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Clinton's budget travails


Washington -- PRESIDENT Clinton's weak effort to get back in the budget ballgame does not alter one big political fact.

Whatever he has to say about the budget is of little consequence.

Its fate lies with the Republican Congress.

Not only will Congress draft a budget that reflects its own philosophy, but also it wields enormous leverage over the president and will likely get its way in the end.

Unless Congress approves appropriations, most discretionary programs will halt on Oct. 1, when the new fiscal year starts. Only those government functions essential to health and safety will be up and running.

It will be too distasteful for President Clinton to see welfare, road-building, small-business loans, environmental regulations and other programs grind to a tire-smoking halt.

What's potentially more troubling for the president is that in November the $4.9 trillion debt ceiling will be reached, and by law cannot be exceeded.

Unless Congress acts in a timely fashion, he will have to cut back all discretionary programs and possibly entitlements such as Social Security, Medicare and Medicaid, because the government would have to spend incoming revenues to roll over debt as bonds and notes come due.

The House and Senate have both passed resolutions calling for balanced budgets in the year 2002, and they intend to do this without raising taxes. But the House version is preferable for three important reasons.

First, the House budget offers a tax cut. The Senate version contemplates action on taxes -- maybe and, if so, in the sweet by and by.

The House would accelerate economic growth through an expanded individual retirement account, changes in business depreciation rules and by reducing the tax rate on capital gains. The Senate offers nothing along these lines.

The House plan also calls for a $500 nonrefundable tax credit for each dependent, and eliminates the so-called marriage penalty, under which a couple living together pay less in taxes than if they were married.

Second, the House would make up for part of the cut in tax revenues by spending a little less -- $11.9 trillion -- than the Senate's $12 trillion on federal programs over seven years.

The congressional budget committees have forecast that annual federal spending and tax revenues at the end of the seven years would be nearly $70 billion less under the House plan than under the Senate's version.

Finally, the House budget is more likely to restrain spending because the House is more willing to pare down the federal establishment. It would close down three Cabinet departments -- Commerce, Education and Energy -- altogether. The Senate would eliminate only Commerce.

The House would terminate hundreds of unnecessary agencies -- such as the National Endowment for the Arts. The Senate would reduce the financing of many but leave them intact.

In proposing to balance the budget over 10 years, Mr. Clinton cautioned against reducing the deficit too fast so as not to hurt the economy. This echoes a recent warning by Laura D'Andrea Tyson, Clinton's chief economic adviser, that rapid reduction of the deficit would drive the economy into a tailspin.

How soon we forget. In the 1987 fiscal year, total federal spending, adjusted for inflation, fell for the first time in nearly two decades, and the deficit plummeted from $221 billion to $150 billion.

There are no grounds to imagine that the national recession in 1990 had anything to do with the rapid reduction of the deficit in 1987.

But there are firm grounds to believe that today's economy will grow stronger under the rigorous Republican approach to deficit reduction.

I= Jim Miller was budget chief in the Reagan administration.

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