Clinton Making Concessions on Economic Plan

When ethanol producers complained about the potential effect of President Clinton’s proposed energy tax on their industry, the White House quickly arranged to exempt them from the levy.

And when farm-state senators complained that Clinton was seeking too many cuts in agriculture subsidies, the Administration accepted a budget resolution with more than $2 billion less in agriculture cuts than it had originally proposed.

Such arrangements seem to contradict the concept of “shared sacrifice” that was the watchword of Clinton’s original economic program.

To push meaningful deficit reduction through Congress, the new President initially was counseled to hold firm to his plan and to simultaneously attack all interest groups in order to avoid having his program nibbled to death.

Clinton indicated that he wanted to follow the political strategy used by the Ronald Reagan Administration in 1981 to push its conservative economic agenda through Congress: Do something that is so big and so dramatic that it develops its own momentum, a steamroller that is difficult for special interests to stop.

But now the Administration, apparently determined to maintain congressional support for its agenda, has made numerous concessions on the tax and spending provisions of its economic plan. Many of the changes clearly were made to save Clinton’s short-term economic stimulus plan from defeat in the Senate.

Many Administration officials were reluctant to discuss the changes openly and played down their significance. But the result is that Clinton has backed away from controversial spending cuts and tax increases that he initially proposed when he announced his economic plan in February.

To be sure, without compromise very little would ever be accomplished in Washington, and Clinton so far has been remarkably successful in getting Congress to support the broad budget resolution that forms the basis of his program.

But in Congress, a budget resolution is essentially only the skeleton of an economic agenda. Soon Congress will begin filling in the details with specific tax and spending provisions. Once that process begins, some observers are concerned that the President’s willingness to make side deals will undermine his ability to maintain a coherent package.

“The White House has been caving in to the special interests that it promised to fight,” complained Daniel Becker, director of global-warming and energy programs for the Sierra Club, who is critical of the Administration’s decision to compromise on its proposals to raise land-user fees in the West. “As a result, they have started to unravel their own package,” he said.

The Administration’s willingness to compromise clearly has left some of Clinton’s allies in Congress muttering some of the same criticisms that were expressed about former President George Bush during last year’s campaign.

For instance, Rep. George Miller (D-Martinez), the chairman of the House Natural Resources Committee, was openly outraged that Clinton agreed to demands from Western senators, led by Sen. Ben Nighthorse Campbell (D-Colo.) and Sen. Max Baucus (D-Mont.), and backed down from including in his budget package higher fees for mining and timber-cutting on federal lands in the West.

Miller has said that he could hold together House Democrats from Western states on the issue and that he believes he was blindsided.

Administration officials stressed Wednesday that the White House still hopes to pursue higher user fees on Western lands in legislation that will be separate from the current budget process, but congressional critics argue that this was the time to pursue such a goal.

“The whole point of this budget package was it was a way to do a lot of things that individually would be difficult,” said a senior Miller aide. “For something like mining, it doesn’t take many people in Congress to block it from getting done when it is on its own. This was our best opportunity to address these issues.”

Other critics chided Clinton for seeming to acquiesce to demands from relatively junior lawmakers in his own party, sending a clear signal all over Capitol Hill, they said, that pressure works with Clinton.

“If he is going to give in to Max Baucus on low-cost timber sales in Montana, how the hell is he going to stand up to anybody else?” asked one lobbyist.

“The miners put on the pressure and the Clinton folks caved in,” added Phil Hocker, president of the Mineral Policy Center, a Washington group that pushed for higher mining fees on federal lands.

Furthermore, as soon as the White House made the concession to Western senators, it scrambled to do the same with Midwestern lawmakers angered by Clinton’s proposed reductions in farm subsidies.

Sen. Kent Conrad, (D-N.D.), a key member of the Senate Budget Committee and the Senate Agriculture Committee, said he met with White House Chief of Staff Thomas (Mack) McLarty and White House legislative liaison Howard Paster to work out a compromise on farm programs.

In the end, the budget resolution that emerged sharply scaled back the Administration’s subsidy cuts. Cuts in agriculture entitlement programs, which include farm subsidies, were reduced over the next five years from $4.9 billion to $2.7 billion.

Some of the most intensive negotiations have come in recent days over the $70-billion energy tax and how and where it will be levied. Many of the details on that were left blank in the original Clinton plan, so every subsection of the energy industry has been lobbying furiously to make a deal with the Administration and with key legislators.

Under pressure from farm-state legislators who support ethanol producers, most notably agribusiness giant Archer-Daniels-Midland Co., Treasury Secretary Lloyd Bentsen agreed to exempt ethanol from the tax and also to extend the exemption to methanol.

The Administration also appears to be poised to alter its stance on where the energy tax would be collected. Initially, the Clinton plan called for the tax to be levied as close to the source of energy production as possible. For oil and natural gas, for instance, the tax would be collected at the wellhead; for imports, collection would be at the port.

But energy industry lobbyists have been urging, apparently successfully, that the energy tax be moved away from their employers--and toward consumers.

Lobbyists are saying, for instance, that the Clinton Administration will announce that the tax on natural gas will be collected after the gas has moved through the pipeline, at the juncture where local utilities buy it.

That change means that natural gas pipeline companies will not have to pay the tax on gas they receive and transport from natural gas producers.

And, critics warn, once such deal-making begins, it is very hard to stop.

“Once you do a deal with the Western senators, the Midwesterners want a deal, then the Southerners,” one lobbyist said. “And then, the thing is unraveling.”