Interview With John Boehner; Interview With Peter Orszag
JOHN KING, HOST: I'm John King. This is our STATE OF THE UNION report for this Sunday, May 17th. President Obama says America's health care system is broken and reform has to happen this year. But can the country afford his ambitious plan? We'll break down the numbers with the White House budget director Peter Orszag. House Speaker Nancy Pelosi tries to set the record straight on what she knew what and when about waterboarding during the Bush administration. But Republicans say she isn't coming clean and is wrong to lash out at the CIA. House GOP leader John Boehner right here to discuss that and more. And we'll go to Selma, Alabama, a city with a big place in the struggle for civil rights that at the moment is struggling to deal with the pain of nearly 20 percent unemployment. That's all ahead in this hour of STATE OF THE UNION. President Obama's push to reform the nation's health care system this year faces some key tests in the Congress the coming weeks. Majority Democrats share the president's urgency but paying the bill is a huge challenge. Even more so now because of new indications the economy isn't rebounding as fast as the administration had hoped. Joining us to discuss the numbers and the path ahead is the White House budget director Peter Orszag. Peter, welcome to STATE OF THE UNION. And if you could join me over here what we lovingly call the magic wall, I want to start over here. Because I want to talk as Americans wake up this Sunday morning with this economic snapshot. You had hoped the economy would start to rebound especially with the stimulus program. The Dow this past week down 306 points, initial jobless claims, 637,000 of them this past week, quite a high number, and consumer spending, the engine of the American economy down 0.4 percent in the latest government data. Before we get into the numbers crunching on health care, just as Americans look at these numbers I assume the impression we have not hit bottom yet?</s>ORSZAG: Well, I think what happened is the free-fall in the economy seems to have stopped and we're, I guess the analogy there are some glimmers of sun shining through the trees, but we're not out of the woods yet. We do have more work ahead.</s>KING: More work ahead. I want to shrink this one and pull it over here for a second. Because of the more work ahead, those numbers are not rebounding as fast as you had hoped just a little bit of time ago. You had hoped in your budget projection, you were here two months ago to discuss the budget. The administration's budget is based on unemployment averaging 8.1 percent this year. In May the rate went up to 8.9 percent. For the year it's averaging 8.3. percent which is above your average and most economists say it's going to go up before it comes down. If it stays up here, something has to give in your budget, right? Because you're not taking in as much revenue and you're spending more in terms of unemployment benefits and the like?</s>ORSZAG: We are going to update all of these assumptions in the mid-session review in a few months so we'll have more to say with an updated set of numbers in just a couple months.</s>KING: Just a couple of months. You say just a couple of months. I want to again bring in one more number here. This is your deficit. Move this down so people can see this. You had projected a smaller deficit. Your deficit numbers have gone up $89 billion for the current fiscal year just from February. That's just a few months ago, 87 billion. More than 175 billion dollars there just in two months. In two months a higher deficit number. If the deficit is going up at this rate, you say you'll update this in the future but I assume now the big question for the budget director what has to give? Higher deficit or scale back the agenda.</s>ORSZAG: Well, this is coming from some technical changes. You have to remember the deficit is very sensitive to the state of the economy. As the economy starts to recover the deficit comes down quickly. The economy remains weak we will continue to have these elevated deficits so, again, we're going to have more to say about this in a couple of months.</s>KING: You say more in a couple of months. I want to remind you something you said here in a couple of months ago. Because I asked you these questions. If the unemployment rate doesn't follow your budget, and it hasn't if the deficit numbers don't follow your budget and they haven't and if the growth rate doesn't follow your budget and so far it hasn't, what will change? Here was your answer two months ago.</s>ORSZAG: We need to give this recovery act some time to work. I don't think we should be chasing our tail constantly revising assumptions. Let's see what happens. Let it work.</s>KING: Now you say we have to wait a couple of more months.</s>ORSZAG: Well, hold on. At that time I also said we would be revising our economic assumptions for the mid session review and so that is exactly what we're still saying. Look. The Recovery Act passed three months ago, $100 billion has been obligated, it always was designed to kind of ramp up and you're going to get more momentum from the Recovery Act over time. That's what should be expected.</s>KING: Let's sit and continue the conversation. But as we do so, let me ask you this question here. Which is you say the Recovery Act kick in. There are some who thought the Recovery Act would kick in a little sooner in terms of maybe the unemployment number. Maybe people would be just the psychology of it would help with consumer spending. Why not?</s>ORSZAG: Well, again, it takes time to get money out the door wisely. We are trying to do it quickly and wisely. Our goal is 70 percent of the money out the door before the end of fiscal year 2010. We're on target for that. This is exactly how -- we're on target with our initial projections for the Recovery Act ...</s>KING: As you know ...</s>ORSZAG: And I would note also the sense of free-fall has attenuated. So while we're not out of the woods yet the sense was the case two, three months ago that the economy was in free-fall I think has attenuated a bit.</s>KING: Let's apply that now, the economic prescription, to where we go especially in the health care debate. Usually (ph) expensive. The president overrode objections of some very serious people on his team who said let's not try to do this in the first year. Too much to do. The president says, no, let's go forward. Now Congress is trying to figure out how to pay for it. Doesn't agree with everything the administration says which is to be expected. The Congress is doing it. But if you face -- if those numbers stay where they are and you face a decision later this year in paying for health care, either higher deficit numbers to pay for it, or wait a while for the economy to come back and help you on that front, what will the decision be?</s>ORSZAG: Let's be very clear. We've always said health care reform has to be deficit neutral over a five or 10-year window and much better than that over the long term. So we are committed to making sure health care reform is self-financing and also brings down costs over time, both for families and for the federal government. So you are not going to see a deficit increasing health care reform.</s>KING: You mentioned bring down health care costs over time. The president had a pretty big photo-op at the White House this week and brought in some people who were standing in with him in a Democratic White House, the health care industry, the doctors, the insurance, the providers, the people who raised political opposition to the last Democratic president who tried to sign health care legislation and torpedoed it with a lot of spending. And we have a picture of them up on the wall with them arrayed behind the president. The president said they had agreed to these huge savings in the system. Within a few days they said, no, we said we would try but we did not agree to that specific number.</s>ORSZAG: Not quite. And if you look at their letter, they specifically say 1.5 percentage points per year lower growth rate, $2 trillion in savings. The controversy or the thing that came out later in the week is they want a couple of years to ramp up to the 1.5 percentage points reduction in the growth rate. That's understandable. It doesn't change either the political significance of the statement that they made, which is they believe they can get efficiencies out of the health care system or the long-term impact. If we achieve that 1.5 percentage point reduction and that would help sustain lower growth rates in Medicare, eliminate two thirds of the Medicare deficit over the next 75 years. It is a huge thing to do and we should get on doing it.</s>KING: I want to talk about Medicare in a second but let's talk about paying for health care reform this year. On the table in Congress taxing the health insurance benefits that workers get. I get from my company and many people get from their companies saying if you're at a certain income level we're going to tax those benefits. The administration has said not our idea but you haven't said no way.</s>ORSZAG: Yes. It was not in the president's campaign plan, it wasn't in our budget. Clearly, some members of Congress who are putting it on the table and we are going to have to let this play out.</s>KING: Let this play out. But would the president sign a bill that includes a pretty significant tax increase? That would be a tax increase.</s>ORSZAG: We're not going to be -- I think it's premature to be commenting on individual items. We're looking for a comprehensive plan that brings down costs and expands coverage and there are lots of ideas that are being put on the table and that is exactly how it should be.</s>KING: What other items? How else could you do it? If the Congress won't accept your plans the tax changes you want and you ...</s>ORSZAG: By way the way, I don't know if that is the case either. We went through a policy process that come to our proposals. I think you're seeing the Congress go through that same process. Let's see where they wind up.</s>KING: We also learned this past week in the trustees' report on Medicare and Social Security, this year, this year, as we sit here Medicare will pay out more than it takes in. That also happened last year and Medicare fund will be depleted in 2017. Social Security will pay out more than it takes in in 2016. If this president is reelected that would be in his second term. There are those who say we understand you want to do climate change, you want to do health care reform and you want to do all of these other things but why not, why not put together a group, Senator Kent Conrad, a man I know you are a fan of, he issued this statement this week. He says he knows you are trying to do health care reform and he knows it will help when it comes to Medicare but he also says a solution to the long-term fiscal imbalance has to involve all aspects including Social Security, Medicare, underlying costs, rising costs of health care and fixing our outdated and inefficient revenue system. Why not do, what is the harm in doing what Senator Conrad wants? A bipartisan panel to study Medicare and Social Security and then Congress would have to vote up or down. Why not put that together, tell them give us a report one year from today so you can do everything you are trying to do this year and then next year be ready to move immediately on Social Security and the bigger Medicare question. What is the harm?</s>ORSZAG: Well, I think what we're trying to do is get health care reform done this year because that is, by far, a more important force on our long-term fiscal imbalance than other factors. Social Security matters but if you look at the deficit in Social Security it's a fraction of the deficit in Medicare. We are trying to deal with the big problem first and bring down costs and address the long term imbalance in Medicare and then it will be time then to turn to Social Security. The president has been clear while we want to get health care reform done this year we also do need to address other aspects of our long-term fiscal imbalance.</s>KING: But you have a first things first answer to that approach and yet the administration is doing so many things this year and has decided we're going to try to do all of these things at once. Is he just opposed to the commission idea, does he want to do it a different way? Is that why you won't do that now and just again say we don't want to hear from you guys again for a year. So don't clutter this year debate but get ready?</s>ORSZAG: I think we will be able to turn to different processes on Social Security and other aspects of our fiscal imbalance after we get health care reform done but it would be unusual to say to a commission, here, go off and study our long term fiscal imbalance and in the meanwhile we are going to be making these significant changes to health care and Medicare while you're doing your work. I think that is one of the key problems.</s>KING: The stimulus plan or the recovery act, as you call it, was passed with great urgency at the beginning of the administration. I have traveled to 21 states, I believe, around now since the beginning of the administration, and mayor after mayor have said, I want that money, where is that money? Some of them have started to receive it, or others have at least said you will get this money soon, so they can make the plans and get going. But I was this week in Selma, Alabama. It's in Dallas County. The unemployment rate there is 18.1 percent. And I saw the mayor, George Evans, and I said to him afterwards as we walked through downtown and all the shops were closed -- it's a depressing place at the moment, even though the citizens are inspiring -- I said, isn't this a perfect test case for stimulus money? He said, yes, and we want the money, but not yet. Listen to the mayor.</s>MAYOR GEORGE EVANS, SELMA, ALABAMA: We have not gotten any yet. We submitted over $40,000 -- $40 million of stimulus projects for our city. You know, street maintenance, curbs, gutters, interpretive (ph) center, our riverfront project, but we have not yet gotten any response on it at this point, so we are still hoping.</s>KING: Why is it a place with enormously high unemployment -- I assume that would be the poster city for stimulus money -- why not a dime yet?</s>ORSZAG: Well, I'll have to look into the specifics there, but again, we've obligated $100 billion. We're running at about $1 billion a day now, so there is a significant impulse coming. At the same time, we want to make sure that the money goes out for real projects that will help boost the economy and not for swimming pools and things that will -- you know, that are not for intended purposes. So quickly and wisely is the balance.</s>KING: But is the system maybe backwards in that they have to apply for the money and it goes through the bureaucracy, as opposed to somebody in Washington saying, where's the need greatest, let's take it to them?</s>ORSZAG: Well, there is some of that. So the Army Corps of Engineers, for example, ranks projects and then gets money out the door based on that ranking. So it's a mixture.</s>KING: I want to ask you, finally, our next guest is the House Republican leader, John Boehner. He, as you know, has been critical of the administration's stimulus plan. All the Republicans in the House voted against the president's budget. All the Republicans in the Senate, for that matter. There are stress tests of the banking industry have been in the news, and he sort of turned that moment into saying, let's take a stress test of your fiscal policies. Let's listen to Leader Boehner.</s>BOEHNER: What would it look like if we gave the federal government a stress test? Taking into account some of the leading economic indicators, frankly, I think Washington fails and fails miserably.</s>KING: Fails and fails miserably?</s>ORSZAG: No. I mean, again -- look. The key thing is the economy recovers, we have to reduce the growth rate of health care costs. That will dramatically improve our long-term fiscal imbalance. I'm really encouraged, from what I hear, that Republicans will be stepping forward this week with their own health care reform plans. I think that's terrific, and that's the kind of engagement and constructive debate that I think should occur.</s>KING: And is there any possibility that if the economy does not come back as you think -- I know you have your review coming, I don't want you to go into the numbers -- any possibility that three months from now, if the numbers are as bad as they still are, that you will say time-out on health care, we have to save it until next year when the economy comes back, or will you do it this year, regardless?</s>ORSZAG: Well, again, health care reform is going to be deficit- neutral, and then actually over the medium and long-term, deficit reducing. So I don't think there is a conflict between concerns about the deficit and getting health care reform. In fact, if anything, the opposite.</s>KING: I want to close with something from the thesis of a guy named Peter Orszag at Princeton. It was mentioned in a "New Yorker" article this week. And you -- one of your conclusions you wrote, was quote, "It is clear that Congress suffers from a lack of understanding of even the most rudimentary economics." Do you still stand by that? Leader Boehner is right over there.</s>ORSZAG: I think I was 19 or 20. I think one of my other recommendations was that the Congressional Budget Office could regularly brief members of Congress. So there was obviously a bit of naivete with a Princeton senior. But...</s>KING: Peter Orszag, welcome back to the "State of the Union." We'll keep reading that thesis. Next, the GOP view on health care reform and on House Speaker Nancy Pelosi's claim that the CIA misled Congress about its terror interrogations. The House Republican Leader John Boehner when "State of the Union" returns.