BUSH BUDGET PRIORITIES : Democrats Reject Medicare Cuts, Accuse Bush of ‘Voodoo Economics’

Pledges of bipartisanship began to crumble only minutes after President Bush’s speech to Congress Thursday night when Democratic leaders flatly rejected cuts in Medicare payments or capital gains taxes and accused Bush of reviving “voodoo economics.”

Although House Speaker Jim Wright (D-Tex.) renewed his party’s commitment to cooperate with the new President in devising a budget, the strident tone of the Democrats’ official response to Bush’s speech and budget proposals suggested that America’s politically divided government was returning to business as usual after the heady first days of the new Administration.

“We’ll give him our sincere cooperation,” Wright said in a televised speech after Bush’s appearance before a joint session of Congress. “That does not mean obedience. It does mean our honest help and our very best advice.”

Desire on Social Causes

Democrats praised Bush’s desire to tackle social causes such as improving education and health care and combatting drug abuse, but they took the President to task for failing to explain what other federal programs he would cut to pay for these initiatives without additional taxes.

“I’d say it was a nice laundry list of problems, sure, but it doesn’t really speak to the central issue,” said Rep. Vic Fazio (D-Sacramento), a member of the House Budget and Appropriations committees. “Where does the money come from to pay for all of this? It sounds like voodoo economics revisited to me.”

“Voodoo economics” is a term first coined by Bush in 1980 to describe the supply-side proposals of Ronald Reagan when both were seeking the GOP presidential nomination.

“He’s saying to Congress: ‘It’s your baby. The hard choices are yours,’ ” added Rep. Leon E. Panetta (D-Monterey), chairman of the House Budget Committee.

Democratic leaders viewed Bush’s proposals to cut Medicare payments for the elderly while trimming the capital gains taxes paid by the rich as evidence that the so-called “flexible freeze” would be unfair. Wright emphasized that such a strategy is unacceptable to Democrats.

Flexibility for the Rich

“We would have to reject any kind of ‘flexible freeze’ that would bend with flexibility for the rich and powerful, but freeze out the middle-income families of America,” he said.

Wright was particularly emphatic in condemning Bush’s proposal to trim the growth in Medicare payments to doctors and hospitals. “We will oppose attempts to cut Medicare,” he said flatly.

At the same time, Democrats made it plain that congressional leaders are in no mood to accept Bush’s contention that a cut in capital gains taxes would increase federal revenues by about $5 billion. Capital gains taxes are levied on the sales of stocks or other investments.

Rep. Dan Rostenkowski (D-Ill.), chairman of the House Ways and Means Committee, announced earlier in the day that he would “strongly resist” any changes in the 1986 Tax Reform Act--”including the return to a preferential tax rate for capital gains.”

“I’m not about to tell the wage earners in Chicago that they should pay a higher tax than stockbrokers,” he said.

Senate Majority Leader George J. Mitchell (D-Me.) said that cutting taxes would be foolish at a time when revenues are in short supply. “When the most serious problem we face is the budget deficit, it makes no sense to increase that deficit by giving a huge tax break to the wealthiest Americans,” he said.

Rostenkowski also called on Bush to drop his pledge for no new taxes and “put everything on the table” in his budget negotiations with Congress. “Spending cuts and revenue increases must be part of any meaningful compromise,” he emphasized.

He warned that it would be “a mistake to play a game of chicken” between Congress and the White House that might risk putting automatic budget cuts into effect under the Gramm-Rudman deficit-reduction legislation.

Panetta said that he and Senate Budget Committee Chairman Jim Sasser (D-Tenn.) would meet with Director Richard G. Darman of the White House Office of Management and Budget early next week to get more details on what programs the President wants to trim. Sasser, meanwhile, characterized Bush’s approach as “a hocus-pocus flexible freeze.”

While pledging to cooperate with Bush’s efforts to create “a kinder, gentler America,” Democrats were quick to note that they have long been recommending an increased federal commitment to education and health programs. “That’s old-time Democratic religion,” declared Wright. “We embrace it enthusiastically.”

Education Effort Hit

Rep. Augustus F. Hawkins (D-Los Angeles), chairman of the House Education and Labor Committee, criticized Bush’s proposals on education as inadequate, noting that the federal government is spending fewer real dollars on education now than in 1980.

“Adjusted for inflation, Bush’s down payment of about $300 million in additional spending really amounts to more than a 4% reduction in current educational services nationwide,” he said. “It is just not enough to provide a quality education to all the disadvantaged children who need and deserve one today.”

Hawkins said that education should be treated like defense, with an allowance for inflation, which he said would give it a nearly 5% increase--meaning an extra $1 billion for schools. “After eight years of the defense build-up and domestic cuts, Bush continues to feed the fat and starve the lean,” he added.

Rep. Henry A. Waxman (D-Los Angeles), chairman of the House Energy and Commerce subcommittee on health and environment, said that he was disappointed by the President’s proposed cuts in Medicare and what he viewed as an inadequate commitment to finding a cure for AIDS. Nevertheless, Waxman credited Bush with a kinder and gentler attitude toward the Medicaid program.

Likewise, Sen. Sam Nunn (D-Ga.), chairman of the Senate Armed Services Committee, praised Bush’s approach on the defense budget, which Congress had trimmed under Reagan. “A zero increase will be more than Reagan got over the last three years,” he noted.

And despite the criticism, Senate Minority Leader Bob Dole (R-Kan.) predicted that the spirit of bipartisanship would be revived once talks begin on a compromise budget.

“The American people now expect action, not partisan reaction,” he said. “Once all the instant criticism dies down, even the critics will realize (that) the President has the only budget plan in town. It’s not the final answer; its a starting point. So let’s get started.”

Staff writers Josh Getlin and Art Pine contributed to this story.