[Weekly Compilation of Presidential Documents Volume 33, Number 33 (Monday, August 18, 1997)]
[Pages 1225-1228]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Remarks on Line Item Vetoes of the Balanced Budget Act of 1997 and the 
Taxpayer Relief Act of 1997 and an Exchange With Reporters

August 11, 1997

    The President. Last week we took historic action to put America's 
economic house in order when I signed into law the first balanced budget 
in a generation, one that honors our values, invests in our people, 
prepares our Nation for the 21st century.
    It includes the largest increase in college aid since the GI bill, 
the largest increase in children's health since the creation of Medicaid 
over 30 years ago, tax cuts that are the equivalent of a $1,000 raise in 
take-home pay for the average family with two children, and much more 
that is good for America.
    The new balanced budget law also offers the first opportunity to use 
a powerful new tool to protect taxpayers: the line item veto, a tool 
designed to fight against waste and unjustifiable expenditures, to 
ensure Government works for the public interests, not the private 
interests.
    In the past, good legislation could be cluttered up with 
unjustifiable or wasteful spending or tax provisions, leaving the 
President no choice but to sign or veto the overall legislation. With 
the line item veto, the President can sign an overall bill into law that 
cancel a particular spending project or a particular tax break that 
benefits only a handful of individuals or companies.
    Forty-three Governors throughout our Nation already have the line 
item veto power. Last year I signed the Federal line item veto into law. 
Last month the United States Supreme Court, on procedural grounds, 
rejected a challenge to this authority. Today, for the first time in the 
history of our country, the President will use the line item veto to 
protect taxpayers and to ensure that national interests prevail over 
narrow interests.
    In reaching agreement with Congress on how to balance the budget, we 
worked very hard to be fair to all Americans and to avoid wasting our 
citizens' tax dollars. For the same reason, I've asked the members of my 
administration to work carefully over the final legislation to identify 
any specific spending or tax provisions that I should consider 
canceling. Here's what I told the budget team.
    First, any provision I cancel must be one that was not included--and 
let me emphasize--not included--as a part of the balanced budget 
agreement process with Congress. Our agreement was entered into in good 
faith, and I will keep it. Second, any provision I cancel must be one 
that benefits just a few individuals, corporations, or States at the 
expense of the general interest. Finally, any provision I cancel must be 
one that is inconsistent with good public policy. Just because

[[Page 1226]]

something benefits a small number of people doesn't necessarily mean 
that it hurts the public interest or the American people at large.
    After careful scrutiny and numerous meetings with my staff and 
Cabinet members, we have found three provisions that meet those 
criteria. In a few moments I will use the power of the line item veto to 
cancel a provision that would allow financial service companies to 
shelter income in foreign tax havens to avoid all U.S. taxation. I will 
also cancel a provision that singles out New York by allowing it to tap 
into the Federal Treasury to reduce its State expenditures through the 
use of health provider tax to match Federal Medicaid dollars that are 
impermissible in every other State in the country and actually in 
existence now in several other States. No other State in the Nation 
would be given this provision, and it is unfair to the rest of our 
Nation's taxpayers to ask them to subsidize it. Finally, I will cancel a 
provision that, though well-intended, is poorly designed. This provision 
would have allowed a very limited number of agribusinesses to avoid 
paying capital gains taxes, possibly forever, on the sales of certain 
assets to farmers' cooperatives. And it could have benefited not only 
traditional farm co-ops but giant organizations which do not need and 
should not trigger the law's benefits.
    Because I strongly support family farmers, farm cooperatives, and 
the acquisition of production facilities by co-ops, this was a very 
difficult decision for me. And I intend to work with Congressman 
Stenholm and Hulshof and Senators Daschle, Dorgan, and Conrad and other 
interested Members of the Congress to redesign this effort so that it is 
better targeted and not susceptible to abuse.
    The actions I take today will save the American people hundreds of 
millions of dollars over the next 10 years and send a signal that the 
Washington rules have changed for good and for the good of the American 
people. From now on, Presidents will be able to say no to wasteful 
spending or tax loopholes, even as they say yes to vital legislation. 
Special interests will not be able to play the old game of slipping a 
provision into a massive bill in the hope that no one will notice. For 
the first time, the President is exercising the power to prevent that 
from happening. The first balanced budget in a generation is now also 
the first budget in American history to be strengthened by the line item 
veto. And that will strengthen our country.
    And now I want to go and sign these provisions.

[The President signed the cancellation letters.]

    Q. Mr. President, is that the only pork you can find in that budget?
    The President. I think that my staff is going to brief you about it, 
but let me say that they have--the relevant Cabinet and staff members 
have gone over this quite extensively. Keep in mind, the primary use of 
the line item veto overwhelmingly was meant to be in the appropriations 
process, which is not even started yet. I don't have the first 
appropriations bill.
    There are only a few spending items in this balanced budget that are 
part of the so-called entitlements process, so that--for example, you 
had the New York Medicaid provision there on provider taxes. With regard 
to the taxes, there were some 79 items certified to me, but that was 
only because of their size, that is, the number of people affected by 
it. Of those 79, 30, or more were actually recommendations by the 
Treasury Department to fix flaws in the present laws or to ease the 
transitions in the tax laws. And another dozen or more were put in by 
Congress by agreement with the Treasury Department to fix procedural 
problems in the law. Then there were a number of others that I agreed 
were good policy. So these are the ones that I think--and then there 
were several others that I might have line-item- vetoed, but they were 
plainly part of the understandings reached with Congress as a part of 
the budget process. So these seemed to me to be the ones, after being 
briefed by my staff, that both involved significant amounts of money and 
met the three criteria that I mentioned. And I believe it was the 
appropriate thing to do.
    Q. May I ask another way, sir, the last question another way? Were 
these the most glaring examples of why you were given this power and, 
therefore, they might hold up better in a court challenge?

[[Page 1227]]

    The President. Well, I wouldn't say that. I expect the most glaring 
examples to come up in the appropriations process, at least if the past 
is any prolog. Now, it may be that the use of the line item veto here 
will mean that it won't have to be used as much in the appropriations 
process, and that would please me greatly. But I think it's important 
that the American people understand that when the line item veto was 
given to the President, the primary assumption was that it would take 
out special projects that were typically funded in big bills, and those 
are those big appropriations bills, none of which have come to me yet.
    But I do believe that this should withstand court challenge because 
the process by which the matters were reviewed at least was a very 
careful, exhaustive process, and I received input from people all over 
the country that had interests in it, through my Cabinet and staff 
members. But we worked very hard on this, and--well, since I told you 
after my press conference on Thursday that I would be meeting with my 
staff, and I had meetings and conversations each day since then before 
finally making these decisions.
    Claire [Claire Shipman, CNN].
    Q. Mr. President, it sounds as though, given the deliberations among 
your staff and the talk about the court challenge and the difficulty 
finding items in this particular tax and spending legislation, that you 
decided to act now largely for symbolic reasons instead of----
    The President. No, I wouldn't say that. I think these three things 
are appropriate. But I just want to point out that I think that when the 
Congress certified, for example, 79 tax items to me, people said, 
``Well, maybe you ought to veto 76 of them.'' And I think it's important 
to recognize that there really never were 79 candidates for a line item 
veto there. The Congress is required--the Joint Tax Committee is 
required by law to certify to the President all the tax items that 
benefit fewer than 100 people, and there were--the vast majority of 
those were either put in by the Treasury Department or by the 
congressional committees with the support of the Treasury Department to 
actually clean up procedural problems in the law so that the numbers 
were smaller.
    Then there were a number of things that, as I said, I might well 
have line-item-vetoed, but they were part of the overall budget process 
and that did a lot of good for the American people and I have to honor 
the agreements that were made and the process of it.
    So these things I hope will be both real and symbolic in the sense 
that I'm hopeful that this will work out pretty much the way it did when 
I was Governor; that is, when you know the President is prepared to use 
the line item veto, that tends to operate as a deterrent against the 
most egregious kinds of projects that would otherwise not be funded. So 
it would suit me if, after a while, the use of the veto became quite 
rare because there was a disciplined agreement not to have projects that 
ought not be funded in the first place.
    Q. Sir, can you tell me where in the Constitution the President is 
given this kind of power that hasn't been exerted until now?
    The President. Well, the power is given by legislation. The real 
question is, does the Constitution permit or forbid the Congress to give 
the President this kind of power. I believe that since--if you look at 
the fact that 43 States have this power for the Governor, and it has 
been upheld in State after State after State, the provisions of most 
State constitutions are similar to the provisions of the Federal 
Constitution in the general allocation of executive authority and 
legislative authority.
    So I think it is an implicit thing. As long as the legislature has 
the right to override the executive, then for the legislature to allow 
the executive to make reasoned judgments about particular items in these 
omnibus bills, I do not believe is an unconstitutional delegation of the 
legislature's authority to the President.
    So keep in mind, they can override this. If they decide that they 
think I'm wrong, and two-thirds of them agree, they can override this.
    Q. Do you welcome a challenge?
    Q. Mr. President, Senator McCain sent you a note last week saying 
you ought to consider putting off a line item veto until you get the 
appropriations bills, on the grounds that it might be a blow to the 
spirit of co

[[Page 1228]]

operation that produced the tax cut and the balanced budget bills in the 
first place. Did you give that any consideration?
    The President. Absolutely. And when Senator McCain came to see me 
about the campaign finance issue and our common support for his 
legislation, we talked about it a little bit. As I've already said to 
you, that one of the reasons that we have decided on a relatively small 
number is I didn't want to touch anything that I thought where there was 
even a question that it might have been part of the negotiating process 
and a cooperative spirit with Congress.
    If you look at these three things, they present three entirely 
different problems, but I think all three are outside the scope of the 
budget negotiating process and all three are the kinds of things that 
the line item veto was meant for: the first, the avoidance of Federal 
taxation in an inappropriate way; the second, giving a break to one 
State in a way that would immediately disadvantage several others and 
potentially disadvantage all the other States; and the third, as I said, 
I believe a very worthy goal, having incentives for farmers' co-ops to 
integrate with production facilities in a way that is overbroad and 
could lead to the total avoidance of taxation under circumstances, which 
are inappropriate, which would require a more disciplined fix. I think 
those are the kinds of things that the line item veto was meant to deal 
with in these contexts.
    Now, when you get to the appropriations process it will be somewhat 
more straightforward: Should this project be built or not; should this 
road be built or not; should this money be given to this agency or not 
for this program? And I think that those are the things where typically 
it's in use at the State level. But in the context of taxes and the 
entitlements, I thought each of these three things presented a 
representative case where the veto was intended to be used.
    Q. Are you running out of travel money, sir? [Laughter]
    The President. I hope not; I'm trying to go on holiday. [Laughter]

Note: The President spoke at 12:30 p.m. in the Oval Office at the White 
House. The President signed cancellations affecting Public Law 105-33, 
the Balanced Budget Act of 1997; and Public Law 105-34, the Taxpayer 
Relief Act of 1997.