Clinton retreats on spending Deficit reduction climate prevails


WASHINGTON -- In another major setback for President Clinton's economic program, the administration has agreed to give up about half of its proposed new spending on domestic programs for next year.

The president's concession, which congressional sources said would total about $3 billion in new funds for domestic social programs in fiscal 1994, is an attempt to placate Congress as it struggles to stay within self-imposed spending limits.

Mr. Clinton's investment package is the latest casualty of a new attitude in Congress that prizes deficit-reduction above new spending.

The retreat on domestic investment marks the latest reversal for Mr. Clinton's drive to reorder the nation's spending priorities away from defense and toward more emphasis on social programs, as he promised to do during his election campaign.

Last month, the president suffered an embarrassing Senate defeat over his $16.3 billion program for a quick burst of public works spending to create new jobs.

But in the context of a $1.15 trillion budget, the $3 billion concession on investments may be a small price to pay for soothing the president's troubled relations with Congress as bigger fights over tax increases and health care reforms lie ahead.

Mr. Clinton's offer was made in discussions over the past few days between White House budget director Leon E. Panetta and leaders of the House and Senate Appropriations Committees, said congressional and administration sources.

The Appropriations committee chiefs have been protesting since Clinton unveiled his fiscal 1994 budget proposal April 8 because it came with $5.7 billion more domestic discretionary spending for next year than Congress had approved in the budget blueprint adopted the week before. That left the legislators with the politically painful task of cutting almost $6 billion from the budget to meet their own self-imposed spending limits.

The money that needed to be cut was nearly equal to Mr. Clinton's $5.9 billion in new investments -- the first phase of his five-year, $113.6 billion long-term spending program for

education, Head Start, technological research and public works

intended to put the economy on a sounder footing.

To preserve Mr. Clinton's investments, Congress would have to cut elsewhere. "That would leave us with the blame for cutting popular programs, while the president gets the credit for the new investments," complained one of the 13 House Appropriations subcommittee chairmen, known as the "cardinals."

Although cutting spending is a very popular concept in the abstract, legislators find it difficult to actually do when confronted with special interest lobbyists determined to save their share of the federal pie.

Mr. Clinton, whose $5.7 billion budget gap demonstrated his own unwillingness to recommend additional cuts, is now trying to meet the legislators halfway, administration officials said.

In his meeting Tuesday with House Appropriations Committee Chairman William H. Natcher of Kentucky, and Wednesday with Senate Appropriations Committee leader Robert C. Byrd of West Virginia, Mr. Panetta "tried to provide some guidance as to the administration's priorities on the investment package," said a spokesman for the Office of Management and Budget.

The spokesman, Barry Toiv, said he could not confirm what percentage of the package Mr. Clinton would give up. But House and Senate sources put the figure at $3 billion, or about half of the request.

His investment package would not create new programs but simply enhance existing ones.

Mr. Toiv said Mr. Panetta also offered to propose specific recommendations for cuts elsewhere in the budget to finance the remaining investments, but that Mr. Natcher said he would work that out with his subcommittee chairmen. Mr. Natcher was not available for comment yesterday. Other committee sources said they expect the administration's proposals for cuts to be made informally through the subcommittees.

Congress is now working to live up to the budget resolution it adopted last month calling for nearly $70 billion in deeper spending cuts over the next five years than Mr. Clinton had proposed. Although the legislators can vote to exceed their self-imposed ceilings, there is no thought of doing so in this tight-fisted climate.

This atmosphere was created in part by independent presidential candidate Ross Perot, who warned of the perils of the mushrooming federal budget deficit.

But Mr. Clinton also stirred new sentiment for budget-cutting in his February economic address, when he spoke of the need for national sacrifice and then proposed $337 billion in new taxes over the next five years.

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