Clinton, Allies Look for Strategy to Avoid New Defeats on Capitol Hill : Congress: The White House is trying to protect the core of its agenda. The President will probably have to reach out to Republican lawmakers.

On Capitol Hill, President Clinton’s emergency jobs bill was going down in flames, the victim of a relentless and ultimately successful Republican strategy to depict the Administration’s economic stimulus program as wasteful political pork.

Inside the White House, the President had already conceded defeat and was looking ahead. On Wednesday, he convened his National Economic Council to debate how to protect his long-term investment plan from newly aggressive Republicans and conservative Democrats.

On Thursday, he met again with his advisers to consider the politically sensitive problem of paying for health care reform.

Hanging like a cloud over both meetings and a spate of other White House huddles was a critical question: Having stumbled at several critical turns in his first major battle in Congress, what should Clinton do to prevent similar disasters with the far more important proposals that are supposed to form the core of his presidency?

By Thursday night, White House advisers were still pondering the specifics of a possible new strategy, but already it was clear they would address these points:

--Mollifying angry Democratic supporters in the House who bowed to White House pressure and voted the party line for the stimulus package but now feel exposed to political attack for backing controversial proposals that Clinton offered to abandon to placate Senate Republicans.

--Cutting back, or possibly scrapping, the temporary investment tax credit designed to spur corporations to buy new equipment. House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) told the President at a White House lunch on Tuesday that the plan faces almost certain defeat.

--Facing up to the need to include Republicans in the early discussions of such major proposals as health care reform and then working out compromises that will draw votes across party lines, especially in the filibuster-prone Senate.

Even before the defeat of the stimulus package, the Administration had to back down from suggestions that it might seek a broad new value-added tax--a form of national sales tax--to pay for health care. Many of Clinton’s other programs could require Democrats to cast similarly difficult votes to raise taxes.

Clinton has a well-documented history of pulling out last-minute victories just when he appears to be defeated, and on Thursday, some congressional Democratic leaders were vowing that the battle over the President’s economic agenda is far from over.

“This is just the end of the beginning,” said House Majority Leader Richard A. Gephardt (D-Mo.). “We have to put this program back together.”

Gephardt stressed that congressional leaders and the White House are already studying ways to repackage the key elements of the stimulus package--which included funding for summer jobs and training, childhood immunization, highway construction and other public works programs--in new legislation that could be voted on later this year.

“This doesn’t mean that the President has been beaten,” Gephardt said.

“You can read too much into this defeat,” agreed Thomas Mann, a political analyst at the Brookings Institution. “The President may learn a lesson from this and go on.”

But others conceded that the road ahead has become more difficult.

“It’s going to be hard. This is tough. It is heavy lifting,” said Senate Appropriations Committee Chairman Robert C. Byrd (D-W. Va.). “Changing the economic direction of this country is not easy.”

Senate Budget Committee Chairman Jim Sasser (D-Tenn.) agreed. “I was never laboring under the impression that the Senate was going to rubber stamp the Administration program. I think this is just a bump in the road. The real fights are going to be on Clinton’s long-term investments, his revenue (tax) proposals and health care. And this just makes what was already a steep slope a little more slippery,” he said.

In fact, congressional Democrats, given the difficult and controversial votes that will be required, are no longer sure they can count on Clinton’s much-vaunted political skills to carry the day. From the formulation of his ill-fated stimulus program to his final attempts to forge a compromise with a newly invigorated GOP minority in the Senate, Clinton made a series of what lawmakers said in retrospect were avoidable mistakes.

Democratic moderates and conservatives in the House had tried to argue for compromise with the GOP on the stimulus package, only to be told that Clinton needed their support for a show of party unity.

Having put aside their misgivings out of loyalty to the new President, they felt betrayed when he offered a scaled-back version of the stimulus package to Senate Republicans.

“They keep cutting deals in the Senate and asking us to walk the plank,” said Rep. Timothy J. Penny (D-Minn.), who had opposed the package but voted in favor of it to support Clinton.

“Long term, it’s going to create problems. They’ve made too many issues in the near-term tests of loyalty and, long term, it’s going to cost them when they need some votes.”

On the other hand, liberals in the House had voted for the spending cuts embodied in the President’s budget on the assurances that Clinton would fight for the stimulus package, which adds new funding to many programs that liberals support.

“There’s very real potential for damage here,” said Rep. George Miller (D-Martinez), chairman of the House Natural Resources Committee, discussing Clinton’s prospects in Congress. “Historically, once things start to unravel around this place, it’s very difficult to stop.”

And the ripple effect from Clinton’s defeat on the stimulus package is moving swiftly.

Rostenkowski, in his lunch with Clinton on Tuesday, told him that business lobbyists have successfully convinced key members of Congress to support a deal in which the investment tax credit, which would reduce government revenues, would be abandoned in exchange for lowering Clinton’s proposed increase in the corporate income tax rate, according to congressional sources.

That move, in turn, would be likely to have another ripple effect--the top income tax rate for individuals would be higher than the rate for corporations, giving some wealthy individuals an incentive to form corporations as a way to shelter income.

Clinton’s defeat on the stimulus plan points up a more fundamental obstacle that Clinton seems certain to face as he tries to sell his broader agenda: His programs are complex and, at least on the surface, often include contradictory elements.

In his State of the Union speech, for instance, Clinton focused on the need for sacrifice and deficit reduction and an end to politics as usual. Yet his stimulus plan called for new spending that would raise the deficit and benefit traditional Democratic constituencies.

His long-term economic plan also includes both ambitious new spending initiatives and the largest tax increases in history at a time when the White House is trying to focus attention on the fact that the President has proposed 200 specific spending cuts.

And, at least in the stimulus debate, his inability to explain why deficit spending was important to a President who had been talking up deficit reduction left him vulnerable to Republican attack.

“The Clinton people keep talking about how they are stealing from (former President Ronald) Reagan’s bag of tricks, trying to model their legislative strategy after his early efforts,” said Bill Kristol, former chief of staff for Vice President Dan Quayle. “But Reagan had a coherent strategy and you were either for him or against him. Reagan didn’t talk about tax cuts and then propose a tax increase. Clinton has to have a coherent strategy of where he wants to take the country.”

Meanwhile, unless he starts out by dealing for the necessary GOP votes in the Senate, the President will continue to face the same filibuster problem: He is three Democrats short of the 60 votes he needs to break off debate.

* SHARP BLOW FOR L.A.: The defeat of President Clinton’s stimulus plan is a sharp blow to L.A. projects. B1