Part II of the text of Obama's news conference

Text of President Barack Obama's news conference Tuesday at the White House, as transcribed by CQ Transcriptions: Part II

OBAMA: But it is — it is going to be an impossible task for us to balance our budget if we're not taking on rising health care costs, and it's going to be an impossible task to balance our budget or even approximate it if we are not boosting our growth rates. And — and that's why our budget focuses on the investments we need to make that happen.

Q: But even under your budget, as you said, over the next four or five years, you're going to cut the deficit in half, then, after that, six years in a row, it goes up, up, up. If you're making all these long-term structural cuts, why does it continue to go up in the out-years?

OBAMA: Well, look, it is going to take a whole host of adjustments, and we couldn't reflect all of those adjustments in this budget.

Let me give you an example. There's been a lot of talk about entitlements in Medicare and Medicaid. The biggest problem we have long term is Medicare and Medicaid. But whatever reforms we initiate on that front — and we're very serious about working on a bipartisan basis to reduce those deficits or reduce those costs — you're not going to see those savings reflected until much later.

And so a budget is a snapshot of what we can get done right now, understanding that, eight, ten years from now, we will have had a whole series of new budgets and we're going to have to make additional adjustments.

And once we get out of this current economic crisis, then it's going to be absolutely important for us to take another look and say, are we growing as fast as we need to grow? Are there further cuts that we need to make? What other adjustments are — is it going to take for us to have a sustainable budget level?

But, keep in mind, just to give one other example, as a percentage of gross domestic product, we are reducing nondefense discretionary spending to its lowest level since the '60s, lower than it was under Reagan, lower than it was under Clinton, lower than it was under Bush or both Bushes.

And so, if we're growing, if we are doing what's necessary to create new businesses and to expand the economy, and we are making sure that we're eliminating some of these programs that aren't working, then, over time, that gap can close.

But I'm — look, I'm not going to lie to you. It is tough. As I said, that's why the critics tend to criticize, but they don't offer an alternative budget. Because even if we were not doing health care, we were not doing energy, we were not doing education, they'd still have a whole bunch of problems in those out-years, according to CBO projections. The only difference is that we will not have invested in what's necessary to make this economy grow.

Is Lourdes here from Univision?

Q: Thank you, Mr. President. Today, your administration presented a plan to help curb the violence in Mexico and also to control any or prevent any spillover of the violence into the United States.

Do you consider the situation now a national security threat? And do you believe that it could require sending national troops to the border? Governor Perry of Texas — Texas has said that you still need more troops and more agents. How do you respond to that?

OBAMA: Well, first of all, let's focus on what we did today. It's very significant.

We are sending millions of dollars in additional equipment to provide more effective surveillance. We are providing hundreds of additional personnel that can help control the border, deal with customs issues.

We are coordinating very effectively with the Mexican government and President Calderon, who has taken on an extraordinarily difficult task of dealing with these drug cartels that have gotten completely out of hand.

And so the steps that we've taken are designed to make sure that the border communities in the United States are protected and you're not seeing a spillover of violence, and that we are helping the Mexican government deal with a very challenging situation.

Now, we are going to continue to monitor the situation. And if the steps that we've taken do not get the job done, then we will do more.

One last point that I want to make about this. As I said, President Calderon has been very courageous in taking on these drug cartels. We've got to also take some steps, even as he is doing more to deal with the drug cartels sending drugs into the United States, we need to do more to make sure that illegal guns and cash aren't flowing back to these cartels.

That's part of what's financing their operations. That's part of what's arming them. That's what makes them so dangerous. And this is something that we take very seriously and we're going to continue to work on diligently in the months to come.

Kevin Baron, Stars and Stripes? Is Kevin here? There you go.

Q: Mr. President, where do you plan to find savings in the Defense and Veterans Administration's budgets when so many items that seem destined for the chopping block are politically untenable, perhaps?

OBAMA: I'm sorry. So many ...

Q: When so many items that may be destined for the chopping block seem politically untenable, from major weapons systems, as you mentioned procurement, to wounded warrior care costs, or increased operations in Afghanistan, or the size of the military itself.

OBAMA: Well, a couple — a couple of points I want to make. The budget that we've put forward reflects the largest increase in veterans funding in 30 years. That's the right thing to do.

Chuck asked earlier about sacrifices. I don't think anybody doubts the extraordinary sacrifices that men and women in uniform have already made. And when they come home, then they have earned the benefits that they receive. And, unfortunately, over the last several years, all too often the VA. has been underresourced when it comes to dealing with things like post-traumatic stress disorder or traumatic brain injury, dealing with some of the backlogs in admission to VA. hospitals.

So there are a whole host of veterans issues that I think every American wants to see properly funded, and that's what's reflected in our budget.

Where the savings should come in — and I've been working with Secretary Gates on this, and we'll be detailing it more in the weeks to come — is, how do we reform our procurement system so that it keeps America safe and we're not wasting taxpayer dollars?

OBAMA: And there is uniform acknowledgment that the procurement system right now doesn't work. That's not just my opinion. That's John McCain's opinion. That's Carl Levin's opinion.

There are a whole host of people who are students of the procurement process that will say, if you've got a whole range of billion-dollar, multibillion-dollar systems that are, where we're seeing cost overruns of 30 percent or 40 percent or 50 percent, and then still don't perform the way they're supposed to or are providing our troops with the kinds of tools that they need to succeed on their missions, then we've got a problem.

Now, I think everybody in this town knows that the politics of changing procurement is tough, because, you know, lobbyists are very active in this area. You know, contractors are very good at dispersing the jobs and plants in the Defense Department widely.

And so what we have to do is to go through this process very carefully, be more disciplined than we've been in the last several years.

As I've said, we've already identified potentially $40 billion in savings just by some of the procurement reforms that are pretty apparent to a lot — a lot of critics out there. And we are going to continue to find savings in a way that allows us to put the resources where they're needed, but to make sure that we're not simply fattening defense contractors.

One last point. In order for us to get a handle on these costs, it's also important that we are honest in what these costs are. And that's why it was so important for us to acknowledge the true costs of the Iraq war and the Afghan war, because if — if those costs are somehow off the books and we're not thinking about them, then it's hard for us to make some of the tough choices that need to be made.

OK, Ed Henry. Where's Ed? There he is.

Q: Thank you. Mr. President. You spoke again at the top about your anger about AIG. You've been saying that for days now. But why is it that it seems Andrew Cuomo seems to be in New York getting more actual action on it?

And when you and Secretary Geithner first learned about this 10 days, two weeks ago, you didn't go public immediately with that outrage. You waited a few days. And then when — you went public after you realized Secretary Geithner really had no legal avenue to stop it.

And, more broadly, I just want to follow up on Chip and Jake. You've been very critical of President Bush doubling the national debt. And, to be fair, it's not just Republicans hitting you. Democrat Kent Conrad, as you know, said, quote, When I look at this budget, I see the debt doubling again.

You keep saying that you've inherited a big fiscal mess. Do you worry, though, that your daughters, not to mention the next president, will be inheriting an even bigger fiscal mess if the spending goes out of control?

OBAMA: Of course I do, Ed, which is why we're doing everything we can to reduce that deficit.

Look, if this were easy, then, you know, we would have already had it done, and the budget would have been voted on, and everybody could go home. This is hard.

And the reason it's hard is because we've accumulated a structural deficit that's going to take a long time, and we're not going to be able to do it next year or the year after or three years from now. What we have to do is bend the curve on these deficit projections.

And the best way for us to do that is to reduce health care costs. That's not just my opinion. That's the opinion of almost every single person who has looked at our long-term fiscal situation.

Now, how do we — how are we going to reduce health care costs? Because the problem is not just in government-run programs. The problem is in the private sector, as well. It's experienced by families. It's experienced by businesses.

And so what we've said is, look, let's invest in health information technologies. Let's invest in preventive care. Let's invest in mechanisms that look at who's doing a better job controlling costs while producing good quality outcomes in various states and let's reimburse on the basis of improved quality, as opposed to simply how many procedures you're doing. Let's do a whole host of things, some of which cost money on the front end, but offer the prospect of reducing costs on the back end.

Now, the alternative is to stand pat and to simply say, we are just going to not invest in health care. We're not going to take on energy. We'll wait until the next time that gas gets to $4 a gallon. We will not improve our schools. And we'll allow China or India or other countries to lap our young people in terms of their performance. We will settle on lower growth rates, and we will continue to contract, both as an economy and our ability to — to provide a better life for our kids.

That, I don't think, is the better option. Now, am I completely satisfied with all the work that needs to be done on deficits? No. That's why I convened a fiscal responsibility summit — that started in this room — to start looking at entitlements and to start looking at the big drivers of costs over the long term.

Not all of those are reflected in our budget, partly because the savings we anticipate would be coming in years outside of the ten-year budget cycle that we're talking about.

OK?

Q: But on AIG, why did you wait — why did you wait days to come out and express that outrage? It seems like the action is coming out of New York and the attorney general's office. It took you days to come public with Secretary Geithner and say, look, we're outraged. Why did it take so long?

OBAMA: It took us a couple of days because I like to know what I'm talking about before I speak.

All right.

Major?

Q: Good evening, Mr. President. Thank you.

Taking this economic debate a bit globally, senior Chinese officials have publicly expressed an interest in international currency. This is described by Chinese specialists as a sign that they are less confident than they used to be in the value and the reliability of the U.S. dollar. European countries have resisted your calls to spend more on economic stimulus.

I wonder, sir, as a candidate who ran concerned about the image of the United States globally, how comfortable you are with the Chinese government, run by Communists, less confident than they used to be in the U.S. dollar and European governments, some of them center-left, some of them Socialist, who say you're asking them to spend too much?

OBAMA: Well, first of all, I haven't asked them to do anything. What I've suggested is, is that all of us are going to have to take steps in order to lift the economy.

OBAMA: We don't want a situation in which some countries are making extraordinary efforts and other countries aren't with the hope that somehow the countries that are making those important steps lift everybody up. And so somebody's got to take leadership.

It's not just me, by the way. I was with Kevin Rudd, the prime minister of Australia, today, who was very forceful in suggesting that countries around the world, those with the capacity to do so, take the steps that are needed to fill this enormous hole in global demand.

Gordon Brown, when he came to visit me, said the exact same thing.

So the goal at the G-20 summit, I think, is to do a couple of things, number one, say to all countries: Let's do what's necessary in order to create jobs and to get the economy moving again. Let's avoid steps that could result in protectionism, that would further contract global trade. Let's focus on, how are we going to move our regulatory process forward, in order, so that we do not see the kinds of systemic breakdowns that we've already seen?

And that requires, that means not just dealing with banks, but also some of the other financial flows that are out here that are currently unregulated. We've got to update regulations that date back to the 1930s, and we're going to have to do some coordination with other countries in order to accomplish that.

As far as confidence in the U.S. economy or the dollar, I would just point out that the dollar is extraordinarily strong right now. And the reason the dollar is strong right now is because investors consider the United States the strongest economy in the world with the most stable political system in the world.

So you don't have to take my word for it. I think that there is a great deal of confidence that, ultimately, although we are going through a rough patch, that the prospects for the world economy are very, very strong.

And, and last point I would make, in terms of changing America's image in the world, Garrett, I, you know, I haven't looked at the latest polling around the world, but I think, I think it's fair to say that the response that people have had to our administration and the steps that we've taken are ones that are restoring a sense of confidence and the ability of the United States to assert global leadership.

Q: (OFF-MIKE)

OBAMA: That will just strengthen — excuse me?

Q: (OFF-MIKE) global currency?

OBAMA: I don't believe that there's a need for a global currency.

Mike Allen, Politico? Hi, Mike.

Q: Mr. President, are you — thank you. Thank you, Mr. President. Are you reconsidering your plan to cut the interest rate deduction for mortgages and for charities? And do you regret having proposed that in the first place?

OBAMA: No, I think it's — I think it's the right thing to do, where we've got to make some difficult choices. Here's what we did with respect to tax policy.

What we said was that, over the last decade, the average worker, the average family have seen their wages and incomes flat. Even in times where supposedly we were in the middle of an economic boom, as a practical matter, their incomes didn't go up. And so, well, we said, Let's give them a tax cut. Let's give them some relief, some help, 95 percent of American families.

Now, for the top 5 percent, they're the ones who typically saw huge gains in their income. I, I fall in that category. And what we've said is, for those folks, let's not renew the Bush tax cuts, so let's go back to the rates that existed back in, during the Clinton era, when wealthy people were still wealthy and doing just fine, and let's look at the, the level at which people can itemize their deductions.

And what we've said is: Let's go back to the rate that existed under Ronald Reagan. People are still going to be able to make charitable contributions. It just means, if you give $100 and you're in this tax bracket, at a certain point, instead of being able to write off 36 percent or 39 percent, you're writing off 28 percent.

Now, if it's really a charitable contribution, I'm assuming that that shouldn't be the determining factor as to whether you're giving that $100 to the homeless shelter down the street.

And so this provision would affect about 1 percent of the American people. They would still get deductions. It's just that they wouldn't be able to write off 39 percent.

In that sense, what it would do is it would equalize. When I give $100, I'd get the same amount of deduction as when some, a bus driver who's making $50,000 a year, or $40,000 a year, gives that same $100. Right now, he gets 28 percent, he gets to write off 28 percent. I get to write off 39 percent. I don't think that's fair.

So I think this was a good idea. I think it is a realistic way for us to raise some revenue from people who've benefited enormously over the last several years.

It's not going to cripple them. They'll still be well-to-do. And, you know, ultimately, if we're going to tackle the serious problems that we've got, then, in some cases, those who are more fortunate are going to have to pay a little bit more.

Q: It's not the well-to-do people. It's the charities. Given what you've just said, are you confident the charities are wrong when they contend that this would discourage giving?

OBAMA: Yes, I am. I mean, if you look at the evidence, there's very little evidence that this has a significant impact on charitable giving.

I'll tell you what has a significant impact on charitable giving is a financial crisis and an economy that's contracting. And so the most important thing that I can do for charitable giving is to fix the economy, to get banks lending again, to get businesses opening their doors again, to get people back to work again. Then I think charities will do just fine.

Kevin Chappelle (ph)? Hi, Kevin.

Q: Thank you, Mr. President. A recent report found that, as a result of the economic downturn, 1 in 50 children are now homeless in America. With shelters at full capacity, tent cities are sprouting up across the country.

In passing your stimulus package, you said that help was on the way. But what would you say to these families, especially children, who are sleeping under bridges and in tents across the country?

OBAMA: Well, the first thing I'd say is that I'm heartbroken that any child in America is homeless. And the most important thing that I can do on their behalf is to make sure their parents have a job. And that's why the recovery package said, as a first priority, how are we going to save or create 3.5 million jobs?

How can we prevent layoffs for teachers and police officers? How can we make sure that we are investing in the infrastructure for the future that can put people back to work right away? How do we make sure that, when people do lose their jobs, that their unemployment insurance is extended, that they can keep their health care?

So, there are a whole host of steps that we've done to provide a cushion for folks who have fallen on very hard times and to try to spur immediate projects that can put people back to work.