Interview with OMB Director Jack Lew

Interview with OMB Director Jack Lew

By John King, USA - April 13, 2011

KING: Jessica, Dana, thank you. We just mentioned the vice president will take the lead for the administration trying to bring people together, but the president's point man when it comes to counting the money and making these policy decisions is the director of the Office and Management of Budget, Jacob Lew. He joins us live now from the White House.

Mr. Lew, I want to start there, with this ambitious time table because the president was pretty partisan in parts of his speech today. The Republicans fired back in a pretty partisan way. Sometimes we say that's a divide we can't solve. Sometimes we say maybe they're blowing off steam and they'll finally get in a room. Do you really believe that you can get in the room with the Democrats and Republicans and essentially by the 4th of July have a grand bargain?

JACOB LEW, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET: John, I think that what we've learned over the last few months is that we can work together. In December, we worked together to do quite a few pieces of important legislation, including a tax bill that nobody thought we'd be able to agree on. Just these last two weeks, we've been able to work together to cut $78.5 billion from spending in the current year.

So I think our track record of finding a way to work together is actually better than people give it credit for. This is a much bigger challenge. And I think that if we look to the next several months, we do have to be realistic. I'm not sure that anyone imagines that all of the specific pieces of legislation would be agreed to in the time frame we've discussed. But I think one could have an agreement on an approach and some initial pieces of it. And I think that that's -- when we get together right after Congress gets back from its break the first week of May, the first order of business. If you start by asking what can you agree on and agree to agree on those things, you can make progress.

KING: So let's go through some of these things. Let's try to go through as many specifics as we can so people watching at home understand precisely what their government is debating. One of the things the president proposes and a lot of Republicans like this is this trigger, essentially a debt fail/safe. That if the United States debt is not reduced to a certain percentage of the economy, by 2014 you want to have this, essentially it automatically triggers across the board spending cuts to make that happen.

A lot of Republicans find that attractive. Would the president sign a deal that has that trigger in there if he does not get tax increases? Because, now, he might not be president at the time or he would be halfway through his second term if he wins reelection. But if you don't get the revenue increases, then of course you might have to make even deeper cuts. Would he sign his own proposal if you don't get the tax increases?

LEW: Well, just to be clear what he proposed was an across the board mechanism that would cut spending and raise revenue. So it was covering both sides of the equation. And I think it's very important that whatever mechanism we put out there should be even-handed because the idea of these kinds of triggers is not that they should take effect but that the policy process should make decisions so that they don't need to take effect.

And it's very important for everyone to feel that there's a consequence to failure to act. I think it's important for the financial markets. It's important for us, staying on a path of meeting our targets, for there to be a fail-safe. But the fail-safe is not plan A. The fail-safe is plan B.

KING: And the president said today, and he was adamant about this, he said he would refuse to sign another extension of the Bush tax cuts. As you know, a lot of people in Washington don't find that to be a very credible threat or marker, promise, I don't know what word you want to use for it, because he campaigned in 2008 on getting rid of the Bush tax cuts. He promised last year to get rid of the Bush tax cuts and he signed an extension to the Bush tax cuts as part of the budget deal -- tax cut deal you were just talking about. Is this a final answer from the president of the United States never, never he would veto anything that includes an extension of those tax cuts?

LEW: I think the president was very clear today. And I think if you look at December, December was a very particular point in time when we were just at the very beginning of a recovery and the risk of a tax increase in January was something that could have set us backwards. It could have put us back into a recession. We're now talking about several years into a recovery and we're not going to be in the same situation.

KING: So Shermanesque never, never?

LEW: I just said, the president was very clear today.

KING: OK. Another thing he said is that wealthy Americans need to pay more. He was very clear about that. And one of the things in addition to not extending the Bush tax cuts anymore, he said if you're a wealthy American, we're going to look at some of the deductions. Maybe you'll have big comprehensive tax reform and this conversation will go away, but under the current system, mortgage interest deduction was one of them. At what point, at what level, how much do you have to make where then you would not get the mortgage interest deduction that you get today under the president's approach?

LEW: Well, the president didn't put out the specific composition of a tax package. He called for a tax reform debate to be undertaken --

KING: Where does -- where does he think that line should be though? That's one of the -- as you know, one of the criticisms is you laid out a vision. What are the specifics? LEW: The president's been clear that we don't need to raise taxes for people at $250,000 and below. There's enough benefit to special tax provisions and lower rates in the higher brackets. There are options that don't require that. That's what he wants to work towards.

KING: Another thing the president said today was that Social Security is not a big driver in the deficit, but it is something both parties should sit down and work on over the next few years. Senator Lindsey Graham, two other Republican senators today proposed raising the retirement age to 70 as part of a package that they said would put Social Security on firmer financial footing.

Would you and the president embrace that as an effort to say you know what, there's a proposal. We're trying to be bipartisan. We're trying to move Social Security and these other bigger issues down the road. Is that a good number, 70?

LEW: I think one has to start the discussion about Social Security and understanding that it's not the driver of the deficit we're facing today, but it is a very important problem, and it's an important problem because we have an obligation to make sure that Social Security is on sound financial footing for the next 75 years, not just for the next five or 10 years.

And we have invited a bipartisan discussion that would put a broad range of options on the table consistent with the principles the president laid out. And I think that rather than saying are you for provision X or against provision Y, we need to have that conversation --

KING: But you know a lot of --


KING: A lot of your critics say he's the president of the United States. Why don't you be more specific? Why doesn't he lead?

LEW: No, I'll tell you, in Social Security, I can tell you from having worked on this issue for 30 years and having been one of the principal people involved in 1983, advising the speaker of the House when he negotiated with a Republican president, a Democratic speaker, Tip O'Neill, negotiating with Ronald Reagan, that got resolved not because either party put something on the table, but because both parties came to the table and worked together through -- in that case, intermediary of a commission.

There are lots of ways to work together. I've never seen a constructive Social Security debate that started with one side digging in, in one place and another side digging into another. The president has tried to structure a debate, which will actually give us the ability to make progress. And we should do it right away. We shouldn't wait.

KING: One last question for you sir, and then we'll continue this conversation in the weeks ahead, hopefully as we make progress on this issue. The president was very clear today that he wants to raise taxes on wealthy Americans as part of this deal. The Republicans were equally adamantly clear they will not accept any tax increases. If the Republicans hold to that position and you cannot get tax increases in the short term and that becomes a 2012 campaign issue, and we litigate it in the country, would the president this year, if you have some modest down payment on deficit reduction while we fight out the bigger issues, would he change his deficit reduction target if he doesn't get the tax increases or would he agree to more cuts?

LEW: Look I think the important thing -- one of the important things about today is that there is an emerging consensus that the right target is $4 trillion. It's less important if it's 10 years or 12 years, but to be on a path where we're reducing the deficit as a percentage of GDP to the level that we propose that gets it to the point where it's shrinking as a percentage of the economy. I think that the -- what we can agree to this year is something we'll figure out when we engage with the vice president, with the leaders, and we should do as much as we can.

Just agreeing on a goal would be important. Agreeing on components, several components would be even more important. I don't think that the president suggested today that he was not fully aware of the deep divide on the tax issue and on some of the issues regarding the future of Medicare. But that doesn't mean that there's not an awful lot that we can work together on. And I think that's what the coming weeks are about, even if we can't agree on everything, we should agree on what the size of the problem is. We should agree on the pieces of it that we can agree on and we should put a mechanism in place that keeps the political process focused.

KING: Jack Lew is the president's budget director. Mr. Lew, we'll keep in touch as these negotiations continue. Appreciate your time --

LEW: Of course.

KING: Appreciate your time tonight.

LEW: Thank you.

KING: Thank you.


John King, USA

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