Ending Bad Habits

Jesse Lee
Jesse Lee
May 07, 2009
01:07 PM EDT
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Today the President released his full budget providing all the details for the blueprint that Congress recently approved in the Budget Resolution.  Having spoken about his vision to create a new foundation for the country a few weeks ago, today he returned to that theme:
 
We're doing everything that we can to create jobs and to get our economy moving while building a new foundation for lasting prosperity -- a foundation that invests in quality education, lowers health care costs, and develops new sources of energy powered by new jobs and industries.
But one of the pillars of this foundation is fiscal responsibility.  We can no longer afford to spend as if deficits don't matter and waste is not our problem.  We can no longer afford to leave the hard choices for the next budget, the next administration -- or the next generation.
That's why I've charged the Office of Management and Budget, led by Peter Orszag and Rob Nabors who are standing behind me today, with going through the budget -- program by program, item by item, line by line -- looking for areas where we can save taxpayer dollars.
He referenced the 100-program volume of Terminations, Reductions, and Savings released by OMB Director Orszag in his blog post this morning, and went on to give a few examples of how these programs represent the long-standing bad habits in Washington. He mentioned an obsolete navigation system that still gets funding, a literacy program that devotes half its budget to overhead, an a Department of Education outpost in Paris whose work could easily be accomplished here at home.
In addition, we're going to save money by eliminating unnecessary defense programs that do nothing to keep us safe, but rather prevent us from spending money on what does keep us safe.  One example is a $465 million program to build an alternate engine for the Joint Strike Fighter.  The Defense Department is already pleased with the engine it has.  The engine it has works.  The Pentagon does not want and does not plan to use the alternative version.  That's why the Pentagon stopped requesting this funding two years ago.  Yet it's still being funded.
These are just a few examples.  But the point to remember is that there are consequences for this kind of spending.  It makes the development of new tools for our military, like the Joint Strike Fighter, more expensive -- even prohibitively so -- and crowds out money that we could be using, for example, to improve our troops' quality of life and their safety and security.  It makes government less effective.  It makes our nation less resilient and less able to address immediate concerns and long-term challenges.  And it leaves behind a massive burden for our children and grandchildren.
He closed by reiterating all of the ways the Administration has fought for fiscal discipline already, from supporting "pay as you go" rules, to ending sibsidies for insurance companies, to empowering government employees to find and suggest efficiencies. He pledged that this was just the beginning.
Related Topics: Fiscal Responsibility, Maine
THE WHITE HOUSE
Office of the Press Secretary
_____________________________________________________________________
For Immediate Release                                     May 7, 2009 
REMARKS BY THE PRESIDENT
ON REDUCING SPENDING IN THE BUDGET
 
Dwight D. Eisenhower Executive Office Building
Room 350
10:42 A.M. EDT
THE PRESIDENT:  Good morning, everybody.  All across this country, Americans are responding to difficult economic times by tightening their belts and making tough decisions about where they need to spend and where they need to save.  The question the American people are asking is whether Washington is prepared to act with the same sense of responsibility.
I believe we can and must do exactly that.  Over the course of our first hundred days in office, my administration has taken aggressive action to confront a historic economic crisis.  We're doing everything that we can to create jobs and to get our economy moving while building a new foundation for lasting prosperity -- a foundation that invests in quality education, lowers health care costs, and develops new sources of energy powered by new jobs and industries.
But one of the pillars of this foundation is fiscal responsibility.  We can no longer afford to spend as if deficits don't matter and waste is not our problem.  We can no longer afford to leave the hard choices for the next budget, the next administration -- or the next generation.
That's why I've charged the Office of Management and Budget, led by Peter Orszag and Rob Nabors who are standing behind me today, with going through the budget -- program by program, item by item, line by line -- looking for areas where we can save taxpayer dollars.
Today, the budget office is releasing the first report in this process:  a list of more than 100 programs slated to be reduced or eliminated altogether.  And the process is ongoing.
I want to be clear:  There are many, many people doing valuable work for our government across the country and around the world.  And it's important that we support these folks -- people who don't draw a big paycheck or earn a lot of praise but who do tough, thankless jobs on our behalf in our government.  So this is not a criticism of them.
At the same time, we have to admit that there is a lot of money that's being spent inefficiently, ineffectively, and, in some cases, in ways that are actually pretty stunning.
Some programs may have made sense in the past -- but are no longer needed in the present.  Other programs never made any sense; the end result of a special interest's successful lobbying campaign.  Still other programs perform functions that can be conducted more efficiently, or are already carried out more effectively elsewhere in the government.
One example of a program we will cut is a long-range radio navigation system which costs taxpayers $35 million a year.  This system once made a lot of sense, before there were satellites to help us navigate.  Now there's GPS.  And yet, year after year, this obsolete technology has continued to be funded even though it serves no government function and very few people are left who still actually use it.
Another example is the National Institute for Literacy.  Now, I strongly support initiatives that promote literacy -- it's critical -- but I oppose programs that do it badly.  Last year, nearly half of the funding in this program was spent on overhead.  So we've proposed cutting the $6 million for this program in favor of supporting literacy efforts within the Department of Education which use tax dollars more effectively and wisely.
We're also closing an office maintained by the Department of Education in Paris.  This is an office that costs hundreds of thousands of dollars to employ one person as a representative to United Nations Educational, Scientific and Cultural Organization, or UNESCO.  Now, participation in UNESCO is very important, but we can save this money and still participate using e-mail and teleconferencing and a small travel budget.
In addition, we're going to save money by eliminating unnecessary defense programs that do nothing to keep us safe, but rather prevent us from spending money on what does keep us safe.  One example is a $465 million program to build an alternate engine for the Joint Strike Fighter.  The Defense Department is already pleased with the engine it has.  The engine it has works.  The Pentagon does not want and does not plan to use the alternative version.  That's why the Pentagon stopped requesting this funding two years ago.  Yet it's still being funded.
These are just a few examples.  But the point to remember is that there are consequences for this kind of spending.  It makes the development of new tools for our military, like the Joint Strike Fighter, more expensive -- even prohibitively so -- and crowds out money that we could be using, for example, to improve our troops' quality of life and their safety and security.  It makes government less effective.  It makes our nation less resilient and less able to address immediate concerns and long-term challenges.  And it leaves behind a massive burden for our children and grandchildren.
Some of the cuts we're putting forward today are more painful than others.  Some are larger than others.  In fact, a few of the programs we eliminate will produce less than a million dollars in savings.  And in Washington, I guess that's considered trivial.  Outside of Washington, that's still considered a lot of money.
But these savings, large and small, add up.  The 121 budget cuts we are announcing today will save taxpayers nearly $17 billion next year alone.  And even by Washington standards, that should be considered real money.  To put this in perspective, the $17 billion is more than enough savings to pay for a $2,500 tuition tax credit for millions of students as well as a larger Pell Grant -- with enough money left over to pay for everything we do to pay for -- to protect the national parks.
And this is just one aspect of the budget reforms and savings we're seeking.
I've signed a presidential memorandum to end unnecessary no-bid contracts and dramatically reform the way government contracts are awarded -- reform that will save the American people up to $40 billion each year. 
Secretary Gates has proposed the elimination of expensive weapons systems ill-suited for the threats of the 21st century -- and a sweeping overhaul of a defense contracting system which has been riddled with hundreds of billions of dollars in waste and cost overruns.  A proposal to accomplish these kinds of reforms, sponsored by Senators John McCain and Carl Levin in the Senate, and Representatives Ike Skelton and John McHugh in the House, is advancing through Congress as we speak.
We're also going to eliminate the subsidies we provide to the health insurance companies through Medicare, saving roughly $22 billion each year starting in 2012 as part of a broader effort to reduce health care costs -- essential to putting our nation on a more secure fiscal footing.
All told, by the end of my first term we will cut the deficit in half.  Over the next decade we'll bring non-defense discretionary spending to its lowest level as a share of Gross Domestic Product since 1962.  We will also continue to look for ways we can save taxpayer money.  And I know there are many in both parties in Congress committed to cutting spending and eager to work with us.
One important step is restoring the "pay as you go" rule -- and I've called on Congress to do exactly that.  This rule says, very simply, that Congress can only spend a dollar if it saves a dollar elsewhere.  This is the principle that guides responsible families managing a budget.  This is the principle that helped transform large deficits into surpluses in the 1990s.
I've also asked my Cabinet to continue to scour their budgets looking for savings and to report their findings back to me.  And I've proposed other creative ways to control spending.   For example, we don't want agencies to protect bloated budgets -- we want them to promote effective programs.  So we'll allow agencies that identify savings to keep a portion of those savings to invest in programs that work within their agencies.
We're also making it possible for government employees to submit their ideas for how their agency can save money and perform better.  And we're going to reach beyond the halls of government.  Many businesses have innovative ways of using technology to save money; many experts have new ideas to make government work more efficiently.  Government can -- and must -- learn from them.
Finally, while these steps will help us cut our deficit in half over the next four years, we recognize that there remain looming challenges to our fiscal health beyond that -- challenges that will require us to make health care more affordable and to work on a bipartisan basis to address programs like Social Security.  So what we're proposing today does not replace the need for large changes in non-discretionary spending.
It is important, though, for all of you as you're writing up these stories to recognize that $17 billion taken out of our discretionary non-defense budget, as well as portions of our defense budget, are significant -- they mean something.  Now, none of this will be easy.  For every dollar we seek to save there will be those who have an interest in seeing it spent.  That's how unnecessary programs survive year after year.  That's how budgets swell.  That's how the people's interest is slowly overtaken by the special interests.  But at this moment, at this difficult time for our nation, we can't accept business as usual.  We can't accept anything less than a government ready to meet the challenges of our time.
We must build a government of the 21st century:  a government that is more efficient and more effective; a government that does what we need to do it -- and nothing that we don't; a government that invests in our future without leaving behind enormous financial burdens that put our future in jeopardy.  And today we've taken an important step, albeit just a first step, towards building this kind of government -- not just for this generation of Americans, but for the sake of generations to come.
Thank you, everybody.
END              
10:53 A.M. EDT
 

Determining What Works, Line by Line

Jesse Lee
Jesse Lee
May 07, 2009
10:06 AM EDT
OMB Director Peter Orszag tells us about the budget being released today, in particular the volume on Terminations, Reductions, and Savings.

We in the Administration have spoken often about the President’s Budget heralding a new era of responsibility—an era in which we not only do what we must to lift our economy out of recession, but in which we also lay a new foundation for long-term growth and prosperity.  This means making long overdue investments and reforms in health care, education, and energy. It also means restoring fiscal discipline.  We cannot put our nation on a course for long-term growth with uncontrollable deficits and debt, and we no longer can afford to tolerate investments in programs that are outdated, duplicative, ineffective, or wasteful.
That’s why the Budget we’re releasing today includes a separate volume, Terminations, Reductions, and Savings, which identifies more than 100 terminations, reductions, or other areas of savings that take nearly $17 billion off the federal government’s bottom line next year alone.  About half of the savings for next fiscal year are from defense programs, and about half are from non-defense programs.
The programs in Terminations, Reductions, and Savings are ones that do not accomplish the goals set for them, do not do so efficiently, or do a job already done by another initiative. They include these ten:
  • LORAN-C ($35 million): This long-range, radio-navigation system has been made obsolete by GPS.
  • Abandoned Mine Lands Payments ($142 million): This program now pays to clean up mines that have already been cleaned up.
  • Educational attaché, Paris, France ($632,000): The Department of Education can use e-mail, video conferencing, and modest travel to replace a full-time representative to UNESCO in Paris, France.
  • Los Alamos Neutron Science Center refurbishment ($19 million): The linear accelerator housed here was built 30 years ago and no longer plays a critical role in weapons research.
  • Even Start ($66 million): The most recent evaluation found no difference between families in the program and those not in it across 38 of 41 outcomes. Strengthening early childhood education is accomplished through significant investments in proven, more effective programs such as Head Start, Early Head Start, and the Early Learning Challenge Fund.
  • Christopher Columbus Fellowship Foundation ($1 million): Due to high overhead, the Foundation would spend only 20 percent of its 2010 appropriation on the fellowships it awards.
  • Advanced Earned Income Tax Credit ($125 million): This program benefits very few taxpayers, and has an extremely high error rate:  GAO found that 80 percent of recipients did not meet at least one of its requirements.
  • Javits Gifted and Talented Education Program ($7 million): Grants from this program go to only 15 school districts nationwide, and there are no empirical measures to judge their efficacy.
  • Public Broadcasting Grants ($5 million):  USDA made these grants to support rural public broadcasting stations in their conversions to digital broadcasting.  That transition is now almost complete.
  • Rail Line Relocation Grants ($25 million): This program, duplicative of a merit-based program, is loaded with earmarks.
The steps we are detailing in Terminations, Reductions, and Savings are part of the Administration’s larger effort to change how Washington does business and put the nation’s fiscal house in order.  Today represents a significant installment in our commitment to review the federal budget line by line.  
But our efforts to restore fiscal responsibility have already begun. To date, we have taken the following steps to cut waste, save taxpayer dollars, and make government more effective:
  • The Budget includes an historic down payment on health care reform, the key to our long-term fiscal future.
  • The Budget will cut the deficit in half by the end of the President’s first term and was constructed without commonly used budget gimmicks that, for instance, hide the true costs of war and natural disasters.
  • The Budget will bring non-defense discretionary spending to its lowest level as a share of GDP since we began keeping records in 1962.
  • The President has announced a contracting reform effort that will greatly reduce no-bid contracts and help to save $40 billion.  In support of this effort, Secretary of Defense Gates, in consultation with our nation’s military leadership, unveiled an unprecedented effort to reform defense contracting.
  • The President directed agency heads at the first Cabinet meeting to identify at least $100 million in administrative savings.
  • The President personally called on the congressional leadership to pass PAYGO laws so that Congress will be required to adhere to a simple principle: to pay for what it spends.
Now, every one of the programs listed in our Terminations, Reductions, and Savings volume has a supporter, and there will be vocal and powerful interests that will oppose different aspects of this Budget. I am under no illusions that change will be easy, but after an era of profound irresponsibility, I believe that Americans are ready to put problem-solving ahead of point-scoring and to reconstruct an economy built on a solid foundation.  
That’s why I know the President will work with Congress to reform and transform Washington, to make these needed cuts so that we use taxpayer dollars to invest in what works and put our nation back on the path toward prosperity for all Americans.
Related Topics: Fiscal Responsibility
THE WHITE HOUSE

Office of the Press Secretary
________________________________________________________________________________
EMBARGOED UNTIL 8:00 P.M.                                                  EDT, MAY 6, 2009

BACKGROUND BRIEFING
BY SENIOR ADMINISTRATION OFFICIALS
TO DISCUSS TERMINATIONS, REDUCTIONS, AND SAVINGS
IN THE 2010 BUDGET

Via Conference Call

5:02 P.M. EDT

SENIOR ADMINISTRATION OFFICIAL:  Hi, everybody.  Thanks for joining us.  As Ken said, we are about to roll out the budget document, and we just wanted to give you some sense of some highlights that we think are important going into it.  As you know, the President has talked in some detail about the new foundation that he wants to lay for broad and sustained economic growth, and a budget that will make the investments we need, overdue investments in reforms; in education so every child can compete in the global economy; in health care reform so that we can control costs and offer affordable coverage to Americans; and investing in renewable sources of energy so that we can reduce our dependence on foreign oil and become the world leader in this new clean-energy economy.  This budget responds to those priorities -- priorities that were also reflected in our recovery package earlier this year.

The President also has made clear that fiscal discipline is another pillar of this economic foundation he seeks to build.  We inherited, as you know, a large budget deficit -- $1.3 billion.  We've necessarily had to add to it in order to deal with the economic emergency that we face.  But we understand and feel strongly that our long-term growth requires that we tame these deficits and reduce debt.

And so the President ordered a line-by-line review of the federal budget, and he asked my colleague and his crew and Cabinet members to look at all the government programs and ask some hard questions about what works and what doesn't, what's necessary and what's not, what may have made sense once but doesn't any longer, what may never have made sense, so that we could eliminate those things in order to make room for the things that we truly do need.

And the result has been the document that you will see tomorrow.  And I will -- I can think of no better person to lead that effort than my colleague, who is really a master of the budget and someone who has talked for a long time about the need to prioritize and bring some discipline to the budget so that we can promote our true priorities and long-term interests and still do it within the context of sane and responsible budgeting.

So why don't you give folks a sense of what to expect.

SENIOR ADMINISTRATION OFFICIAL:  Sure, thanks.  A few comments before I get to -- I'll give you a few illustrative examples, but before getting to that, a few broader comments.

First, this is an important step in the process, but it's only a step in the process.  Our effort to find efficiencies in the federal government are going to continue beyond the release of this document.  I know, for example, also Speaker Pelosi has tasked her committee chairs with reporting back by the beginning of June with ideas for savings also.  So the Congress has also focused on this as we move into -- throughout the year we will continue to search for additional savings and efficiencies.

Second, I think there's a general point that should be made about what we're looking for.  In many cases we have multiple programs that are doing the same thing, and that drives up administrative costs unnecessarily.  So duplication can be the enemy of efficiency.

And then secondly another big problem is that we often don't measure and evaluate what works.  We are searching for things that work and trying to cut back on things that do not work.  Part of that means applying more evaluation to a variety of programs.

So you will see, for example, in the document that we're putting out on terminations, reductions, and savings, footnotes which refer to studies from, for example, the GAO or others on the evidence on why these programs that we're proposing to terminate or reduce are not working.

With that said, the volume that we're releasing includes 121 reductions, terminations, or other savings.  In total they would save nearly $17 billion in 2010 alone, and more thereafter.  About half of the money comes from defense, and about half from non-defense.  Looked at a different way, almost $12 billion -- about $11.5 billion comes from the discretionary part of the budget, and the rest from the mandatory part of the budget.

And finally some of these have been discussed by the administration before, but there are about 80 programs that are new to this volume and have not been discussed by the administration previously.

Let me give you a few examples of things that we are terminating or reducing.  First, LRNC, which stands for long-range radio navigation system.  It's a system that is now made obsolete by the prevalence of GPS.  It's not used, it's unnecessary, it costs us $35 million a year, and we perpetuate it just through inertia.  We are proposing that we eliminate the LRNC navigation system.

Abandoned mine land payments.  We continue to make payments to states to clean up abandoned mines even after those states have completed the task of cleaning up the mines.  So we are no longer going to be -- or we are proposing that we no longer pay states to clean up mines that have already been cleaned up.  That saves $142 million.

The Department of Education has an educational attaché in Paris.  We are proposing that the Department of Education can instead use e-mail and videoconferencing and does not need a full-time representative in Paris, France -- $632,000 in a year.

The Christopher Columbus Fellowship Foundation costs $1 million a year.  It has an overhead rate of about 80 percent, so about 20 percent of that million-dollar appropriation -- or only 20 percent, I should say -- is actually paid out in fellowships and awards.  That's obviously inefficient and we are proposing that that appropriation be eliminated.

And then finally as another example of a program that the administration supports the goals of but that the evidence suggests is not working very well -- Even Start.  Even Start is a early education -- early childhood education program -- and obviously the President and the administration feel very strongly that early childhood education done in a high-quality way is crucially important and have provided additional funds both through the Recovery Act and in the budget that we will be releasing tomorrow for early childhood education.

However, a variety of studies of Even Start have suggested that that program does not work well.  The most recent evaluation, for example, found out of 41 outcomes that were measured between families in the program and families that were not, that there was only a difference in outcomes on 38 out of -- I'm sorry, there was no difference on 38 out of the 41 outcomes.

So we are proposing that Even Start be eliminated even while we are investing in other programs that do work, including Early Head Start and Head Start.

And I think that's a general theme.  We're trying to cut back on the things that don't work, invest more in the things that do.  And I just gave you five examples of things that we think do not work and that are part of this overall effort to reduce spending and achieve budgetary savings of $17 billion in 2010 alone.

So with that I'll turn it back over to Ken.

Q    A couple of questions for both of you.  You mentioned first Even Start.  That is a program that President Bush targeted and got a lot of pushback from Democrats, a lot of pushback from liberal advocacy groups who said that that assessment that you're citing was flawed and the program obviously still is alive.  A, why do you think you're going to have more success this year than President Bush had in the past?  And another question, of the programs on the defense side that are going to be cut, do those include the programs already targeted by Secretary Gates, or is this savings on the defense side on top of those really big programs, like the F-22?

SENIOR ADMINISTRATION OFFICIAL:  Let me answer both of those questions and then my colleague can feel free to jump in.

First, this volume that we're releasing does include the reductions or the reforms that Secretary Gates has already announced.  There are a few other items, but the bulk of the defense items are part of the package that you have already heard about from Secretary Gates, which is why I mentioned that part of these programs have already been announced by the administration in various forms.

With regard to Even Start more broadly, I guess maybe the more important point is the more broad point about achieving success.  Clearly a key thing is congressional support for these changes.  None of this is going to be easy and no one ever pretended that it would be.  But we are trying to do the right thing here and I think the context has significantly changed.  I will again say, for example, Speaker Pelosi has tasked her committee chairs with reporting back on ways to save money by the beginning of June.  So the effort to look for efficiencies is not just the administration, it's working in concert with the Congress.

And I'd be happy to have a longer discussion about the evidence on that particular program, but I think the evidence is unfortunately clear that this specific early childhood education program does not work very well, which is why we're proposing to eliminate it.  But there are other early childhood education programs that do, which is why the Recovery Act included $5 billion for Head Start, Early Head Start, and related programs.  And the budget that we're releasing tomorrow will provide additional funds for those kinds of evidence-based activities.

SENIOR ADMINISTRATION OFFICIAL:  Can I just add, just to piggyback on my colleague's last point, Jonathan, that we're interested in measuring programs by their outcomes, not by their intentions.  There are a lot of programs that are implemented with the best of intentions; not all of them are effective.  And we can't afford to carry programs that are ineffective.

The President's commitment to early childhood education is well known and I think reflected in the commitments that my colleague cited.  But what we're not going to do is we're not going to hold back in terms of eliminating programs simply because of their intentions.  And yes, as he said, there will be some struggles here.  There are very few programs in the federal budget that don't have a constituency and someone who's willing to stand up for them in Congress; we understand that.  But there's an overriding national need here and we intend to meet that responsibility.

Q    Okay, thank you.

Q    You talked about some of the education cuts.  I was wondering if there are going to be any cuts to higher education or student aid programs.

SENIOR ADMINISTRATION OFFICIAL:  If you look back at the document that we released in February, I think you can see the vision for higher education there.  Right now we're focused only on the things that I've already discussed, and I gave you some examples.  I suppose the educational attaché would not be an example of a higher education reduction, but, again, the Department of Education representative in Paris, France, at almost a -- or a little over a half a million dollars.

Q    Okay.  So no cuts to student aid programs --

SENIOR ADMINISTRATION OFFICIAL:  No, I didn't say that.  I said we wanted -- remained focused on the things that I delineated.  You can look back on the -- at the February document for a broader set of policies that we have put forward on higher education and you will see more in the full documents that we release tomorrow.

Q    Thank you.  I wanted to be sure -- I'm not sure I heard a figure attached to the Even Start cut.  And among the new items that haven't previously been discussed, have you mentioned the biggest item on the table among the samples that you gave us?  I assume from what you're saying that the defense items would include such items as the Marine One program and the F-22, but have you divulged the largest of the new, previously not discussed items here today?  And lastly, $17 billion in the context of $3.55 trillion -- a lot of people might ask, is this really the best you can do?

SENIOR ADMINISTRATION OFFICIAL:  Let me try to answer those in reverse order.  First, $17 billion I think is to anyone's accounting a significant amount of money.  Again, that's in one year alone.  Clearly there are larger savings that are possible in health care reform, for example.  The $17 billion does not include the very significant savings that we are putting forward, for example, in Medicare Advantage, where we're proposing more than $175 billion over 10 years in savings from reducing subsidies to -- that are excessive for the private plans that operate under Medicare.

And frankly, the big money is in affecting the rate of growth of health care costs and that is why we are so focused on getting health care reform done this year.  But there will be an appropriations process this year as there is every year, and therefore it does make sense to be looking for additional savings in this area also.

And finally, I would say, as I started with, that this is an important first step but it's not the end of the process.  We will continue to look for additional savings and I know that congressional committees are also.  So you have not heard everything that is to be said on this topic from us as we roll into -- as we have a full year.

Again, maybe the context is important here:  During a transition year, the budget process is very accelerated relative to where it -- what normally happens.  And as we have the full budget process in the fiscal year 2011 budget, I am confident that there will be yet more savings that we can identify, working with Cabinet agencies and with congressional committees.

You had asked about Even Start.  Even Start saves -- eliminating it saves $66 million in 2010.

And your final question was the largest item that we had not previously announced -- I think you'll see that in the document that we release tomorrow morning.

Q    Thanks.  I just wanted to get you to reflect for a second on how your approach is going to be different from the previous administration.  I mean, I think a lot of people are going to draw the comparison to the previous administration; say, well, you're picking a lot of the same programs.  But what do you think is different about your approach?

SENIOR ADMINISTRATION OFFICIAL:  Well, first, actually, the majority of the programs that we're proposing here were not -- had not been previously proposed by the previous administration.  But more importantly, I think the question becomes how to work -- it comes back to the question that we had earlier about Even Start -- how to work constructively with the Congress to actually get this stuff done.  And I think the spirit on Capitol Hill is now cognizant of the need to find some efficiencies and I think you're going to see proposals not just from us, but frankly coming from Capitol Hill, to find savings.  And that's all for the good.

I don't know if you want to add anything else.

MR. BAER:  Your colleague actually already jumped off, and we need to do, as well.  Thank everyone for getting on, and there will be a lot more information to come tomorrow.  Thank you

END
5:22 P.M. EDT

 
 
THE WHITE HOUSE 
Office of the Press Secretary
______________________________________________________________
For Immediate Release                                 May 1, 2009
 PRESS BRIEFING ON
SMALL BUSINESS ASSOCIATION EXPANSION OF
ELIGIBILITY FOR LOANS FOR SMALL BUSINESSES
BY
ERIC ZARNIKOW, ASSOCIATE ADMINISTRATOR
FOR CAPITAL ACCESS, SBA
AND
BRIAN DEESE, ECONOMIC ADVISOR TO THE PRESIDENT
 
Via Conference Call
11:36 A.M. EDT
 
MS. BEDINGFIELD:  Hi, everyone.  Thanks for joining us today, we appreciate your time.
Today we have with us Eric Zarnikow, who is Associate Administrator for Capital Access at the Small Business Administration, and Brian Deese, Economic Advisor to President Obama.  And today they will be discussing the SBA's expansion of the eligibility for loans for small businesses.
So with nothing further, I will turn it over to Eric Zarnikow.
MR. ZARNIKOW:  Great, good morning.  Thanks for being on the call.
Today the SBA made an announcement that it's taking additional action to expand access to capital of America's small businesses.  We will be putting in place a change in our -- or providing alternate size standard for our 7(a) loan program that will go in effect next week and will last through September 30th of 2010.  And through this temporary change it will allow access to SBA programs to approximately additional 70,000 small businesses, including auto dealers, RV dealerships, auto industry suppliers and others.  This is part of our process or part of our steps to expand access to capital to small businesses during this difficult economic time.
The change in the alternate size standard will allow our 7(a) program to have a parallel standard to our 504 certified development program and will allow a small business to either meet the normal size standard that's typically based on sales or number of employees, or an alternate size standard that will allow a small business that has up to $8.5 million of net worth and an average of $3 million of net income over the last two years qualify for SBA loans.
Look, the SBA has taken this type of step in the past during difficult economic times, including back in 1993 and then also related to the Gulf Coast hurricanes in 2005.  This change really means that we're providing additional access to capital to small businesses.  It does match -- dovetail nicely with the other changes that we've made as part of the implementation of the Recovery Act provisions, including the change in the guarantee percentage and our 7(a) program of up to 90 percent, as well as the reduction or elimination of fees to borrowers in both our 7(a) and 504 programs.
With that I'll turn it over to Brian.
MR. DEESE:  Thank you, and thank you, all, for getting on the call today.  The steps that the SBA, the Small Business Administration, is announcing today are an exciting addition to the administration's broader efforts to help support the American auto industry and help unlock financing for both consumers who want to buy cars and for the dealers who provide them.
Just to provide some context, that broader goal is something that the administration has been focused on since January 20th and we've taken several steps to help further that goal.  The TALF program is already up and running and we're starting to see some impact in the financing market for retail consumers, and we continue to focus on making that program work better for auto consumers and for dealers as well.
Likewise, as part of the restructuring announcement that the President made yesterday about Chrysler and its new partnership with Fiat, we were excited to announce as well that GMAC has now agreed to take on originating new Chrysler retail and floor plan loans.  Those efforts we believe will make a meaningful impact in helping unlock what has been a frozen market, and help address the $1.5 million to $2.5 million reduction in car sales, I think, can be attributed to the lack of financing.
But we need to do more.  And that's why the SBA program today is such an important step.  Based on some preliminary analysis, this step taken today could more than double the number of dealers, auto dealers, eligible for the SBA 7(a) loan program, which is a really important expansion at a time when dealers in the industry overall is going through a very difficult restructuring process.
So again, we're excited that the SBA, and particularly Administrator Mills, has moved so quickly and constructively on this program.  And with that, I'm happy to turn it over and I think probably take questions.
Q    Thank you for taking my call.  And I'm sorry I don't understand the SBA loan program, but could you explain to me what is different for the RV and car dealers?  Were they -- as a class were they not eligible before?  Or does this only apply to the size of the business and therefore, if they're a smaller business, they become eligible.  I'm just not quite sure what the difference is for them.
MR. ZARNIKOW:  Let me jump in and I'll try and answer that question.  At SBA we provide a partial government guarantee of a loan that's made by a lending partner -- a bank, a credit union or a small business lending corporation.  As part of the Small Business Administration we obviously -- our mission is to help small businesses, and part of that mission is defining what is a small business.  And we have a process that we go through by industry to define what is a small business by industry.  And it does vary by industry because it depends upon, you know, the economic characteristics of the industry, competition, the average firm size, barriers to entry, and kind of a distribution of firms by size.
So only businesses that are small based upon their industry category are eligible to participate in the SBA's loan programs.  So there are size standards for auto industry, RV industry, other industries -- you have to be within the size standard in order to be eligible for an SBA loan.
Typically the size standard is based upon revenues, although in some cases it can be based upon the number of employees.  So the auto industry, RV industry and other industries are already eligible for SBA loans.  But the larger businesses within those industries may not be eligible because they exceed our size standard.
So by applying the alternate size standard it gives additional flexibility that allows additional businesses within those industries that are still small businesses to qualify for SBA loans.  So it's really expanding access to capital to those industries.
Q    Good morning.  Could you talk about when you said the number of dealers will more than double in eligibility -- do you know from about what number to what number?  And also I'm wondering if someone could talk about the size of the overall pool that's available, the amount of -- the dollar value, I guess, to the pool of loan credit that's available.
MR. DEESE:  Well, on that first question, my understanding is that under the new program over 50 percent of dealers will now be eligible.  And so the doubling is up to that number.  And I'd leave the second one to Eric.
MR. ZARNIKOW:  Sure.  Within the SBA programs we have a program limitation of up to $17.5 billion of SBA guarantees in the 7(a) program, and up to $7.5 billion in the 504 program, or a total of $25 billion.  At our current -- the current volume that we're seeing in the 2009 fiscal year, you know, we're not in danger of exceeding those program limitations.  So we expect that we would be able to help or provide a partial government guarantee to any businesses that would qualify and are interested in getting an SBA loan through one of our lending partners.
Q    I'm really at sea here.  What all are you changing?  What was the guidance, what is the guidance?  Does it apply to all 504 loans?  Do you have this posted somewhere?  I don't see it on your web site.  And separately, what if anything have you done on the question of goodwill loan limits.  People in our area, the loan brokers and some of the bankers, say that you've really cut back access to SBA loans by greatly reducing the amount of goodwill you take in certain -- you're willing to support in certain cases.
MR. ZARNIKOW:  Sure, let me jump in and take that question.  Once again, our -- to define what a small business is and to qualify for an SBA loan program, there are limitations or size determinations that are done by industry.  And for our 7(a) loan program, there's a set of size standards that a business must meet or not exceed in order to qualify for an SBA loan.  What we're doing as part of this change is allowing the 504 program, which has an alternate size standard that is based upon the net worth of the business as well as their net income average over the prior two years, we're allowing that alternate size standard to be utilized in the 7(a) program as well.
So what it's doing is providing additional access to borrowers who might want to get a 7(a) loan that would -- that their revenues or number of employees would exceed the normal size standards to potentially meet an additional size standard.  Our estimate is that this expands access to SBA programs to about additional 70,000 small businesses.  So it is providing additional access to SBA programs.
As far as the question of goodwill, SBA is still doing -- will still finance businesses as part of an acquisition or sale of a business, whether it's goodwill, although we've required -- or the change that we've made is that those loans over a certain dollar amount come to SBA for review and are not done through delegated authority by our lending partners.  So we are still open for business and are still doing those loans.
Q    Yes, hi, good morning.  So a quick question.  I mean, you seem to be targeting the auto-related firms, dealers and suppliers.  Are there any other categories that this also applies to, or is it sort of an across-the-board; every category gets more access?
MR. ZARNIKOW:  Let me jump in and answer that, and then Brian can add on if he has additional perspectives on it.  The alternate size standard, or this change that we're making, has actually been underway for a while at the SBA.
As we've been looking at what's been going on in the lending markets, there's a number of themes that we've been hearing consistently from our lending partners.  One is that demand for loans has been down as small businesses have been concerned about the economy and concerned about taking on additional debt to expand.  In addition, because of the more difficult economic environment, some borrowers are not as credit worthy as they might have been a year ago.
And clearly we've also seen the lenders have tightened their credit standards that they apply for borrowers, and we see that evidenced in -- you know, the Federal Reserve does a Senior Loan Officer Opinion Survey that indicates the lenders have been tightening credit standards, really, for the past year.
So at the SBA we've been looking at ways on how do we help provide access to capital for small businesses.  And with the change in the alternate size standard, we were hearing more and more that businesses that were slightly larger than our standards were having trouble getting access to conventional capital.  And this was a way for us to expand access to capital to help small businesses meet their capital and financing needs to be able to continue to retain or create jobs and to grow their businesses.  So this was a change that was underway for a while at the SBA.
I mentioned earlier that it does expand access to about an additional 70,000 businesses, and a lot of those businesses would be in construction, retail trade, services, other categories of industries, in addition to the auto dealers, RV dealers, model suppliers that it helps, as well.
So it's really part of a broader initiative at the SBA to provide expanded access to capital to America's small businesses.  It happened that it also is something that is -- think will be very helpful to the auto dealers and the auto industry, as well as the RV industry.
Brian, I don't know if you had anything you wanted to add.
MR. DEESE:  I would just reinforce the point that obviously the changes to the overall program, and that's really important and part of the, as Eric explained, part of the broader policy mission of the SBA.  But I think in particular the fact that the SBA was able to move quickly to put this into place is going to be of particular help to the auto and RV dealers who are facing particular challenges in the current environment.  And certainly one of the things that the auto dealers really are facing is the inability to access working capital, as Eric explained.
And so this move today is important for the nation's small businesses overall, but will be particularly helpful for America's auto dealers as well.
Q    Thank you.  Brian, this is --
MR. DEESE:  Hello?  Gordon, I think we may have lost you.
OPERATOR:  I'm sorry, he dropped out of queue.
Q    Okay.  So, Eric, you talked about the economic turmoil and how some of these businesses were slightly larger than SBA standards.  But I'm sure that it's no surprise to you guys, considering that the crisis has been going on for some time and the fact that you guys have relaxed standards in the past.  So why now?  Why not two, three months ago?  I mean, so many dealerships and suppliers have already gone out of business or they're severely financially strained at this point.  I mean, I get being better late than never, but why now?  Why not two or three months ago?
MR. ZARNIKOW:  You know, this is something that we've been working on as an agency and there's a process obviously you have to go through to make these type of changes.  In addition, the Recovery Act was something that was passed in February of this year and we really were looking at how does this provision tie into the overall provisions of the Recovery Act.  This was something that we could do through a regulatory change rather than through legislation and we felt that it was something that would complement or provide additional access to capital, in conjunction with the provisions of the Recovery Act that the SBA has been or is in the process of implementing.
So we really felt that this was something that complemented the overall SBA lending programs as well as the changes that are coming about as part of the Recovery Act.
MR. DEESE:  Let me just reinforce a point.  I mean, I think I would just say that this Small Business Administration has moved with really impressive speed to address the challenges facing the small business community.  I think you saw in the Recovery Act and following on from that the SBA take a set of steps to make the 7(a) program more effective where, you know, for several months the 7(a) program had not been being accessed all that much.  And as a result of steps that this Small Business Administration took we've see loan volumes increase more than 25 percent, we've seen lots of new movement.  And I think that it's a credit to the speed with which they're moving.
So we can always do more and we can always do better, but I would say that the steps that they have taken to date, the announcements that they're making today are all part of a really aggressive and proactive approach to trying to increase credit for America's small businesses.
Q    Hi, good morning, and thank you.  Brian, you had mentioned that GMAC will take on originating Chrysler retail and floor plan loans.  And there's a bit of a disconnect there for me.  Many franchise dealers are floor planned with a captive finance source such as GMAC.  And a cursory search this morning showed that none of those entities are approved SBA lenders, meaning that they can't extend 7(a) loans.  And my understanding is that most dealerships use the captive finance source for all their financing activities.  But how many banks on the actual approved list are actually willing to work with dealerships?  If the trend moved from traditional banks to captive finance sources I'm wondering which traditional banks are left out there that will be willing to work with the dealerships in need, or will the SBA encourage the automotive finance entities, such as GMAC, to become approved SBA lenders?
MR. DEESE:  Let me just make a bit of a clarification.  I mean, first, GMAC is not a captive finance source.  GMAC is a independent bank-holding company and has been for some time.
Second, I think you're -- I think there's just sort of confusion between two separate issues.  The issue of how dealers get floor plan financing is one issue.  That was what my reference to was with respect to GMAC, where to date a significant portion, though certainly not all, of Chrysler dealers relied on Chrysler Financial to provide their floor plan financing.
And let me just reinforce, Chrysler Financial provided the floor plan financing to a majority of Chrysler dealers, but there are several -- there's a meaningful share of Chrysler dealers who have been financing their floor plans from a number of different types of financial institutions -- regional banks, credit unions, et cetera.
What the change that was -- the President talked about yesterday was that going forward GMAC will provide floor plan financing for those dealings.  What the Small Business Administration is talking about today is not directly related to floor plan lending, which I think just that's sort of the second clarification to your question.  They're talking about a provision of working capital that dealers and other small businesses could access to help support their business.
Q    If I could get a couple clarifications here.  Eric, if you could talk a little bit more about the floor planning -- this does not directly relate to floor plan financing?  And the second question would be, giving them access is one thing; a lot of RV dealers are saying it's the tightening credit.  Does this expansion of the loan program address the problem of the credit standards?
MR. ZARNIKOW:  Let me answer -- take both those questions.  The SBA currently in our 7(a) program does not do floor plan financing.  But as you know, a number of dealers have other financing needs, whether it's related to their facility or other working capital type needs that SBA does, and we do a fair amount of financing for the auto and other industries, but we currently don't do floor plan financing through SBA loans.
And tell me -- say your second question again.
Q    You talk about this expansion provides access, give access to about 70,000 small businesses.  Does it do anything to address the tightening credit standards?  Giving access is one thing, but they may not qualify under those tightening standards.
MR. ZARNIKOW:  Right.  Where it does expand access to capital is because we're providing a partial government guarantee and that can now be up to 90 percent.  What we find is that our lending partners are willing to take more risk.  They're still lending obviously to credit-worthy small businesses, but they're willing to take more risk than they would without the partial government guarantee.
As part of the Recovery Act, the amount that we're able to guarantee on a loan was increased from either 75 percent to 90 percent, or from 85 percent to 90 percent.  And we think that additional government guarantee will allow lenders to take additional risk and will help offset the impact of tightening credit standards.
MS. BEDINGFIELD:  Great.  Well, thank you, everyone, for joining us today.  We appreciate your time.
END               
12:01 P.M. EDT
 
THE WHITE HOUSE

Office of the Vice President
_____________________________________________________________________
FOR IMMEDIATE RELEASE                                           April 29th, 2009

VICE PRESIDENT BIDEN HOSTS CONFERENCE CALLS WITH GOVERNORS AND LOCAL OFFICIALS TO DISCUSS RECOVERY ACT IMPLEMENTATION
 

Earlier today, the Vice President hosted two conference calls with Governors and Mayors/County Executives from across the country to discuss Recovery Act implementation.

The following elected officials participated:

GOVERNORS:

  • Governor Chet Culver (D-IA)
  • Governor Jim Doyle (D-WI)
  • Governor John Lynch (D-NH)
  • Governor Joe Manchin (D-WV)
  • Governor David Paterson (D-NY)
MAYORS / COUNTY EXECUTIVES:
  • Mayor Mick Cornett (R – Oklahoma City, OK)
  • Mayor Phil Gordon (D – Phoenix, AZ)
  • Mayor Mark Mallory (D – Cincinnati, OH)
  • Mayor Allen Joines (D – Winston Salem, NC)
  • Mayor Kitty Piercy (D – Eugene, OR)
  • County Supervisor Teresa Altemus (R – Gloucester County, VA)
  • County Executive Kathleen Falk (D – Dane County, WI)

Delivering on Change, an Inside Look

Jesse Lee
Jesse Lee
April 28, 2009
09:15 PM EDT
Pete Souza and the White House Photo Office bring us an exclusive, massive, unique look at the President’s term so far.  Take a few minutes to get a different perspective from the images on television every day.

Related Topics: Economy, Energy and Environment, Fiscal Responsibility, Foreign Policy, Health Care

Update on Lobbyist Contacts Regarding the Recovery Act

Posted by Jesse Lee on April 27, 2009 at 01:03 PM EDT
In the spirit of transparency, Norm Eisen, special counsel to the president for ethics and government reform, asked us to pass along this update on the President’s restrictions on lobbyist contacts regarding the Recovery Act.
President Obama has made historic commitments to putting the public interest first and to cracking down on special interests and, in particular, lobbying abuses. To accomplish that, he has put forward the toughest rules in history closing the revolving door between K Street and the Executive Branch and putting contacts with lobbyists regarding projects under the American Recovery and Reinvestment Act on the internet for all Americans to see. 
We know some people think the Administration has been too tough in keeping lobbyists out of government jobs, and too tough in making lobbyist contacts about Recovery Act projects fully transparent. We don’t think so. We think our restrictions are correct to promote the public interest ahead of special interests. As the President has noted, one of the hallmarks of being tough is that you not only talk to the people you agree with—you talk to the ones you disagree with. So we want to hear from everyone affected during the 60-day initial evaluation period for the stimulus lobbying restrictions. We have heard from those that support these rules. On Friday, we met with several groups who disagree with the rules. These groups included Citizens for Responsibility and Ethics in Washington (CREW), the American Civil Liberties Union (ACLU), and the American League of Lobbyists (ALL). Present at the meeting were the following, each representing the entity noted:
Michael W. Macleod-Ball, Chief Legislative and Policy Counsel, American Civil Liberties Union (ACLU); Melanie Sloan, Executive Director, Citizens for Responsibility and Ethics in Washington (CREW); Adam Rappaport, Senior Counsel, Citizens for Responsibility and Ethics in Washington (CREW); David Wenhold, President, American League of Lobbyists (ALL); Kenneth A. Gross, Partner, Skadden, Arps, Slate, Meagher & Flom (representing ALL);
and
Norman Eisen, Special Counsel to the President for Ethics and Government Reform; Preeta Bansal, General Counsel and Senior Policy Advisor, Office of Management and Budget; Michael Mongan, Deputy Counsel to the Vice President; and members of their staffs.   
We told them we believed the restrictions were tough but fair to make sure that lobbyist communications are as transparent as possible, and that stimulus decisions are based on the merits. They agreed with our objectives -- any differences we have are over the best means to achieve those goals. They took exception to some of the specifics of the restrictions and we had an honest exchange about our differences. We noted that others, including in the reform community, strongly support the restrictions and we have heard from them too as part of the 60 day evaluation period mandated by the President's Memorandum.
See more about Ethics, Fiscal Responsibility  
THE WHITE HOUSE

Office of the Press Secretary
__________________________________________________________________________________
EMBARGOED UNTIL 6:00 AM ET,                                    SATURDAY, April 25, 2009

WEEKLY ADDRESS: President Obama Announces Steps to Reform Government and Promote Fiscal Discipline

WASHINGTON – In his weekly address, President Barack Obama reiterated his call for fiscal discipline and outlined the steps his administration will take to eliminate waste and increase efficiency. First, the President called on Congress to pass PAYGO legislation.  Next, the administration will create incentives for agencies to cut costs and identify savings.  Third, the administration will establish a process for every government employee to submit their ideas on how their agency can save money and perform better.  Finally, the administration will reach outside of Washington for ideas by convening a forum on reforming government for the 21st century later this year.

The audio and video will be available at 6:00am Saturday, April 25, 2009 at www.whitehouse.gov.
 

Prepared Remarks of President Barack Obama
Weekly Address
April 25, 2009
Good morning. Over the last three months, my Administration has taken aggressive action to confront an historic economic crisis. As we do everything that we can to create jobs and get our economy moving, we’re also building a new foundation for lasting prosperity – a foundation that invests in quality education, lowers health care costs, and develops new sources of energy powered by new jobs and industries.

One of the pillars of that foundation must be fiscal discipline. We came into office facing a budget deficit of $1.3 trillion for this year alone, and the cost of confronting our economic crisis is high. But we cannot settle for a future of rising deficits and debts that our children cannot pay.

All across America, families are tightening their belts and making hard choices. Now, Washington must show that same sense of responsibility. That is why we have identified two trillion dollars in deficit-reductions over the next decade, while taking on the special interest spending that doesn’t advance the peoples’ interests.

But we must also recognize that we cannot meet the challenges of today with old habits and stale thinking. So much of our government was built to deal with different challenges from a different era. Too often, the result is wasteful spending, bloated programs, and inefficient results.

It’s time to fundamentally change the way that we do business in Washington. To help build a new foundation for the 21st century, we need to reform our government so that it is more efficient, more transparent, and more creative. That will demand new thinking and a new sense of responsibility for every dollar that is spent.

Earlier this week, I held my first Cabinet meeting and sent a clear message: cut what doesn’t work. Already, we’ve identified substantial savings. And in the days and weeks ahead, we will continue going through the budget line by line, and we’ll identify more than 100 programs that will be cut or eliminated.

But we can’t stop there. We need to go further, and we need an all-hands-on-deck approach to reforming government. That’s why I’m announcing several steps that my Administration will take in the weeks ahead to restore fiscal discipline while making our government work better.

First, we need to adhere to the basic principle that new tax or entitlement policies should be paid for. This principle – known as PAYGO – helped transform large deficits into surpluses in the 1990s. Now, we must restore that sense of fiscal discipline. That’s why I’m calling on Congress to pass PAYGO legislation like a bill that will be introduced by Congressman Baron Hill, so that government acts the same way any responsible family does in setting its budget.

Second, we’ll create new incentives to reduce wasteful spending and to invest in what works. We don’t want agencies to protect bloated budgets – we want them to promote effective programs. So the idea is simple: agencies that identify savings will get to keep a portion of those savings to invest in programs that work. The result will be a smaller budget, and a more effective government.

Third, we’ll look for ideas from the bottom up. After all, Americans across the country know that the best ideas often come from workers – not just management. That’s why we’ll establish a process through which every government worker can submit their ideas for how their agency can save money and perform better. We’ll put the suggestions that work into practice. And later this year, I will meet with those who come up with the best ideas to hear firsthand about how they would make your government more efficient and effective.

And finally, we will reach beyond the halls of government. Many businesses have innovative ways of using technology to save money, and many experts have new ideas to make government work more efficiently. Government can – and must – learn from them. So later this year, we will host a forum on reforming government for the 21st century, so that we’re also guided by voices that come from outside of Washington.

We cannot sustain deficits that mortgage our children’s future, nor tolerate wasteful inefficiency. Government has a responsibility to spend the peoples’ money wisely, and to serve the people effectively. I will work every single day that I am President to live up to that responsibility, and to transform our government so that is held to a higher standard of performance on behalf of the American people.

Thank you.

Weekly Address: Creative

Macon Phillips
Macon Phillips
April 25, 2009
05:30 AM EDT
This week the President reiterates a theme that has been a hallmark of his career, namely that "old habits and stale thinking" will simply not help us solve the new and immense problems our country faces. Listing off several specific changes he intends to bring, he describes his guiding principle: "To help build a new foundation for the 21st century, we need to reform our government so that it is more efficient, more transparent, and more creative. That will demand new thinking and a new sense of responsibility for every dollar that is spent."
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Related Topics: Fiscal Responsibility, Technology