Title: Briefing by OMB Director Panetta 1993-10-26

Author: OMB

Date: 26 Oct 93 16:28:54 UT

Date: Tue, 26 Oct 1993 15:12:13 -0400 (EDT)

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Office of the Press Secretary


For Immediate Release October 26, 1993




Room 450

The Old Executive Office Building

10:57 A.M. EDT

DIRECTOR PANETTA: What I would like to do is to present

a brief summary of the elements of the package that we will be

presenting and forwarding to the Congress later today. We have

Elaine Kamarck and Al Burman speak to the procurement issues. Also

present is Colleen Preston from DOD, and she's familiar with

particular issues that relate to DOD with regards to procurement.

Let me again emphasize that the primary effort of this

package is really making an effort to try to make government work

better and to try to achieve savings in that process. But the main

focus is really on government reforms. We're trying to do a number

of efforts at streamlining that I'll describe, at eliminating

programs, at consolidating programs. We're also doing a major reform

with regards to the whole collection process within government, to

try to expedite the ability to make these collections on outstanding

debts; also to try to provide incentives for efficiency

competitiveness, as well as the procurement reform that both the

President and the Vice President spoke to.

Let me mention the key elements that are in the package.

Hopefully, you all have a briefing packet on that. It's basically

tied to the four areas that were described in the National

Performance Review -- cutting back to basics, cutting red tape,

putting customers first, and empowering employees to get results.

Let me just hit some of the highlights. I don't want to

go through every one of these pieces, although I should say before I

get into this package that I want to pay tribute to the staffs of

particularly OMB -- Phil Lader, John Angel and the rest of the staff

at OMB, as well as the Vice President's office, because what we had

to do here, essentially, is put a reconciliation package or the

equivalent of a reconciliation package together in a matter of a few

short weeks, and that means working on all the legislation, getting

it all done, getting it all packaged. So there's a lot of work that

went into this in the package we're going to be sending up.

The key elements of it that I want to just draw your

attention to is, first of all, on streamlining, we are going to

include legislation that would provide the Secretary of Agriculture

the authority to streamline and achieve his 1,200 office reduction

with regards to field offices, as well as his bureaus here in

Washington. That would achieve almost $1.6 billion in savings just

by accomplishing that over five years.

In addition to that, we're going to include language

that would allow the Secretary of HUD to proceed with the

streamlining of the HUD operations as well. And in addition, we're

including a directive to the Corps of Engineers to achieve savings of

almost $105 million over five years, basically by implementing a

reorganization plan, again, to reduce the costs in operations in that

area as well.

In addition, we are eliminating a number of programs and

facilities: the uniform services -- university for health services.

That's the Department of Defense's operation to provide medical

training. That is being eliminated. That's something that was

contained in their bottom-up review and we're fulfilling it here.

We're also eliminating the federal aviation higher education program,

which is a program that has long been identified as one that we ought

to get rid of. We're also phasing out the Bureau of Mines mineral

institutes. The President mentioned wool and mohair, which is also

part of the package, although Congress is already moving that

legislation. As a matter of fact, we have a major piece of that

legislation here at the White House. We're doing the same with

honey; the honey program will be eliminated on the same basis as wool

and mohair. And we're also going to be eliminating essential air

service subsidies for those airports that are located within 70 miles

of a major hub. Those are some of the key streamlining proposals

that are part of the presentation.

In addition, what we're doing on collections -- the

essential part of the collections reforms are basically to allow the

agencies to have -- to be able to retain a portion of what they

collect from delinquent debts in order to pay for credit management

and the debt collection improvements. That's something that's never

happened before. We're trying to lift the restrictions on the use of

private collection agencies. We're also trying to bring technology

into their collection efforts. Those are all part of this proposal.

That affects, in particular, the Department of Justice, as well as

HHS and others.

The Veterans Affairs departments, we're going to pick up

almost $420 million by basically authorizing them to use the same

data bank to determined whether veterans are receiving health care --

those who receive health care have private insurance that could cover

those kinds of costs. That's included in this provision as well.

We have efforts at basically trying to target fraud in

government. It's amazing when you look at the fact that we, for

example, cannot right now cut off benefits to people who basically

defraud the government in various areas. And so we are now

authorizing that we are able to cut off their benefits, plus also bar

from the program those who are convicted of defrauding it, which is

something that currently is still allowed by the law. So we're doing

some reforms on those enforcement areas.

On fair compensation, we are creating the opportunity

for local commanders at DOD to be able to use some of the resources

at the local level, so that if they are able to sell, for example,

recyclable materials that are generated at the installation, they'll

be allowed to use those funds at the local level and give them that

authority that we ultimately predict will save about $500 million.

We're also adjusting monetary penalties to the inflation

index. We have a broad amount of monetary penalties. They have

never been increased for a number of years. We're basically going to

tie those to an inflation index.

We're also doing power marketing reform, which is

something, as Chairman of the Budget Committee, we have been trying

to do for the last almost 16 years. We finally have been able to

work with Bonneville Power. We've worked with others to try to work

out something that would allow us to be able to reduce the kind of

subsidies that are provided to those PMAs. So that's a major effort,

and it has the support of the delegations that have been working on

this issue.

In addition, we are providing the increased use of

technology to streamline financial services. We are now going to

require measures to promote electronic transfers by direct deposit of

federal salary and retirement payments. And so we are finally, as

the President and Vice President said, going to move to actually

making allowance for electronic transfers. That will save about

$23.5 million.

We're also doing a couple things that have been talked

about for a long time in government. On year-end spending, in order

to try to cure the "use it or lose it" syndrome with regards to the

year end, when you get to the end of the year, if you have additional

savings, the incentive now is to basically spend those savings rather

than trying to save them or use them. And so the incentive is

exactly the wrong approach with regards to the government. What we

will do is encourage federal departments and agencies to be able to

roll over those savings so that they can use those savings for either

bonuses or within the programs that they have within in their


In addition, we're going to reduce the number of

congressionally-mandated reports. We've got a stack of mandated

reports that is almost a foot and a half high, and we have now gone

through each of those. We're going to send to the Congress

recommendations to try to cut out some of those mandated reports that

have lost their relevance.

And lastly, we're going to try to provide the incentives

to encourage voluntary separation. This is really related to the

effort to cut 252,000 federal employees. We think we do need to have

the ability to buy out those employees who are ready for retiring.

The last thing I would mention is that we are

eliminating the kind of federal printing monopoly that developed with

GPO. We're going to basically permit and encourage that there be

more competition when it comes to printing in the government. Those

and others -- we've got about 40 different programs, as I said, that

are presented in particular. Let me just give you a quick run-down

of the process that we think we're looking at right here.

First, with regards to reinventing government, as the

Vice President said and as I've testified, three key things --

executive orders, which we're implementing; the package, which we're

presenting; and also the '95 budget, which will contain many of this.

On savings we're looking at $9.1 billion of savings that

are in this package of recommended savings in the various areas --

$9.1 billion. We will then be sending later in the week a rescission

package. And the reason we haven't included it here is because five

of the appropriations bills still are with the Congress and have not

been completed. But we hope to complete that action by Friday, and

we expect that the amount of savings in that package could range

anywhere from $1 to $2 billion. That will take this package to well

over $10 billion. Plus the procurement reform -- obviously our view

of the savings on procurement reform is we'll achieve $22 billion

over five years. That's five percent of procurement costs in the

government. The CBO will obviously estimate that at much lower --

somewhere between $3 billion to $5 billion. So we're looking at a

minimum by CBO at a package of somewhere around $15 billion. By our

count, it would be closer to $30 billion, based on what we think are

real savings on procurement.

The process we're looking at right now is that the

package will go to both the House and the Senate. We will send up

this package late today. It will be distributed in the House to the

various committees of jurisdiction, as it will be in the Senate. On

the House side, however, because of their rules, they will require

that there be a two-week consideration and then a report back to the

rules committee where this package will be assembled as one and

brought to the floor. We expect there will be amendments that will

be offered on the floor, but we are very confident of action on the

House side.

On the Senate side, it's much more difficult because of

their rules, but we think that because of the merits of the package

and the pressure of trying to get it done, hopefully, before the end

of the session, that they'll be able to pull it together as well.

But it's going to be much more difficult on the Senate side.

Q If you were still Chairman of the Budget Committee,

would you have the same view about these numbers? Do you believe

strongly that these numbers really can be lived up to? And how much

do you intend to try to squeeze out to spend on crime? Will that

come from the rescission package, or would that depend on how much is

in there?

DIRECTOR PANETTA: We're very confident of the numbers

that are in the base package. When I tell you $9.1 billion in this

package, it is a very solid number. I think CBO will support it. We

may even actually pick up some additional savings, hopefully by

virtue of their scoring. But it's a very solid number.

On the rescission package, which I said we'll introduce

later in the week, that's also very solid. When you're rescinding

spending and you put a number in there, believe me, that's real. So

the rescission package will also provide us with over $10 billion.

That $10 billion will basically go for savings and for deficit

reduction. The amount that would be dedicated to fighting crime are

the savings that we hope will flow from the procurement package. And

that will be, as I said, savings that will flow over the next five

years. But hopefully, that -- because we believe those savings are

real -- we would commit those to the crime bill.

Q On the commitment the President made to Senator Bob

Kerrey of Nebraska to come up with additional deficit reductions,

does this package that you're unveiling today -- the rescissions plus

the procurement reforms -- does that meet the commitment, or is there

anything else that you plan to further reduce the deficit that would

go back to that commitment? And I have a related question after


DIRECTOR PANETTA: We think this more than fulfills our

commitment. At the time both on the House side and on the Senate

side we made clear that we would come back with an additional

proposal with regard to spending cuts and savings reflecting in large

measure the Vice President's effort on improving government,

reinventing government, this package fulfills that commitment. We're

going to be producing, as I said, in excess of -- under our terms, of

course, we think with procurement reform we can get almost $30

billion in savings. But at the very least, with regards to CBO, it's

$15 billion over five years in real savings.

This more than meets our commitment with regard to

advancing additional efforts to try to find savings, and again

focusing on improving government. There will be opportunities,

obviously, on both the House floor and the Senate floor for members

to offer additional amendments to this package. That commitment was

made to a group of members on the House side by the Speaker. They

will have the opportunity to offer that kind of amendment on the

House side, and the same thing I'm sure will happen on the Senate

side. So it's possible this package could be increased in terms of

savings before it's over.

Q And speaking about deficit reduction, what do you

say to those critics of the health care reform package who suggest

that what you're doing is simply releasing another uncapped

entitlement program that will further increase the deficit at a time

when the country simply can't afford it? And if there are caps, how

do you maintain the universal coverage that the President said is a

nonnegotiable item?

DIRECTOR PANETTA: There will be briefings, obviously,

on the health care package, but I can assure you that our approach

was to basically ensure that we had capped entitlements in order to

maintain some discipline with regards to spending in that area. We

think it's important. We think the President feels it's important

that we not create open-ended entitlements, particularly when we're

trying to discipline the rest of government spending. And the

mechanism that has been built in to try to help us with regards to

what happens if we reach the cap I think more than meets the

requirement with regards to covering those that might be impacted.

Q Are you talking about three separate pieces here

and having them move very rapidly through Congress -- do you

anticipate that everything will be joined in one? Within the two

weeks you'll have just one bill that will pass Congress?

MR. PANETTA: Well, obviously, we're going to leave some

of that judgment up to the leadership on both the House and Senate

side. I should tell you, the rescission bill goes up on a separate

process, just by the nature of a rescission bill, which is expedited

when we send it up on a very limited time frame Congress has to act

on rescissions.

On the House side, they may very well wish to join those

issues, at least bringing those bills to the floor with one title

being rescission, the other title being the spending savings.

On the Senate side, I believe their inclination is to

handle the rescission bill as a separate bill. But the ultimate

decision on that will be made by the leadership.

Q Has the administration abandoned the ticket tax to

pay for NAFTA, and if so, have they come up with other ways to pay?

MR. PANETTA: We are in the process of putting that

package together. We have, we feel, have come together on what we

think is a funding package that is more than supported by the facts.

If there are to be any fees in that package they will only be used to

cover the additional costs with regards to customs fees. The bulk of

the coverage will be from other areas of savings.

Q How much of this package is actually going to be

used for deficit reduction and how much to meet the caps and targets?

DIRECTOR PANETTA: In the package we're presenting here,

if we use CBO's numbers, again $10 billion we would commit for

savings and the ability to reduce the deficit. The amount above that

we would like to commit to helping to fund the crime bill.

On the overall package of $108 billion, as I've pointed

out in my testimony, about $44 billion of that -- particularly the

amounts with regards to the bottoms-up review at Defense -- are

already very much in the process of having to be accomplished in

order to meet the '94 targets that have been established under the

budget. And $66 billion involves essentially new savings that we're

hoping to achieve over these next five years to meet -- again, either

provide for deficit reduction or help us to meet the caps that have

been provided by the budget agreement.

As I've emphasized, these caps are tough. We're looking

at a hard freeze over the next five years. Obviously, some of these

savings will be used for that purpose and some of the savings will be

used for deficit reduction.

Q The President has mentioned today that this is

somehow tied to getting money for crime fighting. Could you explain

how that mechanism will work and how you would link this --

DIRECTOR PANETTA: Sure. Let me explain -- in the crime

package, the spending in the crime package is basically on the

discretionary side. We're not looking at entitlement spending on the

crime side. Discretionary spending -- money for cops, money for

additional programs to try to assist communities, money for prisons,

money for law enforcement, generally. That's all discretionary


What we would like to do is if we achieve procurement

savings, which we think we can achieve, that money under the cap

could be then used in order to help meet these new funding

requirements if the crime bill is passed, and that's what we hope.

So it's basically the ability to move savings under the cap into the

crime area. That's what we're talking about.

Q But there's no mandate in this bill?

DIRECTOR PANETTA: We would have to fight to make sure

that the Appropriations Committee, in fact, meets the President's

commitment, which is to use this money for crime. We think we've got

a good argument to make with the American people, and that's the

argument we would make with the Appropriations Committee.

Q But is it your intention to expand the crime --

Q The $9.1 billion -- you mentioned that wool and

mohair have already been passed, and there are a couple of other

things in here that have already been passed. How much of the $9.1

billion is, in fact, new, and how much of it is stuff that's already

in the appropriations process?

DIRECTOR PANETTA: The vast majority -- the only

exception would be wool and mohair, which is, as I said, a good piece

of that is here at the White House for signature by the President.

But everything else is essentially new legislation that will achieve

new savings.

Q Back on the crime bill. Is it your intention to

expand the provisions of the crime bill if you get this money, or to

use this money to pay for what you already proposed in the crime


DIRECTOR PANETTA: Our view is that we don't want to

make a commitment to spending on the crime bill that we in fact

cannot meet. I mean, the problem we've had in the past is, there

have been a lot of promises, either on the war on drugs or the war on

crime. Everybody sticks a number in, and it's not met because of

constraints in the budget.

What the President is basically saying is, we are going

to meet the number that is in the crime bill. And if we can't meet

it with procurement savings, which we think we can, then we will find

other cuts in order to meet that commitment.

Q So you don't really have any number at all about

how much of this program would go to crime reduction, would go to

funding the crime bill?

DIRECTOR PANETTA: We estimate that that number would be

somewhere between $4 billion to $5 billion.

Q Would any of it go to pay for health care?

DIRECTOR PANETTA: No. Health care is really on a

separate track, and obviously that track will be presented based on

each of the elements that we need in order to support and pay for

health care. That is really on a very different track. There is

nothing in here that would be used for health care.

Q A bipartisan House group is going to finalize, I

believe this evening, a package of perhaps $100 billion in cuts which

they hope to offer as an amendment on the House floor to this package

that you're talking about today. Given that you haven't seen it yet

-- I don't know if you've been told by any of the people down there

what's in it - do you think that the administration would look

favorably or unfavorably on such a cost package that's 10 times

greater than what you're proposing here today?

DIRECTOR PANETTA: Well, obviously we'd like to review

the particulars of it, which my understanding is that Tim Penny and

John Kasich are still putting the pieces together on that package.

So we would like to review it.

The test is this, as always on these things. I mean, if

an amendment winds up hurting our chances to get this package through

the Congress, then that's cause for concern. Because our goal right

here is not only to propose the savings that are part of this

package, but to get it done and get it done before the end of the

session. So often, when you get into these budget battles, everybody

has a plan that can either multiply or quadruple the amount of

savings in any proposal, but you never have the votes, and it's

always blocked for some reason.

So one of the tests for us will be, does this help or

hurt in terms of our ability to complete action on the package? The

second thing I would mention is that my understanding is that they're

talking about including some very key elements with regards to

funding that affect health care, particularly on the entitlement

side. And we would be very concerned about taking those resources,

and instead of using them for health care reform, use them as part of

the savings package -- because that could really hurt us in terms of

health care reform.

Q What very key elements?

DIRECTOR PANETTA: I think they're talking about

elements that would relate to means testing on health care

entitlements. And that concerns us because those are some of the

same areas we're considering with regards to health care reform.

Q You would oppose that?

DIRECTOR PANETTA: I'm going to introduce --

Q Before you do, on the year-end savings for the

agencies, on "spend it or lose it," you say that they're going to be

able to keep a portion of that. Do you have that apportioned out in

your legislation? For example, a dime on a dollar in terms of the

additional savings that agencies will be able to keep as well as the

debt collection they'd be able to keep?

DIRECTOR PANETTA: This package doesn't really relate to

the '95 budget. I mean, this is on a separate track.

Q That would be the '95 budget?

DIRECTOR PANETTA: The '95 budget is where we will use

some of the remaining savings, hopefully, to meet those targets.

Thank you.

END11:21 A.M. EDT

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