[Weekly Compilation of Presidential Documents Volume 31, Number 25 (Monday, June 26, 1995)]
[Pages 1106-1109]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
From 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.
    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.

[[Page 1107]]

    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 the Governors 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 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 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.

[[Page 1108]]

[Gov. Evan Bayh of Indiana endorsed the budget 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 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 benefitted 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.]

[[Page 1109]]

    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 thanked the President, said he found the conversation 
very helpful, and once 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 from the Excelsior Hotel in 
Little Rock.