Budget Battle Begins

This is a partial transcript from "Your World with Neil Cavuto," February 7, 2005, that was edited for clarity.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The important question that needs to be asked for all constituencies is whether or not the programs achieve a certain result. Have we set goals, and are those goals being met?

(END VIDEO CLIP)

NEIL CAVUTO, HOST: Well, 150 programs will either get the axe or face deep cuts this year under the president's new $2.5 trillion budget. With us now from the White House is a man who probably needs his own security protection from fellow Republicans, Josh Bolten, the director of Office of Management and Budget.

Josh, good to have you.

JOSH BOLTEN, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET: Thank you, Neil.

CAVUTO: No one likes their own ox being gored, but everyone's ox seems to be gored, save some areas of defense. Some are saying this budget is dead on arrival. Is it?

BOLTEN: I'm sure some say that. Some say that every year. Folks on the other side of the aisle said it last year, when the president asked for discretionary spending to be held at four percent overall and that non- defense discretionary spending be held at no more than one percent. They said it was dead on arrival but in the end, that's exactly hat the Congress adopted.

So, I'm sure we'll have people saying it's dead on arrival. We're putting up a tighter budget this year, fiscally responsible, but I think there's going to be a lot of support for it, at least within the Republican Caucus, and I'm optimistic about, ultimately, its enactment, at least in the broad outlines, if not every single detail.

CAVUTO: Here's the problem, though, Director. You have to get people on board with these spending kind of restraints, and that means the president has to do his part and veto legislation when they do not. And he has never done that.

So, I'm wondering whether he has the resolve to do that, if these guys don't go along?

BOLTEN: Sure, the president has the resolve, but veto has been unnecessary. Like I said, last year was a good example. The president set limits. It was tough to get there, but the Congress ultimately lived within the limits.

What we have going for us in this process right now is a good, strong Republican leadership, good support from the relevant committee chairs for setting some priorities, but being fiscally restrained in our budget. And I'm very optimistic that we're going to have that cooperation going forward.

CAVUTO: But do you really think you're being fiscally constrained when we take a look at spending, unrelated to defense and homeland security, that has grown at a 6.5 percent clip versus 4.3 percent under the Clinton administration.

BOLTEN: Well, there has been additional spending in the course of this administration, but more than three-quarters of it has been related to the war on terror, protecting the homeland.

CAVUTO: Yes, but seriously, this is apart from that. So I'm just wondering where the resolve is? You know, when it doesn't start at the White House, where does it start?

BOLTEN: Well, what I can tell you is that last year, we held the growth in that non-defense category to one percent. The Congress delivered on that.

The budget we're putting forward today is to hold the non-defense category to about a one percent cut. So, we are sending up a budget that is very restrained in that area. And we're also going after savings in other areas, based on what are our priorities and which programs are performing.

It's not going to be easy to adopt, but I have a lot of optimism that the Congress will give us the support we need.

CAVUTO: Let me ask you, though. Your former boss at Goldman Sachs, Jon Corzine, was saying of you, "I think the world of him, but that doesn't mean I'm not going to raise holy hell over spending targets that affect my state."

You're going to have 100 cases of that, hundreds more in the Congress, right?

BOLTEN: Sure. Individual members will be disappointed about individual programs. There's no doubt about that. Nobody will support 100 percent what's in here. But the sense I got from the Republican Caucus at their retreat a week ago was that while each of them is likely to have their individual complaints in the budget, they are going to want to give us a restrained budget that meets our priorities and is fiscally restrained enough so that we continue on the path of meeting the president's goal of cutting the deficit in half by 2009. I think we're well on track.

CAVUTO: Josh Bolten, thank you, sir. Appreciate it.

BOLTEN: Thank you.

CAVUTO: Now to the other side. Democratic Senator Paul Sarbanes joins me right now.

Senator, what do you make of the likelihood of halving that deficit by 2009?

SEN. PAUL SARBANES, D-MD., SENATE BUDGET COMMITTEE: First of all, we're paying the price for the excessive tax cuts which the Bush administration has pushed through in the course of its first term in office. And the public needs to recognize that.

CAVUTO: But wait a minute, Senator. Would you argue those tax cuts at least got us the growth that created two million-plus jobs over the last year?

SARBANES: The president's coming in with these huge deficits, and he's now pressing to get his tax cuts made permanent. Making the tax cuts permanent has nothing to do with the problem we confronted a couple of years ago in terms of moving the economy again.

CAVUTO: So, some of the spending restraint. I understand, sir, but some of the spending restraint that you want to see and the White House wants to see, do you think we will see?

SARBANES: Oh, you'll see some of it, but I think the priorities are all wrong. I think they're neglecting education. They're neglecting health care. They're neglecting the environment. And these things are being neglected in order to give tax cuts to very wealthy people.

I mean that's the simple equation of what's happened in this country. And we need to recognize that that's the case.

Well over half of the deficit is attributed to the large tax cuts. Another quarter is to the slowdown in the economy, and the last quarter is the spending increase, primarily, in the defense and homeland security, which of course, the administration is pushing up again in this budget again.

And in fact, this budget doesn't reflect a further supplemental for Iraq. They've got nothing in there for Iraq in fiscal '06.

CAVUTO: So the budget, sir, is dead on arrival, in your eyes?

SARBANES: I never use the phrase "dead on arrival."

CAVUTO: What would you say?

SARBANES: This is not a good budget. This is a bad budget in terms of the priorities it sets for the country and the country needs to recognize this.

Moving ahead -- educating our children is not a frill. If we're going to build strength in the next generation, that's where it's going to be. And our competitors all around the world are doing exactly that.

They talk about globalization? The international competition. And then you look to see what others are doing, and what we're failing to do and investment in education and in health care are two big failures.

CAVUTO: OK. Senator, I wish we had more time. Thank you, sir. It's always a pleasure having you on. Senator Paul Sarbanes.

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