Interview with OMB Director Jack Lew

Interview with OMB Director Jack Lew

By The Situation Room - February 14, 2011

JESSICA YELLIN: It is time to get real about the new Obama budget blueprint and the failure by either party to make the toughest choices to cut spending. The White House brags that its new 2012 budget would shrink deficits every year over the next ten years reducing them in total by $1.1 trillion. OK. But under the president's plan, the federal government would still spend hundreds of billions of dollars more than it takes in every year over that ten-year period, and the country would sink trillions of dollars deeper into the red.

So, we keep piling on to the total amount we owe to other countries. That's over $14 trillion on the national debt clock right now. Well, here's why the president's plan barely makes a dent in the debt. It only takes a whack at about 16 percent of the federal budget. It doesn't touch the biggest ticket items. That includes most defense and mandatory spending programs.


YELLIN: Joining me now to discuss all this is the White House Budget director, Jack Lew. Mr. Lew, thank you so much for being with us. Big day, big budget, but you really can't balance the budget by tackling only about 16 percent of our spending. Why didn't you guys take on the really hard stuff, entitlements?

JACK LEW, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET: It's good to be with you, Jessica. I would challenge the notion that this budget does not solve the problem in the short and the medium term. We've put forward a budget that tackles almost every part of the budget that you just described.

It would reduce the deficit to a place in the middle of the decade where we'd stop adding to the national debt. We would still have interest payments on the old debt but, you know, like a family that has a problem with its credit card, you have to start adding to the balance before you can pay it down.

We'd accomplish that by the middle of the decade. So, I think it's a very big step, when we get our budget enacted. In terms of the proposals in the budget, we do take $400 billion over the next ten years out of the portion of the budget you're describing which is annual discretionary spending. That would bring spending in that category down to the level it hasn't been at since the Eisenhower administration, but we also take on defense.

We cut $78 billion from the defense programs as they were outlined just a year ago, and we have savings in mandatory programs where in order to pay for Medicare, we have $62 billion in savings in health programs.

YELLIN: So with respect, there is a difference between the deficit, our yearly red ink bill and the debt, how much we owe overall? And it's even -- Kent Conrad, a Democrat, has said we need to be much more serious than when this budget says. He says we need to take a much more - look at a much more robust package of deficit and debt reduction.

So, if we're going to have an adult conversation about Social Security, Medicare, Medicaid, doesn't it need to come first from someone presenting the budget, from the White House, for example?

LEW: Well, I think that we are taking a step today putting a budget out there which frames the issues in exactly the right way. It takes real actions now so that between now and five years from now, we can get our deficit under control so that we can stabilize things so that we're not adding to the debt anymore.

YELLIN: Do you agree that Social Security, Medicare, Medicaid should be reformed?

LEW: I think that they each need to be treated separately, address Social Security. I think it's very important not to confuse the importance of dealing with Social Security in the long term with these short-term deficit reduction challenges. They're different issues.

I think if you look at health care, there's no doubt that health care is a very significant factor in our whole economy that's driving spending. The spending in the government on health care is just reflective of the broader trends across the economy.

I think that the important steps taken in the - in the Affordable Care Act will start to chip away at that. That's why the - the savings in the - in the proposal - in the law that's been enacted, are so important, and it's important that it be implemented.

I think in this budget there's a very important provision, which I should take a minute to explain. You know, for years Congress and successive administrations have been adding to the deficit by just suspending a provision in law that would cut what we pay doctors under Medicare by 30 percent. There's a bipartisan agreement that that wouldn't be a good idea.

In the past, we just put it on the national credit card. What this budget says is we should pay for it. We've put $62 billion of real proposals out there to pay for it for the next two years.

YELLIN: Sir, but our credit card is going so heavily into the red, and the - what you're talking about, that one proposal, is just a fraction of a fraction of what we owe. So if you're acknowledging that we do need at some point to talk about social security, Medicare, Medicaid, is this slightly a political move, this budget?

Isn't it really politics in saying we're going touch - we're going to touch non-discretionary - not going to touch non-discretionary spending. We'll let the Republicans go first.

LEW: I - I actually don't think that's right. I think that this budget is the first comprehensive approach put out there, with $1.1 trillion of deficit reduction, two-thirds of it on the spending side, one-third of it on the revenue side. We have proposals in domestic discretionary, we have proposals in defense. We have proposals on these entitlements, and we have proposals on the tax side.

We bring the deficit down, frankly, to meet the target that the Deficit Commission was asked to meet. So we've accomplished it with a plan that we think is a sound, responsible, balanced plan.

We know that it wouldn't be a plan that all agree with, and there will be questions asked. We challenge others to put their plans on the table, and we also offer to work together on a bipartisan basis to see where can we agree and where can we agree in the short term, because these problems should be dealt with now, not five years from now.

YELLIN: And the Republicans do have a plan out now for this existing year.

We're already into this fiscal year 2011. The Republicans have proposed slashing $100 billion out of the rest of the spending for this year.

Are - is there anything that you would object to in their current spending package, including the elimination of AmeriCorps, for example; they would propose eliminating PBS. Anything the White House objects to in their package?

LEW: The president has put forward a balanced package. Congress is still working. I don't want to pre-judge the outcome either in the House or the Senate of what they're doing. We're obviously going to need to work together and find the things that we can agree on. There will be things that we don't agree on. I think we have to work through that.

The challenge is going to be have a balanced approach and to not put all the burden in one place. Our budget doesn't put all the burden on that small slice of the budget.

The challenge is not just to reduce spending. We agree, we all need to reduce spending. We need to reduce the deficit, and in the comprehensive plan, that does that.

YELLIN: All right, Mr. Lew. We'll have to leave it there. Thanks for your time. This will be -

LEW: Thank you.


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