Monitor Breakfast: Mitchell Daniels

Selected quotations from a Monitor breakfast with Office of Management and Budget Director Mitchell Daniels.

On Charges by Rep. David Obey that homeland defense is underfunded:

"He is sincere but he is wrong. Everything that he wants to see done is being done with the greatest possible dispatch. Funding is not the problem and is not going to be for months.

"As of today, close of business Nov. 30th, the estimate is that 84 percent of $40 billion (Congress provided for the war) is unobligated and unspent."

On the need to trim domestic spending growth to pay for war:

"Vietnam we remember as guns and butter. If we do that, we will regret it."

On why he predicts budget deficits for the next several years:

"It is absolutely true that the tax cut has very little to do with red ink we looking at in the next couple of years. The tax cut was $40 billion event in '01, only $35 billion event in '02. [It] begins to phase up after that.

"Senator Daschle and [Rep.] Gephart are wrong – it is not only not the biggest factor, it is not the second or third biggest factor. The reasons the ink has shifted from black to red are first of all economic – two parts. One is the recession which is official which the administration inherited ... that is a big factor. The other one I mentioned earlier – we now are told by all the economists that the underlying productivity rate, which was a big driver of future estimates, had been overestimated between 1995 and 2000. They brought it down about half a point. That doesn't sound like a lot but you run that out for 10 years, it changes the picture very much. Factors like that on the economy, between now and '05 are twice as big as the tax cut in terms of their impact."

On when federal budget balanced might be balanced again:

"The decisions we make here in the near term are going to be decisive as to whether our deficits are temporary – if we do things right and the economy recovers we have a fighting chance of black ink in the budget after next – that is '04, the one we will be putting together a year after now. If we don't, if the economy continues to struggle, and we let spending keep running – we pile the spending for the war on top of everything we are doing today – guns and butter style – don't look for black ink, maybe indefinitely."

On how to restrain domestic spending:

"We have already made an attempt and it will be primitive for a while to separate the effective from the somewhat effective from the ineffective programs. We are asking managers to set some goals and show us evidence they are getting there. If they can't, or if the evidence says they are not getting there, somebody ought to – I would hope people would support either going slow or going down on what we spend on those things. That is the way we will do it. And at this point, I am not harboring dreams of cutting the rest of the budget but for goodness sake we ought to be able to slow down and in selective places stop growth."

On whether voters will hold Mr. Bush responsible for the recession:

"It is pretty hard for the president to have created a recession which was waiting for him as he took the oath of office. I don't think he would want to get into a debate about whose it is. In a large extent it is Osama bin Laden's recession. As the NBER [National Bureau of Economic Research] said, there are good signs it might not have finally matured into a recession if not for 9-11."

On the need to reorganize the government to deal with war:

"[It is] not just in the homeland security area but we will be urging things in the next budget – we have got all kinds of misplaced furniture in the federal government. It is really unbelievable. We have got departments dabbling in things that are the core mission of some other department. There are a lot of things we ought to move around. Any common sense of view of it will agree with that. But it becomes difficult because somebody's subcommittee doesn't want to let go."

On whether his relations with Congress make him an obstacle:

"The day that is true I will leave if the president hadn't already asked me to. ...I think that any difficulty I have caused or that have arisen are very narrowly limited. I regret that and I am working on that. These are fine people. I think anything I have ever said was institutional but sometimes misunderstood as personal. And I will be more careful about that. I have been in the middle of all kinds of negotiations and arrangements – other than the appropriations committees – that have worked out just fine and I think in general have been very well treated by members of congress. But there are a few exceptions, I am partly to blame for that, and I'm being more careful."

On the cost of the war:

"We have obligated somewhere in the neighborhood of $6 billion. There are studies done to suggest military action might reach a level of about $1 billion a month but they are not there yet."

On the outlook for domestic spending next year:

"Discretionary spending, by the time we are done this year, is going to wind up growing something like 13 percent. ...It would be a very serious mistake to let those kind of growth rates – underlying growth rates – continue and pile the guns on top of butter. That will not be responsible and we will propose [in new budget year] something other than that."

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