House OKs Scaled-Down Proposal to Reduce Deficit

The House today approved a scaled-down deficit-reduction bill that would save $6.9 billion this year and keep the current cigarette tax, release offshore oil revenues and press the states to raise the drinking age to 21.

The measure faces an uncertain fate in the Senate and a possible veto if it reaches the White House as written.

The bill was brought up last year in an effort to bring 1986 spending in line with the budget resolution, but became stalled by controversies over a number of items, primarily the financing arrangements for the Superfund program. The Superfund was removed from the bill and is being dealt with in a separate measure.

The earlier version would have saved $75 billion, but the saving under the new bill fell to $6.9 billion for 1986 and $18.1 billion over three years.

The bill would continue the current 16-cents-a-pack cigarette tax, which is scheduled to drop to 8 cents on March 15. The bill also affects the tobacco program by providing for the sale of some pre-1982 stocks and the purchase of tobacco in government storage.

The bill provides for coastal states to receive 27% of offshore oil royalties that have accumulated since 1978, with the rest going to the federal government.

It also would make permanent penalties against states that do not raise the legal drinking age in their states to 21 years. Those states face the loss of federal money if they fail to raise the drinking age.

Medicare payment rates to hospitals would be increased by 0.5% under the bill and the current freeze on payment rates to physicians would continue.

The measure also would extend the trade adjustment assistance program, retroactive to Dec. 19, in order to retrain workers who lose their jobs because of foreign competition.