undermines confidence in government and wastes resources. We can no longer afford broken-window budgeting.

That's why in addition to pursuing contract reform, efficiencies in the defense budget, agency savings that the Cabinet have been tasked with reporting back to the President on, the most recent installment in this effort is released today, our volume on terminations, reductions, and savings, which include $17 billion in savings in next year alone, fiscal year 2010 alone.

The spirit is to eliminate duplications and to measure what works and what doesn't and put additional resources into the things that are working while eliminating or cutting back on the things that are not. I think you've already all received the volume or it's already up on the web site, so I won't go into the details. But let me just make two other comments quickly. One is that we are encouraged by the spirit that Congress is bringing to this task also. I would emphasize that the Speaker of the House has specifically asked her committee chairs to report back by the beginning of June on potential savings in both budget resolutions -- I mean the budget resolution, I'm sorry -- also asked committees to seek out efficiencies in savings.

And then the second point that I would make is just to remind everyone of where we are in the budget process because a transition year is an unusual year. As you'll remember, we released our overview document in February. We now do have a budget resolution that has been adopted. We're releasing today, in addition to the Terminations volume, the appendix to the budget, which is a 1,400-page document that fills in the subaccount details that is consistent with the February overview topline numbers that we released. And then early next week we will release the Analytical Perspectives volume, which provides a variety of information about the nation's fiscal condition, and also our set of historical tables, which provides a sense of the historical evolution of a variety of budgetary indicators.

So with that, I will open it up for questions and turn it back for the question period.

Q: Hi. Director, I just wanted to confirm that there would be revenue raisers from cap and trade in what is coming out Monday or Tuesday and that would still be the $650 billion that was called for in the outline that you released in February, which means 100 percent auction. Is that correct?

DIRECTOR ORSZAG: We're not going to provide the full details of what will be released on Monday, but I will say that you should anticipate no changes in our climate proposal.

Q: Okay.

Q: Hi, Peter. You mentioned yesterday that there might be some small changes in economic assumptions on some of the larger issues, and I'm wondering -- I'm not sure where they would be. But could you go through any changes that you made in economic assumptions in deficit forecasts to take into account changes since February when the initial volume was released?

DIRECTOR ORSZAG: Jonathan, that's something that we can talk about on Monday, because we will re-release the summary tables and the Analytical Perspectives volume. But what I would say is that, as I said yesterday, we will be revising our economic assumptions as part of the mid-session review later in the year. Even without changes in the economic assumptions, there are always technical revisions that happen every time we update projections, and we can have a more extensive discussion next week when the summary tables are re-released.

Q: Okay, then can I ask another question?

DIRECTOR ORSZAG: Sure.

Q: I mean, you have $17 billion of savings in the eliminations and cutbacks. But I saw quite a few new starts, as well. And I wonder if you've calculated how much more spending you're going to have in some of these new starts, like there's a new housing trust fund and some new education programs. I saw a new program -- it looked like a new program for health care workers in underserved areas.

DIRECTOR ORSZAG: Again, I want to just emphasize, what we're trying to do is reorient government activity towards things that work. So let me give you an example. In early childhood education, we do invest significant amounts -- the Recovery Act had $5 billion in Early Head Start and Head Start and related early childhood education. But at the same time, as you know -- and by the way, I'd be happy to follow up on the evidence on the program that we're eliminating that does not seem to work well, Even Start. That's an example where if you wanted to say, okay, the Even Start is down $66 million -- if I remember correctly -- and yet we put $5 billion into Early Head Start and Head Start, there was a net increase. But that misses the -- I guess the broken-window budgeting point, which is there is no reason to be perpetuating an inefficient program, and what we're trying to do is move resources towards the things that do work.

Q: Hi, Peter. Just a couple of quick things on the appendix itself, which I think we're all going to try to wade through to some degree. What would you call attention to in any of the line-by-lines, any of the things that you would want to call attention to, particularly, as Jonathan said, plus-ups or new programs? And then on the $17 billion, how much of that actually goes to deficit reduction and how much goes to other programs? Are you saying, in a sense, that all of it goes to other programs?

DIRECTOR ORSZAG: Well, money is fungible so you can -- on the latter question -- you can obviously cut and -- slice and dice a flow of money in different ways. I think the key point on deficit reduction is the budget resolution does get down within four years to 3 percent of the economy, cuts the deficit in half -- that is our target. And the budget resolution is consistent with that and fulfills that.

And then, as you know, as you go out over time, as I said at the beginning of my remarks, health care is the key. And we can have a longer discussion about the impact of the rate of growth of health care costs per beneficiary on our long-term fiscal future.

In terms of -- boy, I don't know that I could -- I wouldn't want to single out any single page out of the 1,400 more than any other because I'm sure you'll find them all scintillating. But I would note that the budget funds the things that we believe are crucially important: key investments in education, investments in clean energy, investments in health care reform, and finally, other areas like investments in veterans' benefits and making good on promises to, in that case, for example, people who have served in our military.

Q: Can I just ask one quick follow on the $17 billion? There are a lot of programs -- say, in the field of education -- that Bush went after that you are not going after. And I'm wondering if that's because if we went through, say, Bush's last list, would all of those programs that you're not going after be good programs? Or are you doing sort of a reality test on what you can actually have a prayer of getting through Congress in some of those cases?

DIRECTOR ORSZAG: Well, the approach that we tried to adopt here was to make sure that reductions and eliminations were not ideologically based, but rather based on the evidence. So if a program was not working or was duplicative of other things or was simply unnecessary, then it wound up on our list. And I'm encouraged that we took something like a fifth of the money out of the $17 billion -- reflects proposals that the previous administration had. And I view that as a good thing because that suggests that where they had good ideas and where it was evidence-based, we adopted it too, and that strikes me as being exactly the way it should be.

Q: A lot of this money comes from eliminating funding for accounts that have been earmarked in the past. But when the omnibus was signed you seemed to suggest that you would be scrubbing that bill and possibly proposing a rescissions package. Why not go after the actual earmarks themselves, rather than anticipating future earmarks by Congress?

DIRECTOR ORSZAG: Well, a few things. First, the issue with many of the programs that we are proposing to eliminate that are heavily earmarked is when they are not based on sound science or a rigorous approach. And so it's not necessarily the earmarks per se, but rather the outcomes that then come from the lack of a consistent approach to evaluating projects, for example, that causes the issue.

The President has already said -- and the leadership in the House, for example, have made it clear -- that we will seek to make earmarks more transparent, to make sure that their number continues to be reduced relative to the peaks that we saw a couple years ago. And I think you will see that playing out throughout the appropriations process this year.

Q: But if they're bad earmarks in 2010, they're also bad earmarks in 2009, so why not go after them?

DIRECTOR ORSZAG: I think we've sort of -- I think we've discussed the approach to the omnibus last year, for fiscal year '09 almost ad nauseam and I'd rather kind of move forward.

Q: So there won't be a rescissions bill is what you're saying.

DIRECTOR ORSZAG: I didn't say that. What I did say was that at the time the omnibus was adopted we were trying to be forward-looking. We will be reevaluating all spending, including spending that was embodied in the omnibus, as we always do.

Q: Well, I mean, I hate to beat a dead horse, but you have an appropriations bill that's rapidly moving. If you're going to do rescissions, now would be the time to do it, don't you think?

DIRECTOR ORSZAG: I believe we can send up a rescissions package at any time. And so we have flexibility to do so. If we decide that there are opportunities for rescissions we will send up a package at the appropriate time if that's a course that we choose to pursue.

Q: Peter, hi. I was just curious, in your original budget you had this $250 billion placeholder in '09 for Treasury and the TARP program. Do you still have that in there?

DIRECTOR ORSZAG: I don't know that there's anything in the appendix. What you will see in the documents that we release next week -- or maybe in the appendix -- but we are retaining that placeholder even though, again, that placeholder was out of an abundance of caution and it's very likely -- or it's our hope that it will not be necessary to call upon it.

Q: But you'll still keep that placeholder?

DIRECTOR ORSZAG: We do keep -- we do have the placeholder. I'm actually having someone check as to whether it's printed in the appendix somewhere. But even if it's not in the appendix it will be printed in the documents that are released next week -- and I'm told that it is printed on page 988 of the appendix.

But again, I want to emphasize that placeholder was put in as a precautionary measure and, in general, we have not changed policies. So there are a whole variety of proposals that we put forward in February. The world has evolved a bit since then. We have incorporated those proposals in the new document as a matter of principle. So you shouldn't read anything into the fact that we continue to put forward the same proposals other than we felt like it was the appropriate principle to embody in the full budget what was embodied in the February document.

Q: I just wanted to follow up on Jonathan Weisman's question about the economic assumptions. Is it possible that there might be some small changes on that? And the overall deficit figure, will that change?

DIRECTOR ORSZAG: Well, the overall deficit figure would change even without a change in economic assumptions because of changes in what's called the technical assumptions. So the way budgeteers typically evaluate things, for a given macro-economy, a given GDP, for example, if -- I don't know -- capital gains realizations are lower than projected, given that level of GDP, or incoming tax revenue is -- on income taxes or other taxes is different from what historical relationships the GDP would suggest, there often are technical revisions that occur.

So you should anticipate some modest changes in the numbers that we put out next Monday, but I would not anticipate massive changes.

Q: Okay, so just to clarify then, the numbers that you put out on Monday will attempt to reflect what's happened in the two months since you released the February estimates?

DIRECTOR ORSZAG: There will be some partial reflection, but again, I want to come back -- we do the full update of the entire set of assumptions behind the budget in the context of the mid-session review. So you should not anticipate a full update of all the assumptions in the document that's released on Monday.

Q: Thank you.

Q: Good morning, Peter.

DIRECTOR ORSZAG: Good morning.

Q: It looks like defense takes a pretty big hit out of the total terminations and reductions in discretionary spending. Even though defense accounts for about 49 percent of discretionary spending in 2010, it takes 81 percent of the terminations and reductions. And while defense accounts for about 19 percent of the total budget, it takes about 55 percent of the cuts in the terminations and reductions. Do you think you ganged up on defense?

DIRECTOR ORSZAG: No, not at all. First, a couple things: The defense budget goes up by 4 percent in fiscal year 2010 relative to 2009. Second, if you look at the overall numbers out of the $17 billion, about half of that in total is coming from defense and about half from non-defense, which is roughly in proportion to -- at least with regard to the discretionary budget -- the shares of defense and non-defense.

And finally, Secretary Gates himself has said that procurement reform and changes in the way the Pentagon does business is absolutely essential and we cannot continue on the path that we were on. So I will defer to the Secretary for further comment, but I would just again note that he has said the defense budget needs reform, and that's why he has put forward a set of changes in weapons systems and also, perhaps just as importantly, has embraced the contracting reform that is I believe on the floor of the Senate as we speak.

Q: Thank you.

Q: Hey, Peter, thanks for doing this this morning.

DIRECTOR ORSZAG: Hi, Lori.

Q: Two questions. I noticed that the payments to high-income farmers is in here, something that Congress has already pretty much rejected. And my question is, what happens if -- what's the result if a good number of these things are not accepted by Congress? And the second part of my question is, I was talking to Bob Reischauer yesterday who said that he really didn't think it was fair to give you guys a grade on this yet because a lot of these decisions have to come up from the agencies where the Obama administration is really not staffed up yet. Do you think that you guys are likely to produce a much more comprehensive list next year?

DIRECTOR ORSZAG: Let me answer that second question first. A transition year is always a challenging one with regard to the budget. This is, as the President has said and as I tried to say, just a step in our ongoing process. I would anticipate that as we have a full year to go through the normal budget process we will find yet more efficiencies and we will have additional things to say and additional items to put on the list over time.

With regard to congressional reaction and, for example, you asked about the ag proposals -- let me just say Chairman Conrad, Chairman Peterson, other leaders with regard to agricultural policy have all said that agricultural savings are possible. We have -- and I already said earlier with regard to the placeholder for financial stabilization that as a general principle we have included all of our previous proposals in this document also. I think that's particularly relevant in agriculture because it's clear that some savings are possible. I think that's particularly important given that child nutrition legislation is up for reauthorization this year. And, for example in the Senate, the Senate Agriculture Committee, that to the extent that it finds savings in agriculture that it could plow back into healthier meals and healthier foods for kids would accomplish a variety of objectives.

And then finally I would say, look, we, again, realize that this is a cooperative process with the Congress. I was particularly heartened in the various meetings that we had to brief congressional leadership on the budget that's being released that they are also actively seeking a variety of savings. And perhaps their list will vary a little bit from ours and that's to be expected, and we look forward to working with them to get as much done as possible.

Q: Thank you, Peter.

Q: Hi. Thanks for taking the call. I have two questions. One is on the issue of the criminal alien program. Can you explain a little bit more about why you would want to zero that out altogether? I think California spent something like a billion dollars incarcerating aliens.

And then the second question is about the attaché in Paris. I'm just curious, isn't the thing that's more scandalous there not that they had a attaché there but that it would cost $600,000 to have a single body there? And have you looked at all at what those overhead costs are and whether those are reflected across the board in other agencies that may have operations overseas? Thanks.

DIRECTOR ORSZAG: Okay. First, with regard to the SCAAP program, let me just first say the administration is very committed to a strong border security agenda. The budget includes $27 billion for border and related security, which is an 8 percent increase over last year; funds 27,000 border patrol agents, 33,000 detention beds; a whole variety of other initiatives. We have a southwest border initiative expansion.

So one of the key things is we do view it as the responsibility of the federal government to strengthen border enforcement and to get at the problem in the first place, in a sense.

With regard to the specific program under question, the evidence suggests that the funds are often used in a variety of ways that are tangential to the direct cost associated with imprisoning unauthorized immigrants. And the reason that we proposed terminating that program is precisely that it is not well targeted to the problem at hand, in addition to the desire on our part to focus our efforts and attention on reducing unauthorized immigration in the first place.

With regard to the Department of Education, the $632,000 includes $77,000 to rent living quarters for the representative, $21,000 in travel expenses, and then there also are office costs. So, yes, there is overhead.

One of the difficulties in foreign representation is that there often are higher overhead costs than with personnel domestically, which is why we want to make sure that our personnel operating abroad are in key priority areas. And an example is that while we are reducing and cutting back on this office, the State Department is investing in additional Foreign Service Officers and AID officers to help us reengage with the world in a constructive way, in a higher priority way, than this position.

Q: Hello, Peter. I'm going to shift on you a little bit. The last administration used the performance assessment rating tool, the PART, to really look at about 1,000 programs. You guys haven't talked much about your process to look at these programs and make decisions. You said we're going to address what works, what doesn't work. How much of the PART tool are you going to use? How much are you really looking at some of the research that has been done over the last few years -- beyond GAO, but really what the last administration did to make some of these decisions?

DIRECTOR ORSZAG: We are in the midst of overhauling the performance metric system. I've said before and I'll say again, I think the PART system was well intentioned but was flawed both in terms of implementation and in terms of design. In implementation, there was not enough buy-in from the people who were supposed to use it. And in terms of design, it was much too input-oriented rather than output-oriented.

As you know, the President has put forward Jeff Zients as the chief performance officer and deputy director of management nominee here at OMB, and one of his highest priorities once he's confirmed is to overhaul that performance metric system. While we await his confirmation, we are doing the legwork that would be necessary to make that move as quickly as possible once he's in office.

Q: And a quick follow-up. I'm hearing that there is some problems with his nomination. Can you comment on that?

DIRECTOR ORSZAG: I have not heard of any such problems, and again, the President has made it clear that Jeff Zients is a very well-qualified individual for this job.

MR. BAER: Great. Thank you very much, everyone, for the call. And if you need anything else, you know to call our office. Thank you.

END 12:03 P.M. EDT