    [Public Papers of the Presidents of the United States: William J. Clinton (1995, Book I)]
    [June 23, 1995]
    [Pages 926-929]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Teleconference Remarks With Democratic Governors in Little Rock,
    Arkansas
    June 23, 1995

        The President. Hello, Governor Romer.
        Gov. Roy Romer. Yes, Mr. President. I'm here, and also on the line
    are Howard Dean, Evan Bayh, and Bob Miller and Tom Carper.
        The President. It's nice to hear your voices.
        Governor Romer. Mel Carnahan would be here, but he's in Korea, Mr.
    President.
        The President. I'm sorry he can't be here, but I hope he does well
    on his trip to Korea. And I want to thank him for his support as well.
    And I want to thank all of you for your letter in support of the budget
    plan that I have presented.

    [[Page 927]]

        I know that all of you have experience in balancing budgets, and you
    know that it takes a combination of discipline and compassion and hard
    choices. And I believe that my budget meets the test that you try to
    meet every year.
        As you know, the Congress yesterday, both Houses of Congress, the
    Republican majorities, have agreed now to reconcile the differences
    between their two. I am glad that both the President and the majority in
    Congress are committed to a balanced budget, and I believe most of the
    Democrats in Congress are as well. But I still disagree fundamentally
    with the way in which they propose to balance the budget. And I think it
    will complicate your lives as Governors considerably.
        I believe that their plan is still too extreme, runs a significant
    risk of putting the economy into a recession and raising unemployment.
    It cuts education at a time we should be increasing it. It cuts Medicare
    beneficiaries in order to pay for large tax cuts that disproportionately
    go to the most well-off people in our country who don't really need
    them. And because the cuts are so severe in some areas, I believe
    they'll be very difficult for you to manage.
        Our plan balances the budget over 10 years instead of 7, increases
    education along with inflation, from Head Start to our investments in
    college loans and scholarships. It preserves--while slowing the growth
    of Medicare and Medicaid, it preserves the integrity of the incomes of
    people on Medicare, so that these middle and lower middle income elderly
    people, who many of whom don't have enough to live on as it is, are not
    going to have to pay more for their medical benefits or give up a lot of
    medical care. It is a much more sensible approach to welfare, and the
    tax cuts are much, much smaller and targeted toward individuals and
    toward education and childrearing. So I believe that it's a better plan.
        But now that the Senate and House have resolved their differences,
    we can proceed to what I hope will be an honest, open, and civil
    discussion with the American people about the agreements and the
    differences in our two plans. And I hope in the end we'll wind up doing
    a balanced budget in the right way that will grow the economy and that
    will support you and what you're trying to do at the State level.
        And I cannot tell you how much I appreciate your support. You may
    have some questions about what we're doing, and I'd like to hear from
    you now.

    [Governor Romer of Colorado stated that all of the Democratic Governors
    favored the President's 10-year plan for balancing the Federal budget
    and asked what they could do to refocus the debate on the importance of
    investing in education.]

        The President. Well, I think that's one of the things the Governors
    have to do, to help us on. And you have raised a point that has been
    almost completely absent from this debate in Washington because there's
    so much focus on the Federal investments and the Federal programs. The
    Republican alternative as compared to mine will have a bad effect on
    education in a direct way and in an indirect way. And I think most of
    the people covering this debate even have not thought about that.
        Directly, it will obviously cut our ability to invest in everything
    from Head Start to the funds we give to you for Goals 2000 to help
    promote reforms, to the apprenticeship programs, to college loans.
        But indirectly, you've made a very important point. Most of the
    funding for education in our country comes from the State and local
    level, and increasingly, States are playing a larger and larger role in
    school funding and in university funding. And if we cut Medicaid as
    severely as they propose to cut it--70 percent of that money goes to the
    elderly and the disabled--they will show up in the legislatures all
    across America. The pressures to avoid severe human hardship will be
    enormous, and therefore, the pressures on you to divert money that would
    otherwise go to education for the State level into nursing home care,
    into the care of the disabled, will be very, very great indeed. And
    there's been almost no discussion of this. So this could be a huge
    indirect cut in education as well.
        And I think most Americans know we ought to be increasing our
    investment in education. In the global economy it's one thing we can do
    to ensure a good life with a secure income for our people. And I would
    urge the Governors to focus on the indirect impacts of this budget as
    well as the direct ones, because that's something our citizens will
    understand if it's explained to them. It's something the press corps
    will understand and report if it's explained to them. But it's been
    almost totally absent from

    [[Page 928]]

    the debate so far. And it's a huge factor that has to be considered.

    [Gov. Howard Dean of Vermont supported the President's plan for its
    approach in dealing with Medicaid costs and asked the President to
    comment on the impact of the Republican budget plan on Medicaid.]

        The President. Well, I would just make a couple of points. And
    Governor Miller may want to talk more about this in a moment because he
    comes from such a high-growth State, but I think two things are going to
    happen if the Medicare and Medicaid budgets that they advocate actually
    become law. One is that the reductions in spending are so significant
    that there's no way that the high-growth States won't be adversely
    affected. That is, you may be able to take account of inflation and the
    fact that people as they live longer will use more health services, but
    there won't be enough to guarantee that the States with fast-growing
    populations that depend upon Medicare and Medicaid will be taken care
    of. There just won't be enough.
        The second thing is that the cuts are so significant that it will
    virtually end the ability of States to expand health care coverage to
    the working poor through the Medicaid program and through a lot of the
    self-initiated reforms at the State level.
        You know, what we tried to do--Governor Dean just alluded to it--
    after the failure of the health care reform effort in Congress last
    year, we just tried to support States that were finding ways to expand
    coverage and increase health care security for their people. I think
    that it will be almost impossible for the States to do that if the
    Medicare and Medicaid funds are cut this much. In fact, I think you'll
    be in a position of either dramatically increasing the cost of health
    care beyond the ability of low-income people to pay it or cutting back
    on the services you provide to them. I think if you look at these
    numbers, it's very difficult to imagine how that won't happen in almost
    every State in the country.

    [Gov. Evan Bayh of Indiana endorsed the President's plan for avoiding
    the shift of health care costs from the Government to consumers and
    asked why Congress would not make this compromise.]

        The President. Well, let me answer your question and then comment on
    what you said earlier. I think that what I'm hoping will happen is that
    now there will be a discussion out in the country and a lot of moderate
    Republicans as well as independents and Democrats will say that, in the
    interest of economic growth and in the interest of fairness and in the
    interest of the integrity of the operation of a lot of our common
    efforts like education and health care, we ought to move more toward the
    framework that I have outlined.
        I think that--I'm very much hopeful that you'll be able to discuss
    this budget at some point with the Republican Governors, and they will
    at least be able to embrace part of it because we've got now a serious
    economic study which predicts that the Republican budget would cause a
    recession. We've got a lot of evidence that it will hurt the States. But
    on the other hand, they are trying to balance the budget and, I agree
    with you, that's a goal we all ought to embrace because--well, let me
    just give you--you've all seen how the Federal-State partnership has
    been eroded as we have to devote more and more of our resources to
    paying interest on the debt. The budget would be balanced today because
    of our previous deficit reduction efforts in the last 2 years but for
    the interest on the debt run up in the 12 years before I became
    President. That's how bad a problem it is recently. And next year we'll
    pay more interest on the debt than we will for defense.
        So we've got to balance the budget. But I'm hoping what you can do
    is to help me reach responsible Republican State legislators, State
    office-holders, Governors, and thoughtful independents to say let's do
    it, but let's do it in the right way.
        Let me make just one other comment. Roy Romer pointed out one of the
    possible indirect impacts of the Republican budget, which was to--if we
    cut health care too much here and you have to take up the slack at the
    State level, you'll invest less in education. So we'll be cutting
    education at the Federal and the State level because of this budget.
        You have pointed out two other indirect impacts, which we have
    already seen over the last 10 years. On health care, if we don't cover
    the full cost of health care for those who are insured by the
    Government, then hospitals and doctors will simply shift that cost on to
    private citizens and on to their health insurance bills, which will put
    more and more pressure on more and

    [[Page 929]]

    more employers to either drop health insurance coverage altogether or to
    dramatically increase the cost of it. And if we cut taxes too much here
    in Washington and put you in a bind at the State level or people at the
    local level, there will be offsetting increases at the State and local
    level.
        Now, we know what happened in the 1980's, the tax cuts in Washington
    mostly benefited upper income people. The tax increases at the State and
    local level, because they were concentrated on sales taxes and property
    taxes, mostly taxed middle income people. So again, I think we ought to
    think about protecting the middle class. Most American wage earners are
    working harder for the same or lower wages than they were making 10
    years ago. We don't need to lower their incomes by these budget
    decisions.
        So I would say anything you can do to tell the Democrats and others
    who aren't for a balanced budget they ought to be for a balanced
    budget--I appreciate what you said, Evan, about the Beltway, as opposed
    to the heartland; I think most Democrats out there in the country are
    with us; that's positive. But anything you can do, to go back to
    Governor Romer's point and your point, to try to help the American
    people and the press, who communicates to the American people,
    understand the indirect consequences of this budget, for education, for
    health care, and for taxes, I think will be very, very helpful, because
    there will be significant indirect consequences that ought to be taken
    into account.

    [Gov. Tom Carper of Delaware endorsed the President's plan. Gov. Bob
    Miller of Nevada pointed out that the congressional plan failed to
    consider the impact on States which faced rapid growth and asked if the
    President's plan addressed that concern.]

        The President. Yes. We maintain the present approach, for example,
    toward helping States fund welfare. And if you had a huge increase in
    the number of poor children, under our plan, there would be provisions
    for funneling more funds there in ways that would enable you to match
    them and go forward. Under their plan, they're going to cut it so much
    there's no way they can take account of growth. They try to on welfare
    for poor kids, but they just can't get there. There's no way, just
    because the size of the cut.
        By the same token, with the medical programs, Medicare and Medicaid,
    with the size of the cuts that are coming in, they won't be able to take
    account of growth. And they will force States to either reduce medical
    coverage or try to get some cost out of people that we know are so poor
    they don't have the money in the first place.
        Now, I would say those would be the two biggest areas where the
    high-growth States will be cut, in medical coverage and in the care for
    poor children.

    [Governor Romer said the conversation had been very helpful and again
    praised the President's budget plan.]

        The President. Thank you. Let's just keep talking about it. And
    let's use this debate. Now there's one alternative and not two, and we
    can use the debate. And again, I would say, let's try to get--let's try
    to go beyond partisanship as much as possible, look at the direct and
    the indirect impacts of both budget proposals. And we'll get to the end
    of the road in the right place.
        Thank you very, very much.

    Note: The President spoke at 11:15 a.m in a telephone conference call
    from the Excelsior Hotel in Little Rock.