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MS. PERINO: Hello, everybody. A couple of things. The President is just finishing up a lunch right now with Prime Minister Gillani of Pakistan. They had a very good meeting -- I would describe it as a serious meeting -- one in which they spent most of the time talking about counterterrorism issues. The President reaffirmed his commitment to Pakistan for the aid that we provide. In addition, you will get a joint statement from the two leaders a little bit later this afternoon -- it's not quite ready yet.

But one thing I would point out is that the President offered $115 million over two years in food aid, and $42.5 million of that will be available over the next six to nine months. Details on that will be coming soon.

And then the President decided that they -- well, I should say they agreed that they would talk about the economy and economic issues facing Pakistan over lunch, which they are in right now.

Also in about 45 minutes you'll hear from OMB Director Nussle and Chairman Lazear, from the Council of Economic Advisors. They will hold a briefing on what is called Mid-Session Review. They'll give you the full briefing and they'll be able to answer all of your questions on the specifics of the new estimate. I know there's a lot of interest in the deficit numbers; I'm not able to talk about that here. But it is no secret that the deficit will worsen this year largely because of the bipartisan economic stimulus plan that was passed in February. Both parties agree that even with a larger deficit that that plan was needed in order for it to have an impact to help pull us out of the downturn that we've been in.

We believe these deficits are temporary and manageable if we keep spending in check, the tax burden low and the economy growing, and that's why the President has been clear that discretionary spending beyond reasonable levels he proposed will be met with a veto. So that's coming up in just 45 minutes. Read more Comment (0), Email this.

MS. PERINO: I'm not able to comment on that report that you're referring to on a strike today. I will tell you that overall in the meeting they talked mainly about counterterrorism after -- and especially what we can do to help provide training for their military. Prime Minister Gillani also talked about something we've talked about here, which is how do you help change the lifestyle of people in the region so that they have a hopeful future, rather than one based on terrorism.

They have complex issues on the border there, especially when they have refugees -- about 3 million refugees from Afghanistan living in the border area. The President pledged support for that, but when it comes to that specific report I'm not able to comment. Read more Comment (0), Email this.

MS. PERINO: That's just not something I would be able to talk about from here. Read more Comment (0), Email this.

MS. PERINO: Or anything at all. I'm not going to be able -- I'm not going to talk about it at all. I would just say broadly the way I could answer the question is that they did speak -- spent most of the time talking about counterterrorism issues. And I would point back to what the Prime Minister said, which is that the Pakistanis recognize that this is their war, too, and that their people are targeted just as much as freedom-loving people here in the United States and elsewhere around the world. But when it comes to specific tactics, I would not be able to talk about it from here. Read more Comment (0), Email this.

MS. PERINO: I am not able to comment. Read more Comment (0), Email this.

MS. PERINO: I think when it comes to counterterrorism President Bush feels that all of us need to be doing more. And the Prime Minister talked about some of the efforts that they've been working on, especially in terms of coordination with our military and training that we have provided. We just announced last week that we've worked towards resolving the F16 repair and maintenance issue. And so they spent time talking about that, and I think that they agreed and reaffirmed this is a war that we need to be fighting together. So they talked about it more in broader terms, rather than operational details. Read more Comment (0), Email this.

MS. PERINO: Sure. I think that this President -- President Bush got to know President Musharraf very well over a period of many years, and they went through some pretty rough times together and established a good friendship. The President has started establishing a good relationship with this Prime Minister, as well, having first met him on May 26th in Sharm el Sheikh, Egypt, and then again today. And I'm sure that if they have a -- I shouldn't say "I'm sure" -- if they had a chance to meet again before the end of this President's term -- he thinks he will, but -- I think they would meet.

President Bush believes and reaffirmed today with this Prime Minister that the relationship between the United States and Pakistan is critically important, and it's one based on democratic values. Prime Minister Gillani did thank President Bush for their democratic elections. So they -- there's a broad base of friendship there that is a foundation for moving forward. And President Bush did say that whoever the next President is of the United States, that he believes that the good relationship will continue, if we can continue working together, especially on issues of counterterrorism.

Their economy is something that we also remain concerned about, and President Bush said that they would be talking about a little bit later today. And of course when it comes to the humanitarian condition, President Bush is concerned about people who are not able to afford food, and that's why we provide -- are going to provide the $115 million in food aid. Read more Comment (0), Email this.

Q So -- one more following -- when you -- the relationship is currently characterized between the

MS. PERINO: I wouldn't -- it's tense in that we are working together to try to fight counterterrorism, but I think that we are much more on the same page than some people would like to paint -- the picture that they would like to paint. I think that from what I witnessed today between the Prime Minister and the President, both in this meeting and the one in Sharm el Sheikh, there is a commitment on behalf of the Pakistanis that they need to be able to do more. But they have a complex situation and they're trying to do a lot of different things at once, focusing primarily on helping prevent terrorists from establishing a safe haven in that area; but also worried about their people and how they're going to be -- improve their economic conditions by improving the job situation and health care and education.

So I would say -- I would say that we have a good relationship, but it is serious times and that the President believes that we all need to do more, especially when it comes to counterterrorism. Read more Comment (0), Email this.

MS. PERINO: I don't comment on any reported missile strikes. So that's what I'm not commenting on. Read more Comment (0), Email this.

DIRECTOR NUSSLE: Good afternoon. Thank you for attending. The Mid-Session Review -- or popularly called the MSR -- updates the administration's estimates of receipts, outlays, and deficits or surpluses, to reflect economic, legislative and other changes since the President's FY'09 budget was released back in February.

I'm going to give you some of the highlights of the budgetary changes, and then turn it over to Dr. Lazear for an overview of the economic assumptions. And then we'll take your questions. And as Kristen said, because Dr. Lazear has to leave at 2:00 p.m., I think probably what we'll do is try and focus questions to you first, and then I'll stay behind for a little bit more.

Relative to 2007, the budget deficit for the next two years will be higher before it begins declining, and reaches surplus in 2012. Specifically, for this budget year 2008, the budget deficit is now estimated to be $389 billion, which is $21 billion lower than estimated in February, where it stood at $410 billion.

At 2.7 percent of GDP, gross domestic product, the 2008 deficit is projected to be just slightly above the average of the last 40 years, which is about 2.4 percent of GDP. The MSR provides a snapshot of the budget when Congress left for the July 4th recess, and reflects the enactment of the farm bill and the supplemental appropriations bill.

However, more recent developments such as the Medicare "doc fix," as it's called, or the housing bill, are not fully captured in this MSR. This suggests the final deficit for 2008 will be larger than our current projection of $389 billion.

So to be clear, that means that every dollar that is spent, whether it's spent by the administration or the Democrat Congress, spends beyond the budget and drives the deficit higher. For 2009, the deficit is projected to rise to $482 billion, or 3.3 percent of GDP. This is still below the recent peak of 3.6 percent of GDP in 2004, and it's well below the record deficit of all time, which was 6.0 percent of GDP back in 1983.

The primary reasons that there will be larger deficits in 2008 and 2009 are because of the bipartisan growth package, or stimulus checks, as well as slower economic growth. Earlier this year, the President and Congress, on a bipartisan basis, correctly agreed that action was needed for our economy, and made a deliberate and conscious decision to temporarily increase the deficit in order to get money into the people's hands and spur consumption. The determination was made that getting the economy back on track was a higher priority than immediate deficit reduction.

`To give you context for how the stimulus has impacted the deficit we talk about today, if you somehow could exclude the bipartisan growth package, the deficit would be 1.9 percent of the economy, or about $272 billion, instead of the $389 billion we speak of today. The deficit is projected to fall sharply then after 2009, with deficits in 2010 and '11, only slighter higher than we projected back in February. The President's budget blueprint remains on track to achieve balance with surpluses of $58 billion in 2012, and $29 billion in 2013.

The important point to remember is that near-term deficits are both temporary and manageable if, and only if, we keep spending in check, the tax burden low, and the economy growing. Excessive spending beyond the President's budget plan will make the problem worse. And it already appears that congressional Democrats are lining up to bust through the President's budget, and for that matter, bust through their own budget. They are seeking to add billions in extra spending to the regular appropriations bills, which will drive up the deficit even further. They've already racked up $209 billion in more spending requests than the President. That's why the President has been clear that discretionary spending beyond his reasonable and responsible levels will be met with a veto.

The President has also repeatedly proposed sensible reforms to the automatic entitlement spending that now accounts for almost two-thirds of the budget. Simply raising taxes is no solution and often makes the problems worse. And congressional Democrats plan to pay for all of their big-government spending with the largest tax increase in history. This is anti-growth policy. It will hurt our economy and jobs, and it will have a negative impact on the bottom line for taxpayers, as well as government.

We can drive down the deficit and get to balance if we maintain fiscal responsibility and continue pro-growth policies. The President and congressional Republicans have a plan to do just that, by restraining spending, the passage of the Colombia and Korean trade agreements to help increase job creation, sensible adjustments to achieve savings and important entitlement programs, and the extension of the President's tax relief which will prevent 116 million Americans from facing an average tax increase of $1,800.

And most importantly, the President and congressional Republicans have a plan to reduce our dependence on foreign sources of energy, including a budget amendment the administration is sending up today that would delete two provisions from the fiscal year 2009 budget request. This amendment would lift the restriction on spending for offshore pre-leasing, leasing, and related activities in federal waters in the Outer Continental Shelf. And we call on Congress to adopt these changes.

Unfortunately, congressional Democrats have a long record of standing in the way of steps when it comes to energy security. For example, back in 1995, President Clinton vetoed legislation that would have opened ANWR to oil production, arguing at the time that it would only supply a small portion of our needs. However, if he had signed that legislation, domestic oil production could be 800,000 barrels a day higher than current levels. In one year, that would be four times the amount of oil the Democrats are now proposing to be released from the Strategic Petroleum Reserve.

Americans and our economy need an energy plan now. And the Democratically controlled Congress is blocking all attempts to increase production. This summer, the House and Senate have refused to bring an Interior appropriations bill to the floor. For that matter, they've pretty much refused to bring any appropriations bill to the floor. This would provide an opportunity to lift the moratorium for drilling on the Outer Continental Shelf. And Democratic Leader Reid has even cancelled action on what he calls a stimulus bill just in order to block any debate on energy production amendments.

I'm quite sure that there will be people who criticize this report, they'll criticize the President, or they'll probably try and just focus attention on the big size of the numbers. And I hope that if they do that you will ask them to present a realistic and detailed budget plan, or at least inform the taxpayers of this country when such a plan will be enacted into law.

The President presented such a detailed budget plan six months ago, to meet the country's needs in a fiscally responsible manner and promoting growth for our economy. Unfortunately, Congress so far has failed to pass even one bill to begin the annual budget process. And I'm informed that there are now only 19 legislative days left in the fiscal year when they can even meet and pass such a plan.

I will now turn to the Chairman of the President's Council of Economic Advisers, Dr. Ed Lazear. CHAIRMAN LAZEAR: Thank you, Jim. I'd like to talk to you today about our forecast. GDP is forecast to grow at 1.6 percent this year. We believe that this forecast is realistic and consistent with others from both private and government forecasters. It is clear that 1.6 percent growth is below the average for the United States, but the positive growth that we are forecasting for 2008 reflects the resilience of the American economy in the face of significant shocks.

The economic stimulus that the President signed in February is a contributing factor to forecasts that sustain positive growth. Headline inflation is expected to moderate over the next few months, which should bring the rate for 2008 to around 3.8 percent. The 2009 inflation rate should be considerably lower, and we are forecasting 2.3 percent. Much of this reflects expectations that increases in energy and food prices that we saw this year will not be repeated. GDP price inflation will be significantly below headline levels at 2.2 percent.

The 1.6 percent GDP growth number is revised down from 2.7 percent that we forecast last autumn. There are three primary reasons. First, the rapid rise in oil and other commodity prices has put downward pressure on the economy. Second, tightness and reorganization of credit markets has affected business investment and other forms of borrowing. The extent of the credit market problems that materialized over the first half of 2008 were not built into the autumn forecast. Finally, housing has continued to be a drag on the economy and has subtracted more from GDP than was expected. Offsetting these drags on GDP growth is the expansion of exports, which has contributed significantly to the positive growth we have seen in recent quarters.

The unemployment rate is expected to remain close to its current levels into 2009. Although these levels are elevated relative to the last couple of years, they are not high by historic levels and are currently below the average for the 1990s. Unemployment rates should decline thereafter, eventually reaching what we believe to be long-run sustainable levels of 4.8 percent.

Interest rates, which are currently low, are forecast to revert to their long-term levels over time. This employs -- I'm sorry -- implies that the forecasted rate of 4 percent for 10-year Treasury notes will eventually rise to 5.3 percent, consistent with our inflation forecast and with historic relationships.

All forecasts are subject to uncertainty, and this one is no exception. We believe it reflects the best information and statistical methods available, and we have confidence that it provides accurate estimates of the key variables.

Thank you. We'd like to take your questions now. Read more Comment (0), Email this.

Q Okay. The question then, I guess, is the President made clear that the deal that Musharraf had

MS. PERINO: As to the first part of your question -- let me take that first -- Read more Comment (0), Email this.

CHAIRMAN LAZEAR: We don't actually provide an estimate of what it would have been without the stimulus. And in fact, we don't break out the estimates quarter by quarter, as you know, we just give an annual estimate. We have seen indications that the stimulus is working. We're quite confidant that we made the right move back in January, when the President proposed the stimulus package. We did it for insurance reasons. We believe that it was a wise purchase. And we have seen some reflection of the stimulus in spending patterns of consumers over the past month or two. So there is indication that it is working, and we expect it to continue to work into the next couple of quarters. Read more Comment (0), Email this.

MS. PERINO: The first part of your question was actually in terms of the effort by President Musharraf to try to establish some relations with the tribal leaders up there in the FATA region. Read more Comment (0), Email this.

DIRECTOR NUSSLE: We did not leave out war costs. In fact, we build in -- and we built into the budget for this year $70 billion for 2009. We certainly understand that may not be the full cost of the war. That number is still being developed by the Department of Defense, and when it is available and when it is developed, then it will be presented to the President for a decision about whether or not that is appropriate and needs to be sent up.

But we've made it very clear that we did not want to tie the hands of the next commander, that we wanted to provide flexibility to the next Commander-In-Chief. The $70 billion we estimate will provide funding for the global war on terror through -- we believe at this point in time, through late spring, possibly early summer, depending on how the Congress develops -- or if they pass an appropriations bill for the Department of Defense this year, or whether we have to live under a CR.

So there is some, I suppose, uncertainty based on how they decide to proceed. But the President has decided that the best way to not only ensure that we have funding through the next administration is to provide that $70 billion. And Congress put that into the supplemental that they passed back in late June. Read more Comment (0), Email this.

MS. PERINO: Well, but so did they. I think the Pakistanis recognized that it wasn't successful either and so they walked it back.

Now this new government thought that they would try a variation on that theme and they are working to see if there is something that they can do to try to improve the livelihood, the conditions of the tribal leaders. One of the things that those people are going to have to have is security. They need to be able to feel that their government is going to be able to take care of them, and not the militants and the warlords that are reigning in some areas -- in that very difficult terrain up on the border region.

So the President thinks that yes we are working effectively together, but there is more to be done. Everybody can always improve on coordination, and that includes sharing of intelligence and also helping improve their military capabilities -- that is another aspect of the conversation that they had today in the Oval.

Peter. Read more Comment (0), Email this.

DIRECTOR NUSSLE: No, we don't believe we are. In fact, Congress has chosen to take on the costs of the war in a piecemeal and a very delayed format. The President, in the most recent iteration of this, had a request for funding for the global war on terror that languished out there for more than a year before Congress even addressed it. Congress held hearings on it, but never even took it to the floor. So it's Congress that is choosing the path here of not addressing the cost of the war, not building it into their own budgets. In fact, they have built in the exact same amount into their budget that the President has built in. So Congress has chosen to take this on in a piecemeal approach, and as they do that, the President needs to respond in kind. Read more Comment (0), Email this.

Q The President made a point of twice emphasizing respect for Pakistan's sovereignty. Does that

MS. PERINO: I think it means that we believe that working together with the Pakistanis is the best way to go after terrorists. And we all need to do more and we need to do it more aggressively; and we need to do it with more resources and we need to do it with the cooperation of our NATO allies and the Afghan government. So there's a lot of -- there's a lot coming together there.

If you're asking me in terms of does President Bush think that no option would be off the table in the future if there was some sort of attack -- it's a hypothetical question that I wouldn't be able to answer here. Read more Comment (0), Email this.

Q Within the budget, it said that the economy can absorb high energy prices. Given where energy

CHAIRMAN LAZEAR: We know that every time oil prices go up it takes off some growth from our economy. So we estimate that every $10 or so per barrel of oil costs us anywhere between a quarter of a point to .4 percentage points of GDP. So, obviously, what that means is that it does have an effect. It has an effect -- a continuing effect on the economy.

The reason that the economy has continued to grow throughout this period is because productivity has grown enough to offset those high energy costs. And what's happened over the past few years is that increasing productivity growth has meant that we've been able to lower our costs of doing business, which in large part is responsible for the competitiveness of our export business, as well, and that has offset these energy costs.

That doesn't mean it doesn't cost us anything. Obviously when we see energy prices going up it does mean a drag on the economy. We've just been able to get through it because other things have been sufficiently positive to offset it. Read more Comment (0), Email this.

MS. PERINO: Keep that in that same category in terms of operations of things that I would not talk about from here. Read more Comment (0), Email this.

Q Dr. Lazear, can you talk a little bit about what you're expecting for economic growth in 2009,

CHAIRMAN LAZEAR: I'll defer to Jim on the budgetary question, but I can certainly tell you about 2009. We're predicting 2.2 percent for 2009. We believe that that is a realistic forecast, that we should be back on track -- Read more Comment (0), Email this.

Q You also said that they discussed a policy aimed at preventing terrorists from establishing a safe

MS. PERINO: Well, we believe that they are severely hampered and that much of the leadership has been captured or killed or brought to justice in some way. And that is due to the efforts of the Pakistanis working with us on counterterrorism efforts. That's exactly what it's for.

They are hampered in their ability to move around, and that's one of the things that we've been able to do. But we still have to continue to fight and continue the search, and if we knew where he was, we would bring him to justice today. Read more Comment (0), Email this.

CHAIRMAN LAZEAR: In February -- oh, you mean our last forecast for that was 2.9 percent was our -- no, no, I'm sorry, that's not right. Fall was 3.0 -- 3.0. So we've revised it down, again for the same factors that I mentioned in my opening: energy prices, credit and housing.

Again, our hope is that we will be through most of the issues that are plaguing those markets right now and that we won't see continued increases in energy prices. We hope that those prices will stabilize or perhaps even fall. If they do, that will be a boost to the economy. The housing market bottoming out will also be a boost to the economy, as well, and we hope that that will happen sooner rather than later.

Again, we believe these forecasts are realistic. They are in line with the kinds of forecasts that you're seeing both among private forecasters and in other government agencies, as well, so we don't think this is a rosy scenario in any way, we think it's a realistic scenario. Read more Comment (0), Email this.

MS. PERINO: Arguably I think in some parts you could say that they're -- have established safe haven, but not in the entire region, not in that entire area. And that's why the efforts to press the Pakistanis to continue to do more and offer them help to be able to do it is something that reigned supreme in the meeting today.

Go ahead. Read more Comment (0), Email this.

CHAIRMAN LAZEAR: Well, there's always new information that come in weekly. We also had some good ones last week. We had a durables number that was pretty strong, and there have been a number of other indicators that seem strong. We'll get GDP numbers on Thursday. Obviously once we know the actual number for GDP in the second quarter that would be additional information that would affect our estimates, as well.

The problem is you always have to choose some point at which to draw the line and base your forecast at that point, and that's what we did. It was the best information we had at the time. Whether new information would have had any significant impact on that, I doubt that it would be significant. But obviously all new numbers do have an impact on the forecast. Read more Comment (0), Email this.

MS. PERINO: Well, there's been -- you know, there's a briefing in 45 minutes by your economic experts that will be on camera and on the record. I'm just going to refer you to them and let them answer all those questions. Read more Comment (0), Email this.

CHAIRMAN LAZEAR: Than in 2007? Yes, I'd have to check on that. I can't give you an answer to that off the top of my head. DIRECTOR NUSSLE: But a big part of it is as a result of the softening of the economy. I mean, that part of it is obvious. But exactly how that figures, we can check on it and get you more detailed answer. CHAIRMAN LAZEAR: I'd want to make sure before I give you any specifics that you're going to quote. We can certainly get back to you on that. Read more Comment (0), Email this.

Q Dana, as you know, Brian Williams sat down with President Ahmadinejad earlier today, and Ahmadinejad

MS. PERINO: I think we have to approach this with a big grain of salt. President Ahmadinejad said one thing to the Iranian people on Saturday and another thing to an American journalist on Monday. So I think that all of us need to consider this with a healthy dose of skepticism. There is a new approach, one that we offered, one that the international community came together on and said, we do not believe that Iran should be allowed to develop a nuclear weapon. We have put together an incentives package with the P5-plus-1, and it calls for Iran to suspend uranium enrichment. That's all they have to do is suspend and then this incentives package could move forward and so could negotiations. And then the Iranian people could move forward to not be so isolated.

And we would hope that they would respond in a positive way. And that's exactly why we went to the meeting 10 days ago, when Under Secretary Burns attended to say, we, as part of the P5-plus-1, are serious about this offer. And the Iranians said to everybody, well, we're going to come and we're going to have a response. And they came and they just continued to play games. And Secretary Rice said that that actually reinvigorated our diplomatic process.

So we'll see what he comes back with in Geneva, but I think given that he says one thing on Saturday and another thing to an American journalist on Monday, just requires a lot of skepticism. Read more Comment (0), Email this.

DIRECTOR NUSSLE: Well, I mean, I acknowledge -- Read more Comment (0), Email this.

MS. PERINO: Well, I won't speak for the diplomats. I think that the political directors would have to talk about that. But I do know that what -- that could -- what Iran could face if they don't respond favorably is additional sanctions. And it doesn't sound from reading the interview that that's what he wants, but yet again I think maybe we should think about what he -- look towards what he says tomorrow. And if it's something different from what he said today and then yet again on Saturday, I think that anybody who would be in our position or any of our allies' position would have to look at this and think that it's one that requires skepticism. Read more Comment (0), Email this.

DIRECTOR NUSSLE: And I acknowledge in my statement that this is going to be a challenge, particularly given the atmosphere on Capitol Hill to spend more. Most of the bills, most of the proposals on the Hill have been to spend more, have been to obligate more. It's going to be a challenge, particularly given the fact that if you see more tax increases that could slow the growth and the economy. These are all challenges that need to be factored in.

So we acknowledge, both because of the small changes since the MSR was finished, as well as what we have not yet seen in the 19 days -- 19 legislative days that remain for Congress in this fiscal year, there are a number of pressures. Most of those pressures are upward pressures on the deficit, not downward pressures. And each one of those, every dollar that is added to that bottom line makes it more difficult and takes away the cushion that we have in 2012 and '13. We do have some cushion, but not enough to squander that with excessive spending programs. Read more Comment (0), Email this.

MS. PERINO: I wouldn't say that. Our determination is to solve this diplomatically, and that is why we have worked so hard to build a multilateral process, one in which we can put forward an incentives package, but also move forward on sanctions in case they're needed. So we have a multi-pronged approach and it's so far held together, and in fact was reinvigorated when the Iranians decided to thwart the international community and walk away from the table last week.

Matt. Read more Comment (0), Email this.

Q In May, the Treasury survey of the primary dealers in public debt who keep very close track of

DIRECTOR NUSSLE: Well, we're giving you the projection as we know it today. I acknowledge, as I did in my statement, that there have been some changes, albeit not too significant, since the MSR has been put to bed. I think the biggest challenge will be as we see how Congress decides to end the year, so to speak, and begin the next fiscal year. There is enormous pressure for additional spending. There's talk of all sorts of legislation in addition to the regular appropriation process that has not even begun yet. All of those -- again, dollar for dollar -- add to the pressure, to the bottom line, whether it's projecting the deficit for the end of this year, or to the '09 deficit and beyond. Read more Comment (0), Email this.

Q Dana, just to go back to the President's meeting with Prime Minister Gillani -- the Prime Minister

MS. PERINO: Certainly he didn't rule it out, in terms of adding more from the military point of view. And he did say that it was -- his singular focus was to try to deal with this counterterrorism issue. I think that when he talks about the war on terror -- when it's from his perspective -- he doesn't think that this is a war on terror just being waged against the United States. And his good friend, Prime Minister Benazir Bhutto, was killed by terrorists, so they have incentive and every reason in the world to try to go after them as well.

And he also said that average citizens in Pakistan are sick of the violence; they're tired of it, they want it to end. And he has committed his government to try to help make that happen and he asked the President for some continued assistance and the President gladly gave it. Read more Comment (0), Email this.

DIRECTOR NUSSLE: Well, again, the record -- it's always interesting, you see these statements about this is a record deficit, or however it is. I mean, you can only compare these very large numbers against something. And I think it's acknowledged by most economists, as well as by most leaders both in the Congress and the administration, that the best way to compare a deficit is by your ability in the economy to manage that deficit. And so comparing it to GDP is the best way to be able to decide whether or not a number is big or not.

We are not happy about the deficit. It is slightly higher than the average of the last 40 years. We have a plan to address that deficit and bring it down, which I think is a responsible one. We call on Congress to both adopt one, as well as enact one, and to do so in a fiscally responsible way so that we can stay on track. But certainly there are a number of pressures out there that could, and will, add to the deficit bottom line if, in fact, we don't keep control over them. Read more Comment (0), Email this.

MS. PERINO: Brianna, we have talked about this before; I would point you back to all the things we have said, especially since this budget came out this year. We have worked very hard to try to keep spending in check. I don't have those specific numbers in front of me -- something like discretionary spending that's been held below inflation. President Bush has tried to hold the line across the board when it comes to this Congress trying to raise taxes on the American people, or raise spending unnecessarily. He hasn't been afraid to veto bills.

But we also headed into an economic downturn. And we recognize that it would be very important to try to help save this economy, and to do so by passing a bipartisan stimulus package. That was the right and prudent thing to do. If we hadn't done that I don't know where the economy would be right now. I couldn't say, I'm not a prognosticator, but these gentlemen will be able to tell you in about 40 minutes. Read more Comment (0), Email this.

DIRECTOR NUSSLE: Well we patch the AMT, as you probably know, for the budget that we're currently trying to enact for 2009. The President believes that we should not patch the deficit -- or patch the AMT -- that rather we should enact AMT reform as part of a comprehensive tax reform. So while he has patched it in years past, made the determination that it should not be patched going forward, and that it should be part of a tax reform debate and, in fact, may be the, I guess you could say the energy that spurs the tax reform debate, and should, because it's a tax that needs to be reformed. And the President has a longstanding policy to do that. So that's how the President addresses it within this budget. Read more Comment (0), Email this.

MS. PERINO: We want to get it signed as quickly as possible, but I think the person you need to ask for when we're going to get the bill is Speaker Pelosi's office. They send -- Read more Comment (0), Email this.

DIRECTOR NUSSLE: No. Read more Comment (0), Email this.

MS. PERINO: Look, we're going to try to get it done as quickly as possible. The President's schedule is packed, and we don't have a signing ceremony for every bill. So we'll sign it and get it into law. Read more Comment (0), Email this.

DIRECTOR NUSSLE: We're assuming that Congress would not be able to withstand the pressure much longer, and will finally address tax reform.

Anything else? Yes. Read more Comment (0), Email this.

MS. PERINO: I think we answered all those questions last week. We talked about our reservations for the bill. But the President lifted his veto; it passed on Saturday and he's going to sign it.

Steven -- got answered? Mark. Read more Comment (0), Email this.

Q You mentioned how you're pretty happy with the results or you're seeing some benefits from the

DIRECTOR NUSSLE: Well, I think what's peculiar about the talk of a second stimulus is that as -- Dr. Lazear spoke of and I think many have spoken of having a comprehensive energy package that deals with production. The President has laid out a four-step plan in order to accomplish a number of the challenges that -- to meet some of the challenges that we need in oil production and energy production. And rather than take that on, which would be quite stimulative to the economy, it appears that Congress is talking about -- we haven't seen anything yet that has been announced, but because we're getting closer and closer to election day, the proposals we hear about sound a lot more like election stimulus, or political stimulus, than it does economic stimulus, which is not all that surprising, as close as we are to election time.

What's also interesting is that there seems to be some rush to consider so-called stimulus, albeit possibly political stimulus, when the rest of the appropriations process has not yet been tackled, again, a peculiar situation and one that has not been seen for -- in modern time. It was before I was born the last time Congress has not adopted an appropriation bill, even taken it to the floor, by this time in the session. So it's a very strange, peculiar thing to watch why Congress is so interested in stimulating the economy so-called, and yet there is basically inaction on the floors. Read more Comment (0), Email this.

Q Dana, Israeli-Palestinian peace talks. The Prime Minister -- Israeli Prime Minister said today

MS. PERINO: No, I don't think so. I believe that Prime Minister Olmert and President Abbas have every intention of trying to work together and seize this opportunity to try to come together. But there are a lot of complications, one of them being the terrorist attacks on the Israelis coming from the Palestinians. And obviously the Palestinians having a lot of issues to deal with, including announcements of new settlements, that certainly don't help the process. It undermines confidence across the board.

I'm not exactly sure the context of what Prime Minister Olmert said. We have always thought that we would be able to only define a state by the end of the year. Part of that would be the issue of Jerusalem, that the parties are going to have to work out.

Let's let it play out a little bit longer. Secretary Rice has announced that she'll be going to the region soon, and usually when she gets there, there's a little bit of activity beforehand and more voluble pronouncements about what may or may not be able to happen. And then when she's there, they seem to be able to keep moving forward and -- not necessarily have breakthroughs, but keep the process moving along. Read more Comment (0), Email this.

DIRECTOR NUSSLE: Well, actually, as we have projected, as we've seen the actual numbers come in with regard to the prescription drug benefit, the actual cost over the projected cost when it was first passed has come down significantly. I believe the projected cost was about $630 billion. It is now down to, I believe, based on the actual trend rate and how it's been used, we're in the $400 billion range. So it has not had the kind of projected cost that many had thought it would when it was first enacted. So actually that has been generally some very positive news and provided a good benefit for seniors who needed to have prescription drugs as part of a modern health benefit under Medicare.

So we believe that's generally been positive news within this not only MSR, but generally within the fiscal condition of the country. That is not to suggest the GAO is not sounding an appropriate alarm with regard to the unfunded liability for the entitlements. And this is true across the board when it comes to, now, two-thirds of the budget. This is probably one of the more disappointing parts of what Congress is basically not doing, and, in fact, just turned off, or is proposing to turn off the so-called trigger mechanism from Medicare.

This all I think bodes very poorly for our ability as a country to deal with some of these entitlements. The President, in his budget, begins to address this unfunded liability. He does it by thirds. He basically says, let's tackle this in bite-size chunks, if you will, taking on a third in this budget, and then proposing to do so again in the future before they become insolvent. And those are I think positive ways to address the unfunded liability that GAO speaks about. I wish Congress would listen to GAO.

So, we'll see. Yes. Read more Comment (0), Email this.

MS. PERINO: They've said that before, Mark. They've said it before and they've been able to keep things on track. But they also -- they have a lot of issues to deal with. It's not just the international community that's interested in this, but they've got domestic politics that play into this, as well, and they have constituents. And surely they get frustrated at times, and I'm sure there are many times when they just want to throw up their hands and walk away, but a tribute to these leaders is that they've been able to keep at it. Their negotiators keep meeting and the President and Secretary Rice have been able to keep pushing them along. So I think let's let the Secretary have her trip there and see what can come out of it. Read more Comment (0), Email this.

Q You talked about Congress not finishing its appropriations bills. Congressional leaders are saying

DIRECTOR NUSSLE: Well, it's disappointing I think to me and I believe it's going to be disappointing to the American people that they're going to continue to draw a full year's salary and basically wait until next year to do any work. That to me seems like -- as though they're not doing the job that they signed up for. We understand that the Congress is basically gambling on the election, betting that they can get a better deal from the next President.

I hope the next President takes a look at this MSR, takes a look at the fiscal condition, and realizes that increasing taxes is not an answer, spending your way into prosperity -- government spending in particular -- is not an answer, and continuing to ignore the entitlement challenges is also not an answer. From what I read from what Congress is doing, they're going to basically ignore this until the next President comes here. That I believe is something they're going to have to be accountable for, not the President. Read more Comment (0), Email this.

MS. PERINO: Not necessarily, but we'll have to see, because it could be subject to change. Read more Comment (0), Email this.

DIRECTOR NUSSLE: Until we have a chance to see what a CR looks like, a continuing resolution looks like -- Congress still has 19 days in which to do some work and make some determination of how they're going to address this fiscal year. If it's true they're going all the way until next March or April, I have a feeling that the American taxpayers may have something to say about that. Read more Comment (0), Email this.

MS. PERINO: I'm going to go to Ann. Read more Comment (0), Email this.

DIRECTOR NUSSLE: What we're doing, and we'll -- I think probably the best way to do that is to give you a copy of the amendment, let you have a chance to take a look at it -- but what we are doing is we are conforming the budget proposal itself to what the President has announced as part of his energy plan. And we're calling on Congress to adopt that. Congress, as you know, has a moratorium within their appropriation bill, and we're asking them to drop that moratorium. And that's the budget amendment that we're sending forward.

So, time for -- we'll come back to two more real quick and then we'll be done. Yes. Read more Comment (0), Email this.

MS. PERINO: Because we have had in our country since after 9/11 a huge amount of security costs that have been brought on our country. It's not just the war in Iraq. We have a war in Afghanistan and also a new Department of Homeland Security, and various measures that we're trying to take to prevent against any type of terrorist attack, one that would be -- explosive devices or biological or chemical or nuclear. We make no -- we make no apologies for the money we have spent to protect the people of this country.

And that is why we have on this discretionary side of the ledger, want to reduce how much money we were committing taxpayers to pay for. For example, we don't think that increasing spending over inflation, over the rate of inflation every year is a good idea, so the President has brought that down.

And I think what you'll see today is there is actually some numbers that are helpful. And if we can keep -- actually, I should say numbers that are hopeful. And if we can keep Congress from increasing taxes, or increasing spending unnecessarily, then we will be able to meet the President's goal, reducing the deficit in half by 2012. Read more Comment (0), Email this.

DIRECTOR NUSSLE: Again, at this point in time, it's speculating, and I think what we'd like to do is take a look at, work with the Congress to see if, in fact, they're only going to send a continuing resolution. It's been a tradition in those situations for it to be clean -- so-called clean CR, but there are many things they may want to add, may want to subtract. We would have to take a look at that before we could give any advice to the President.

Last one. Read more Comment (0), Email this.

MS. PERINO: I am going to let Director Nussle and Chairman Lazear answer specific questions, because they'll have the breakout. But I think there is lots of different issues that go into the cost, how much -- the cost of our deficit.

And one thing that Americans should get real serious about is entitlement spending, because that's eating up more and more parts of the budget, and it's going to start creeping into that discretionary spending and we'll all have less to spend on other things, or to bring down the deficit. Read more Comment (0), Email this.