Clinton pledges trust fund to reduce deficit Tax boost revenue wouldn't go for new programs, he says


WASHINGTON -- President Clinton, seizing on the public mood to end deficit spending, vowed yesterday to set up a "legally separate" trust fund that would guarantee that tax increases he has proposed would go toward reducing the government's annual deficit.

"The time has come to prove that when we say we're going to do something with the people's money, we actually do it," the president said in a speech in New York. "The trust fund will ensure that we do just that."

The trust fund proposal, made first by Mr. Clinton in the Rose Garden yesterday, was immediately ridiculed by Republicans as an accounting gimmick, but Mr. Clinton's statements were significant for another reason: He aggressively began building the case for spending cuts and tax increases he has proposed.

"I will put this money in a trust fund, but that does not mean the money does not have to be paid," Mr. Clinton told an audience in the historic Great Hall of the Cooper Union for the Advancement of Science and Art in New York City. "If you want the interest rates to stay down . . . you must undergo the pain of spending cuts and tax increases, because that's the only way to really bring the deficit down."

The trust fund idea originally was floated by Arizona Democratic Sen. Dennis DeConcini last year and was shot down by Leon E. Panetta, then chairman of the House Budget Committee, who argued that it was based on political necessities, not recognized accounting procedures.

Aides to Rep. Charles E. Schumer, a New York Democrat who was at Mr. Clinton's side yesterday, spoke yesterday of a "wall" separating the money paid into the trust fund account from other money and of strict procedures to ensure that any new expenditures by the government would be paid for by cuts in discretionary spending.

In practice, however, the money wouldn't go to any special bank account or secret safe. The law requires that tax money be used to buy Treasury bills. And since the government spends all the money it collects -- and more -- any money designated for the trust fund would simply be paid out anyway.

But White House advisers are seeking to take advantage of polls done for the Clinton administration that indicate a majority of voters will reluctantly accept tax increases if they know the money is not going for more government spending, but for balancing the federal budget.

One of Mr. Clinton's problems has been that he and his aides have spent much more time in the first three months of his administration talking up his plans for new spending in areas such as Head Start, child immunization and college education grants.

Mr. Clinton did not back away from his pet programs yesterday, but he said his trust fund idea was a way to show Americans that those programs are not what necessitate the tax increases.

Repeating an earlier line, he said taxes must go up because the projections for the annual deficits in three of the four years of his term were $50 billion or so higher than expected.

That is not entirely accurate. Last July, Mr. Clinton correctly predicted that the Bush administration projections were low and that they might end up being as high as $400 billion, a figure that turned out to be far too high, but which Mr. Clinton used for the rest of the campaign.

Yesterday's attempt to make a big distinction between raising taxes to reduce the deficit and raising taxes to pay for programs he wants also is something Mr. Clinton started during the campaign. In October, he said, "I'm not going to raise taxes on middle-class Americans to pay for the programs I've recommended."

That struck Republicans as a distinction without a difference. And yesterday's call for a deficit-reduction trust fund was scorned as even more phony.

New Mexico Republican Pete V. Domenici called the proposal "a sham," "a gimmick," "an illusion" and "blue smoke and mirrors."

Accountants might agree. The deficit, after all, is simply the difference between the amount of money the government spends in a given year and the amount it takes in.

Next year, for instance, under Mr. Clinton's budget proposal, the federal government would spend about $1.5 trillion while bringing in $1.24 trillion in taxes and fees. The difference, $260 billion, is next year's projected deficit. And all of the money going out comes out of the same pot, regardless of whether it is divided into different accounts.

"The American people will recognize it for what it is," said Torie Clarke, President George Bush's former spokeswoman, "a shell game."

Privately, Democrats on Capitol Hill were not disputing the fact that the trust fund doesn't really change the numbers. But an aide to Mr. Schumer said that setting up such a trust fund would not only help convince voters that "we aren't still taxers and spenders," but also would force Congress to remember what it had promised.

Members of the Senate Budget Committee staff said the idea was Mr. DeConcini's first but that it went nowhere. Mr. DeConcini tried again this year, with a little more success, managing to attach trust fund language to the Senate version of this year's budget agreement.

In February, Mr. Schumer began discussing it with four House colleagues, who began a few weeks later to pitch it to the White House.

They didn't get anywhere at first, partly because they kept running into opposition from Mr. Panetta, now Mr. Clinton's budget director, sources said.

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