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American Morning

President Bush Said Country Faced New Realities as He Unveiled $2 Trillion Budget

Aired February 05, 2002 - 08:08   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA ZAHN, CNN ANCHOR: Even as President Bush's budget was heading to Capitol Hill, Budget Director Mitchell Daniels was getting dragged, as we just said, into the Enron affair, responding to Fritz Hollings' call for a special prosecutor. Daniels noted that Enron had donated to both political parties.

And on the subject of the budget, President Bush said the country faced new realities as he unveiled the $2 trillion budget. Well, Congress has already begun dissecting the plan that could pump up to $370 billion into defense spending, while leaving domestic funding largely unchanged.

The director of the Office of Management and Budget, Mitchell Daniels, joins us now from the White House to discuss that plan, among other things -- welcome back -- good to see you, sir.

MITCHELL DANIELS, DIR., OFFICE OF MGMT. & BUDGET: Good morning.

ZAHN: I wanted to call your attention to an editorial in "The New York Times" this morning that claims the budget jeopardizes the future of social security and Medicare. In fact, even the administration projects that over the next 10 years, the budget will continue to eat into the payroll tax revenues every year. What does that mean for people who continue to pay into this system?

DANIELS: We do have to worry about the future of social security and Medicare, but this budget makes their future more bright, not less so. You know, the only way to make those systems sustainable over the long term is to reform them, as the president has proposed. And also we need a strong economy on a sustained basis to enable them to keep their promises.

So this budget is mindful of that. And the president will continue to remind the Congress that we must reform both programs, so that they can meet their promises over the long term.

ZAHN: Here is what Senator Kent Conrad had to say about the dilemma of the administration, this budget yesterday -- let's all listen in.

(BEGIN VIDEO CLIP)

SEN. KENT CONRAD (D), NORTH DAKOTA: The truth is there are no surpluses. There are liabilities. And we've got to start changing the language we use to describe things to our countrymen, or they will never understand the true fiscal condition of their country just like the investors in Enron never understood the true fiscal condition of their company.

(END VIDEO CLIP)

ZAHN: So, Mr. Daniels, essentially you had Senator Conrad accusing the government of faulty accounting, of misleading the country with, as he called it, fictional social security and Medicare funds. How do you respond to his charge?

DANIELS: Well, I think that it's specious with one exception. You know, we clearly have some faulty accounting and have since time in memorial in the way we treat our trust funds. There are enormous unfunded liabilities in social security the way we treat that, and that's why reform is essential. Reform along the lines the president has proposed.

But he is, you know, badly confused or trying to confuse others if he suggests that the state of this current fiscal picture really has much to do with that. Every penny of social security and Medicare will be paid on schedule this year without a problem. And the trust funds will grow by exactly as much as they would under any other surplus outcome.

ZAHN: But the goal of paying off public debt will be indefinitely put off. For how long?

DANIELS: Maybe a year, maybe two. But this is a very important point. We do want to get back to surplus as soon as the war and the recession permit it. And we do want to begin, or resume I should say, paying down public debt. We paid down $100 billion last year. It's a very important thing. The president shares Senator Conrad's commitment to that.

It's just that at this moment in our history, there are a couple of things even more important: defeating terror, protecting Americans in their homeland and getting the economy back on track.

ZAHN: But essentially, aren't you asking the Americans to trade off some of the comforts they have gotten used to in exchange for fighting this war on terror, and then what would be the implications of the war not succeeding?

DANIELS: I really don't know who is going to be less comfortable here. We are -- it is absolutely true that in order to go to a war footing, we have to take a battle stations, not a business as usual approach. And beyond winning the war and the cost of that, and defending Americans, making them safe here at home, the most important thing a government can do -- we do propose the rest of the government to slow down to about 2 percent growth. Now, that's more growth than a lot of families are going to enjoy in their income this year. And anybody made uncomfortable by that perhaps is wasting the taxpayers' dollar today. ZAHN: I just wanted to close off with a question about Fritz Hollings very harsh attack on the administration yesterday suggesting that a number of you in the administration are in what he called the "tank with Enron." Your quick defense here, sir.

DANIELS: Well, perhaps Senator Hollings should be asked that famous question: Have you no decency? He hallucinated and falsified the fact claiming I had been a paid advisor to Enron. Totally untrue -- never had a thing to do with that company or anybody in it. So I assume that he has been misinformed. I think he is a truthful person and will want to take that back and apologize, as he should, to my other colleagues. I don't think the fact that he has taken political contributions from Enron impeaches his judgment, and he ought to show other people the same respect.

ZAHN: I know you say he should apologize. Do you expect that apology?

DANIELS: I never expect that kind of treatment here in Washington, but it would be a nice idea.

ZAHN: All right. Mitch Daniels, director of the Office of Management and Budget -- we appreciate your time this morning.

DANIELS: Thank you.

ZAHN: Thank you.

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