Press Conference With Senate Minority Leader Mitch McConnell; Senator Judd Gregg

Press Conference

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SEN. MCCONNELL: Well, good afternoon, everyone.

As we have said repeatedly, the president's budget spends too much, taxes too much and borrows too much. And this week, we're focusing on how much it borrows.

My impression is that the administration is getting quite nervous about having adequate Democratic support to pass this budget. The best evidence of that is the president and the vice president are coming up here this week -- the vice president, I believe, tomorrow and the president, I think, Wednesday -- to talk to Democrats. And usually when that occurs there have been reports of potential defections.

You all have been carrying the various comments by various Democratic senators expressing concern about the size of the budget, about the potential for some kind of reconciliation vehicle being a part of it, thereby putting them in a position of owning the whole product at the end, without any kind of bipartisan buy-in.

I don't think I've witnessed this level of unease about a budget, certainly in the time that I've been here. I may have heard about other budgets that had this kind of queasiness attached to it.

So clearly they've got a tough sell to make to get their centrist Democrats to buy into a product which, as Senator Gregg has pointed out repeatedly, will double the national debt in five years and triple it in 10 years.

Referring to Senator Gregg, let me now call on him to give you his take as we get ready for the week before the budget debate. Judd?

SEN. GREGG: Thank you, Mr. Leader. And I think that your point that there is concern and queasiness about this budget is very appropriate and timely, because there should be. If the American people look at this budget, they should be extremely concerned about what it's going to do to their children's capacity to have a high quality of life, what it's going to do to the ability of this nation to basically continue to function as a fiscally responsible country.

If you look at the numbers, the spending goes up dramatically. And it is a spending issue initially that's causing the problems here. The Obama budget, President Obama's budget, has proposed that they take spending at the federal level up to 23 percent of gross national product and keep it there. Historically, over the last 40 years, spending on the gross national product has been about 20 percent of GDP. When you start taking it up at this level, you're creating massive gaps, which lead to massive deficits, which lead to massive debt.

And this chart here shows the debt. The debt under the -- President Obama's budget goes straight up, straight up in the next five years, and it continues on up. As the leader said, it increases by half in five years, doubles in five years -- I'm sorry -- and triples in 10 years.

What does that mean? What does that mean, that sort of numbers? Seventeen trillion dollars' worth of debt at the end of 10 years. Eleven trillion dollars at the end of five years. This translates into a debt-to-GDP ratio which we have not seen in this country since the end of World War II, when we were trying to pay off the war debt. Basically you take national debt up to about 80 percent of gross national product. That's the public debt. Historically it's been about 40 percent.

There is, I believe, consensus amongst economists out there who are serious economists -- as most are, obviously -- that when you get up to an 80 percent ratio, where your public debt is 80 percent of your gross national product, and you maintain that ratio for years to come, you're basically running your country into the ground. You're turning over to a status of a banana republic type of fiscal system.

Try to put it in a different context. If you take all the presidents since George Washington through George Bush and add up all the debt that they've put on the books for the American people, President Obama's proposal actually equals and exceeds that amount of debt in his first term -- staggering numbers, when you think about it, just plain staggering numbers.

It's a wall of debt. It is now on its side -- (laughs) -- probably fell over -- probably fell over because it was so heavy. (Laughter.) The wall of debt, which you've seen from my colleague, Senator Conrad, which is an expression of just what we are facing as nation, just goes straight up. You know, we can't afford this. The practical implications of this are that you pass on to a nation -- on to your children a nation which probably can't finance its debt without either devaluing the dollar or basically taking some other action which really harms the capacity of the nation to be productive and competitive, such as radically raising taxes.

And remember, all this debt is added to the books, all this deficit is run up over this period of time, at the same time that we're seeing proposed the largest tax increase in history. So unlike in Clinton years, when President Clinton came into office, he said, "We're going to raise taxes, but we're going to use it reduce the deficit," what's being proposed here is a massive increase in taxes in order to massively increase the size of the government and have virtually no fiscal discipline on the size of -- on the side of borrowing, which leads to a very serious problem for our nation.

Thank you.

SEN. MCCONNELL: We'll take a few questions.

Brian (sp)?

Q Mr. Leader, are you now convinced that the president -- that the -- that congressional leaders, the Democrats, at the behest of the president, will go forward with reconciliation for energy, for health care that will require only a majority vote? And is there anything you can do to prevent that?

SEN. MCCONNELL: Well, I've certainly observed that the president's chief of staff said a crisis is a terrible thing to waste, and it's clear that they want to take advantage of this economic crisis that we have and the problems that we have in the financial system and the housing situation -- housing problem -- and use that to do a whole lot of other things that had nothing to do with getting us in the condition that we're in.

In other words, they're trying to capitalize on this crisis to fundamentally move America -- it strikes me and Judd Gregg and others -- in the direction of Europe -- a massive plug for health care, the details of which we're not certain of; we know a massive energy tax, which we're calling a "light switch tax" of roughly $3,100 a year on every family. If they want to steamroll the minority, obviously some kind of reconciliation vehicle would be the best way to do that.

Now, there's some limitations on that. There is, we all know, the Byrd rule -- that's not great for your listeners; they don't know what the Byrd rule is. But that would make it challenging. But you've got a whole lot of liberals in Congress who've been ranking members for a long time, a lot of pent-up desire to Europeanize the country.

If that were not enough, they've got the effort to get rid of the secret ballot in labor-union elections as well. The whole far-left agenda, which has been bottlenecked for one way -- in one way or another for 16, 18 years, is now coming back. And it wouldn't surprise me, to get back to your initial question, if they tried to use any device they could to advance their agenda.

If I were in their shoes, however, it's a big gamble, because if you do it with no bipartisan buy-in at all, you own the whole thing politically. And they all well remember what happened in 1994 when there was a big blowback to an excessively partisan first two years of the Clinton administration. So it's a calculated risk on their part. I don't know what they will do, but we'll find out in the coming weeks.

Q Senator McConnell? On the secret-ballot legislation, what is your reaction to the proposed compromise that was floated this weekend -- (off mike) --

SEN. MCCONNELL: Well, the compromise apparently unified both management and labor in opposition. I think the reaction of both organized labor and those forces opposing the bill was overwhelmingly negative. And so I don't see that going anywhere.

Q Can you react to the president's public-private investment plan that was announced this morning? Do you think -- some critics are saying already that this was a sweetheart deal for the private investors, that they put very little in but get a lot of the profit back at the taxpayers' expense. What's your reaction to that?

SEN. GREGG: My reaction is it's a genuine and sincere effort to try to free up the credit markets and especially to balance the -- and get balance into the real-estate markets, which is at the core of the financial problems.

I don't know if it's going to work. Clearly, the markets today reacted in a positive way to it. Whether it'll work will depend on how much buy-in there is from the private sector. And remember, what the taxpayers are putting up here is -- are dollars which will be -- come back to us as investments. They'll come back both with interest and they'll come back with return on the underlying investment. So the taxpayers are going to make some money here too, if it works correctly.

I think the biggest threat to it is the House bill on bonuses, which was a penal, targeted attack on a group of citizens who obviously acted inappropriately, but you don't want to use the tax laws to basically target them. That's the biggest weapon we have as a country, and it's certainly not appropriate to use it in that very targeted way and in a very penal way.

And I would think a lot of the private-sector folks who might invest with the government are going to have second thoughts about that, unfortunately, because of the House action in that area.

So I think it's a genuine effort to try to stabilize the financial industry. And it's part of an overall plan. And let's hope it works.

Q (Off mike.)

SEN. MCCONNELL: Well, my view is that this bill ought to slow down. And we ought to think about the ramifications of what we're doing. I gather from listening to the administration, over the weekend, they are having some second thoughts about whether this is the right way to go.

As Senator Gregg indicated, no one approved of these bonuses. They had a good time -- a good opportunity to have had a lot of influence on it, just two weeks ago, when they gave AIG $30 billion.

The government was not exactly without leverage the day before they gave them $30 billion. They chose not to exercise any of that leverage. And now I think we need to be careful about how we respond to it.

And I think one of the things you can say, about the Senate, is frequently it does not act in haste. And a number of my members would like to take a look at this proposal and see whether it is in fact the best way to go. It may not be.

(Cross talk.)

Q What would you like to do to recoup these bonuses?

SEN. MCCONNELL: Well, what we're going to do first is seriously take a look at the proposal that the majority is trying to pass and see if that's the best direction which to take.

The administration, at the risk of repeating myself, had the perfect opportunity to get these contracts renegotiated a couple of weeks ago. And they blew that opportunity. But now we are where we are. And the question is, what is the best thing to do? And we're taking a look at it.

Q (Off mike.) But first, I'd like to hear what you have to say about Secretary Geithner's plan. (Off mike.)

SEN. MCCONNELL: Well, I haven't looked at it yet. But I will say, one of my big criticisms of this administration was that they were not focusing on the problem. And the problem is the financial system and the housing market.

So I will give the secretary of the Treasury credit for finally turning to the real issue here. And as to how I feel about what he proposed, I'm not prepared to react to that yet. It was just announced today.

Q For Secretary Gregg -- Senator Gregg. (Laughter.)

Given your comments about running the country into the ground, banana republic, do you think that the Chinese have a point then, when they say they're concerned and have questions about the safety of their investments in the treasuries?

SEN. GREGG: That was a very telling statement by the premier, when he said that he wanted to make sure that we got our fiscal house in order, because he was worried about his investments, of his nation.

And they do hold a huge amount of our debt, and for us to continue to finance our debt, which we're going to have to do under this budget, obviously -- but we would have to do it in the short run anyway; I'm not arguing with the need for significant borrowing in the short run. It's the long run that worries me.

I can understand why they would continue to have big concerns. And I think the way you alleviate that concern is you do something in the out years to show that you're serious about bringing these numbers back together, the spending numbers back down, so that you don't have a high deficit in the out years.

And the way you do that is you do it in a bipartisan way. You step up to the hard issues, specifically entitlement reform. And myself and Senator Conrad have put a proposal out there. The leader has been very supportive of going forward in a bipartisan way on that issue, especially relative to Social Security. If we put in place some sort of significant long-term correction of the Social Security system so that it was solvent for the next 50 years, that would be a huge positive signal -- huge positive signal to the international investment market, and our own people, that we were serious about running a -- an orderly fiscal house.

But right now this budget has nothing in it, absolutely not one dime in it, of significant savings or significant activity in the area of disciplining our spending side of the ledger.

SEN. MCCONNELL: Could I just add -- you all are familiar with the Conrad-Gregg proposal. I talked to both the president and the chief of staff back just before the administration began, and it was my feeling that they were open at least to doing it on Social Security. They wanted to do Medicare and Medicaid in the context of health care. But that seems to have disappeared.

As Senator Gregg indicated, that's the way to deal with this long-term problem. We have entitlement spending on a completely unsustainable path, and what do they do? They present a budget that completely ignores all of these unfunded liabilities and sends us on a spending spree that will double the national debt in five years and triple it in 10 years. This is extremely irresponsible, this recommendation, and I think that's why the president and the vice president are having to come up here this week, to try to settle down and to reassure Democratic senators who are privately looking at this exactly the way Senator Gregg and I are.

Q Senator McConnell? Can you address how your own -- (off mike) -- members might vote on the budget?

SEN. MCCONNELL: I can only quote Senator Collins yesterday -- on one of the Sunday sows -- shows said that she was going to be opposing the budget.

Q Do you think all of your (colleagues ?) will be against it?

SEN. MCCONNELL: We'll let you know.

SEN. GREGG: Not if they pass some of our amendments.

Q Senator McConnell, you talked about how the -- a lot of your Democratic colleagues -- (off mike). Do you think any of that money will be reflected in the budget resolution that is going to be released -- (off mike)?

SEN. GREGG: Well, I'll say this about the budget resolution. I've heard rumors that it might be a five-year resolution. That must be a reflection of their concern about the real numbers when you get past five years.

Those numbers are pretty bad in the five-year period -- especially three, four and five. One and two we're willing to give them a significant amount of running room on, but three, four and five should be more disciplined than they are. But if you're not going to talk about the next five years, when the president sent up a budget that showed us that the next five years are unsustainable, then basically you're playing hide-and-seek with the American republic on the budget.

And it's an attempt to avoid serious choices.

Q Senator Gregg, do you expect, then, the -- do you expect the administration to come back with a bill for more money for Geithner's plan announced today? What would you need to see happen for you --

SEN. GREGG: Well, they put a placeholder in the budget they sent up which would allow them, if it were passed, to come back for more money. My guess is -- I'm not the vote counter that the leader is -- that it would be very hard to pass more money at this time.

And I think what you saw when the Fed came out last week -- they put on the table on $1.2 trillion initiative which basically did what they would probably do if they got more money from TARP. I think they basically said, we're going to go with the Fed funding this rather than running it through the appropriations process.

SEN. MCCONNELL: Okay, thanks.

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