Clinton Climbs Platform Only to Face a Tightrope : Choices: The President-elect pledged to remake government, but he must balance campaign vows with political and economic realities.

When Bill Clinton places his hand on the Bible to take the oath of office Wednesday, he will close the book on an era that began 12 years ago with Ronald Reagan’s inaugural.

On a bright warm day, Reagan triumphantly sounded the victory of the modern conservative rebellion against the wave of government activism unleashed by the Great Society in the 1960s: “Government is not the solution to our problem,” Reagan intoned; “government is the problem.” Tempered somewhat by President Bush’s promise of a “kinder, gentler America,” Reagan’s ringing pronouncement has guided the executive branch since 1980.

Now comes Clinton, who during his campaign displayed passion about few things more than the conviction that government can be marshaled to solve problems too large for Americans to solve individually. By his own declaration, Clinton arrives not to restore the pre-Reagan status quo but to remake it. A self-styled “new Democrat,” he says he will reinvent government, foster personal responsibility, and carve out a “third way” between Republican supply-side economics and tax-and-spend Democratic tradition.

But Clinton’s ability to make good on his manifesto will require even more political dexterity and determination than he displayed during the campaign. Before he can revive public confidence in government activism and position his party to rebuild a lasting national majority, the President-elect will have to surmount growing tensions in his own coalition--and conflicting goals in his own agenda.

On the campaign trail, Clinton pledged to reinvigorate and redirect government policy on everything from job training, education and welfare to health care, scientific research, infrastructure and campaign finance--all while reviving the economy, restoring “fairness” to the tax code and halving the deficit in four years.

Those expansive ambitions define what may be the underlying question about domestic policy in his Administration: In an era of extremely limited resources, can he restore faith in Washington’s capacity to act, a faith dimmed by Vietnam, Watergate and 20 years of stagnation in the living standards of average Americans?

“If we want to be the party of affirmative government and we want people to support us, we have an obligation to demonstrate that government can work effectively and efficiently and in a way that reinforces the basic values of the society,” says one senior Clinton transition adviser.

The difficulty of reconciling all of Clinton’s campaign promises is becoming increasingly evident. Since the election, Clinton and his aides have suggested the new Administration may be forced to back away from some of its campaign goals, such as cutting the White House staff by 25%, requiring employers to devote 1.5% of their payrolls to job training and cutting taxes for middle-class families.

As he sorts through the dozens of programs, initiatives and reforms he promised voters, Clinton will face at least four broad choices that could shape the course of his domestic policy.

* The dilemma of balancing his goal of new federal investment with his promise to reduce the deficit.

In the campaign, Clinton defiantly insisted that the nation faced a deficit in “public investment” as pressing as the deficit in the federal budget. Clinton still talks about two deficits. But lately the budget deficit has gained increased prominence in his remarks--especially since the Bush Administration revealed in its final budget submission deficit numbers far larger than the ones on which Clinton based his campaign economic plan.

That harsh reality leaves Clinton with a stark choice, says one adviser: “You either sacrifice your program or you cut current programs and raise additional revenues.”

In the end, Clinton seems likely to do some of both. Aides are already suggesting he may scale back some of the $220 billion in new spending he promised over the next four years. Some of his highest profile programs, such as his plan to allow all students to borrow money for college and repay it through national service, may be phased in more gradually than he earlier suggested--both to save money and iron out the bugs, transition sources say.

But aides insist Clinton intends to defend his investment strategy--and to do that, they acknowledge he will have to embrace sterner measures to reduce the deficit than he proposed before the election.

One inescapable option may be broadly restraining the growth of federal entitlement programs--an option Clinton kept at arm’s length during the campaign. Clinton hopes his cost-containment proposals will choke the growth of government health-care expenditures, but Treasury Secretary-designate Lloyd Bentsen and other top economic advisers have signaled in confirmation hearings that Clinton may have to take other whacks at the tree.

Clinton sharply criticized Bush’s plan to impose an across-the-board cap on entitlement programs. But he has indicated interest in measures that would impose greater means-testing on entitlements--for example, by raising taxes on upper-income Social Security recipients.

Transition aides have also presented Clinton with recommendations for a massive audit of government programs modeled on the initiative that Texas Gov. Ann Richards pursued to streamline state operations in Texas. “If there was ever an argument for reinventing government,” says one senior transition adviser, “it is that we don’t have the money to do things the old way.”

Even with such cuts, Clinton almost certainly will have to consider raising revenues. During the Democratic primaries, he criticized rival Paul E. Tsongas for proposing a steep hike in the gasoline tax. But Clinton never closed the door entirely on a more modest rise--and lately he has cracked open the door a notch.

Revenue could be a key to the health-care debate too. Savings from cost-containment alone are unlikely to produce enough revenue to significantly expand coverage to the uninsured by the time Clinton faces reelection in 1996, says Sen. John J. (Jay) Rockefeller IV (D-W.V.), a leading congressional expert on health care.

“The hardest decision is, does he want to see reasonable and substantial coverage by the end of the first term,” Rockefeller says. “You cannot do that without some kind of new revenue.”

* How aggressively he pursues initiatives that set him in conflict with his elements of his own party.

During the campaign, Clinton stressed a handful of issues that divided him from traditional liberal orthodoxy, such as welfare reform, the line-item veto and support of tenant management of public housing.

These issues could assume symbolic importance as he seeks to redefine his party and construct a new national majority. But they will face varying degrees of resistance from the same forces that buffeted Clinton during his selection of a Cabinet--members of Congress and party interest groups.

None will be more difficult than welfare reform. Clinton proposed to increase spending on education and training and then require all welfare recipients to take a job after two years on the rolls, an idea many liberals dislike.

Fiscal constraints could strengthen the hand of the skeptics. Clinton may not have the funds to significantly expand training or move dramatic numbers of recipients to work. With child care and administrative expenses, it costs about $3,400 more annually to put welfare recipients to work than to allow them to stay at home. That financial squeeze “could lengthen the phase-in for the work requirement,” says one well-placed congressional aide.

* Can he end the interest group gridlock and construct the new partnerships he promised during the campaign?

Like every presidential candidate in memory, Clinton pledged to end the adversarial relationship between government, business and labor. More than most Democrats, he was able to translate that pledge into tangible support from corporate executives.

But conflicts submerged during the campaign between those business supporters and other elements of Clinton’s coalition are now likely to resurface. Flash points could include his campaign promises to index the minimum wage for inflation, toughen tax enforcement against foreign companies operating in the United States and sign legislation barring companies from hiring permanent replacement workers during strikes--organized labor’s top legislative priority.

Even more conflict could come as Clinton tries to mediate between business and his traditional Democratic constituencies on trade issues such as the North American Free Trade Agreement and regulatory concerns about the environment, occupational health, consumer safety and civil rights. The biggest fights loom over proposals to impose mandates on business, such as requiring all employers to provide health insurance.

* Can Clinton implement policies that reconnect the Democratic Party with the middle class, the decisive swing vote in American politics?

At the core of Clinton’s political and policy vision of a new Democratic Party is reversing the perception that government programs benefit only the poor or the rich. But budget pressures could squeeze that goal.

Aides have already hinted that the middle-class tax cut Clinton proposed in the campaign as a down payment on tax “fairness” may be scaled back or delayed. Moreover, limited resources may increase the pressure to target new programs, like national service, toward the less affluent.

At the same time, the search for dollars may compel Clinton to take aim at popular middle-class entitlements, or raise taxes that affect the middle class--such as a cap on the deduction for employer-provided health insurance, with the savings used to expand coverage to the uninsured.

All of these questions will test Clinton’s political skills even more than his arduous march to the Oval Office. On the campaign trail, he displayed enormous agility in balancing a message that promised new directions but did not offend his party’s traditional voters.

In office, that balancing act will become infinitely more difficult, because Clinton will be judged not on the basis of gauzy words but the harder currency of decisions and dollars.