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Clinton says budget plan to spur U.S. He vows end to deficit in 6 years, earmarks money for education; 'Economic growth' pushed; Republicans skeptical, but say document is 'good starting point'


WASHINGTON -- President Clinton proposed a 1998 federal spending plan yesterday, expressing confidence that he had put the nation on a path to a balanced budget in six years while still earmarking money for a host of new spending programs, mostly in education and health care.

"I am proud of this budget," Clinton said. "It will spur economic growth, promote education and our other priorities and eliminate the federal deficit for the very first time in three decades."

On Capitol Hill, Republican leaders were underwhelmed by the president's $1.7 trillion spending blueprint. But reflecting their desire to reach a deal that balances the budget by 2002, they refrained from combative criticism.

"It is in need of some very serious repairs," said Sen. Pete V. Domenici of New Mexico, chairman of the Senate Budget Committee. But he added: "I'm not dumping on it. This is a very good starting point."

Republicans made plain, however, their skepticism that a plan with few spending cuts and much new spending would lead to a balanced budget in six years.

They complained that Clinton's economic projections were too optimistic, that he failed to offer a long-term plan to curb the growth of Medicare, that his tax-cut plan was too small and narrow and that he proposed a half-dozen new "automatic" spending programs that threaten to make budget cutting harder in the future.

About two-thirds of Clinton's budget savings, Republicans noted, would occur in 2001 and 2002, after he leaves office.

"We just really do not have the kind of bold document that we would like to see that would be a message to people that there really is change in Washington," said Rep. John R. Kasich of Ohio, chairman of the House Budget Committee.

L Kasich said bluntly: "It does not balance in the year 2002."

Clinton acknowledged that a chasm remains between him and the Republicans who control Congress. But he signaled that he was willing to negotiate.

"I am convinced those differences can be bridged," the president said. "Some of the differences we have are principled differences, and we will have to work hard to have an honorable compromise. But I believe we can do it."

Republican congressional leaders stressed a willingness to compromise as well. They reiterated their pledge to use the president's budget as the starting point for reaching a deal.

But they said they were discouraged that his plan left so much ground to cover.

Domenici said he found it frustrating that Clinton classified several attractive new proposals -- such as health care for Alzheimer's patients and health insurance for children of working-class parents -- as automatic spending programs. Such programs need no annual budget reviews but rather continue growing automatically.

"Who is going to oppose adding $14 billion to Medicare for seniors, when it is for Alzheimer's patients?" Domenici said. Such automatic spending, he said, has swollen the deficit the country is trying to eliminate, and it accounts for more than half of every federal dollar spent.

Other new spending initiatives proposed by Clinton include $18 billion over five years for food stamps and other benefits for legal immigrants; $9.8 billion to provide family health insurance to lower-middle-class workers who are between jobs; $3.6 billion to help prepare welfare recipients to work; $5 billion for school construction; $4 billion to expand the student loan program to poor families, as well as a $1.7 billion increase in the regular student-loan program next year alone; and $1.1 billion more next year to hire police officers.

"The president of the United States, while declaring the era of big government at an end, every day comes up with another program to expand government," Kasich said.

"The president is still a believer in big government -- and we're in a tug of war."

There are several issues of contention in the budget.

One crucial issue will be whose economic projections will be used to estimate future budget deficits.

Republicans pointed out -- correctly -- that the figures used by Clinton's Office of Management and Budget do not account for a recession -- or even a slowdown of the humming economy any time in the next six years.

The administration replies -- also correctly -- that in the past four years, OMB's figures have proved more reliable than those furnished by the nonpartisan Congressional Budget Office.

The CBO is expected to announce soon that by its own accounting, Clinton's budget will produce not the $17 billion surplus he envisions in the year 2002, but instead a deficit of $40 billion to $50 billion.

A second issue of contention will be over tax cuts. Clinton proposes $98 billion in cuts over five years.

The tax cuts would be in the form primarily of a child tax credit that begins at $300 a year and rises to $500 a year for families earning less than $75,000 a year; a $10,000 deduction for college tuition or a $1,500 tax credit; and an end to capital gains taxes on home sales.

Republicans favor the education tax breaks. But they want to go further on the family tax credit and on capital gains; their tax-cut package is worth twice as much as Clinton's.

The gap between the sides may be even greater, because Clinton is also proposing $76 billion over five years in tax increases by closing corporate-tax loopholes and extending expiring excise and other taxes, such as the 10 percent surcharge on airline tickets.

A third area of likely friction is defense. The administration proposes a $259.4 billion defense budget for next year, $7.8 billion below what Congress appropriated for this year. The administration plan includes $42.6 billion for weapons modernization, $2.9 billion less than was projected, a move that troubled Republicans.

Moreover, the budget includes a reduction of $4.8 billion in spending from the current year's budget to pay for peacekeeping in Bosnia, which the administration extended by 18 months.

"I continue to be deeply concerned about this administration's request for defense funding -- especially in the areas of readiness and modernization," said Sen. Strom Thurmond, the South Carolina Republican who chairs the Armed Services Committee. "The Clinton administration has cut modernization to its lowest level since 1950."

Defense Secretary William S. Cohen acknowledged that the modernization figure was "somewhat disappointing," but noted that the budget was projected to rise steadily to $68 billion by 2002.

A fourth potential stumbling block is Clinton's deferral of most of the $137 billion in unspecified spending cuts to the future, after he leaves office.

Stan Collender, an independent budget analyst, said he found the budget plausible in its projections for the economy but less so in its planned spending cuts far into the future.

"The credibility gets strained a little bit in the 'out years' on discretionary spending," he said. "The cuts are going to be difficult."

The fifth difference between congressional Republicans and the White House remains what to do about entitlements. Clinton has proposed less savings from Medicaid than he did a year ago.

And though he appeared to move toward the Republicans on the urgent and politically explosive problem of reining in Medicare spending, some Republicans say he did so only by virtue of accounting gimmicks.

"The administration has embarked on a journey to Shangri-La, a mythical place where spending goes up and where budgets magically balance with a wave of the hand," said Rep. Tom DeLay of Texas, the House Republican whip.

For Americans concerned that this budget debate could degenerate into the furor that shut the government down last year, there was a silver lining: DeLay's needling was about as strong as it got yesterday -- and it was met with good humor at the White House.

"Sounds like an overexcited press secretary prepared the press release," Clinton's press secretary, Mike McCurry, said with a laugh.

"We certainly expect criticism," McCurry added. "We certainly expect alternative ideas. The most encouraging thing to the president is that this budget is being received seriously. It is not being cast aside as 'dead on arrival.' "

Pub Date: 2/07/97

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