Clinton Supports Benefits Curbs to Win Tax Plan OK : Economy: Compromise is designed to quash a House Democratic rebellion two days before key floor vote. Party chiefs concede energy levy will be modified.

President Clinton on Tuesday offered wayward House Democrats a compromise designed to win over enough votes to pass his troubled economic package, saying he will accept some limits on future spending for Social Security, Medicare and other big entitlement programs.

Clinton summoned several dozen House members to the White House in an effort to quash a rebellion over his spending and tax proposals two days before a crucial floor vote, but the outcome remains uncertain.

House leaders predicted that the Administration would prevail Thursday, but conceded that its energy tax will ultimately be modified and said that some spending limits will be imposed to sway conservative Democrats.

Clinton also expressed confidence that the House ultimately would enact his basic program. “I think they’re going to pass the budget bill,” Clinton told reporters as he toured a display of American-made cars on the Mall and shook hands with auto workers.

The key change proposed by the White House on Tuesday is a flexible restraint on future spending under Social Security, Medicare and other entitlement programs that provide mandatory benefits to all Americans who qualify. Although entitlement programs account for half of the federal budget, they are not subject to the annual appropriations process and have been the primary contributor to the rising deficits of recent years.

The Administration compromise proposal was described as an “alarm bell” rather than a rigid cap that would force automatic spending cuts. It was being negotiated with Rep. Charles W. Stenholm (D-Tex.), chairman of the Conservative Democratic Forum.

Rep. Timothy J. Penny (D-Minn.), a key ally of Stenholm, explained that under the proposal, spending that exceeded budget estimates for entitlement or regular appropriations programs would trigger a process in which the President would recommend spending cuts or new taxes to offset the overruns.

Congress would then be required to vote on the President’s recommendations. Although the proposals could be voted down, the process is expected to put pressure on lawmakers by highlighting their response to the overruns.

Clinton, clearly aware of the political peril facing him on Capitol Hill, took time during a Rose Garden event later Tuesday to issue a plea for support. At a ceremony commemorating Older Americans Month, he said his economic plan includes painful spending cuts and tax increases to reduce the deficit, but that such tough measures are needed to ensure prosperity for future generations.

“We could all argue until the cows come home about whether every last decision has been perfectly right, but it is perfectly clear that if you don’t do both (cut spending and raise taxes) you can’t get where we’re going,” Clinton said.

“This is a difficult time for the Congress, a difficult time for the country,” he added. “The worst thing we can do is to walk away and do nothing and continue the perilous paralysis of the last few years. So I implore you to shoulder this, think of our kids and grandkids, and let’s move this country forward in a bipartisan and open manner.”

The compromise being crafted by the White House and House leaders is regarded as a carrot to attract votes from the numerous “deficit hawks” in Democratic ranks. The plan is known as the “Spratt Cap,” after its author, Rep. John M. Spratt Jr. (D-S.C.), who said he will not vote for the President’s budget unless it contains some restraint on the ballooning costs of entitlement programs.

Penny estimated that five to 10 Democrats might swing over from the undecided column to support the bill if the compromise is achieved. Clinton needs 218 votes for approval.

As the Administration was trying to work a deal on spending Tuesday, it suffered a new blow in its efforts to enact $71 billion in broad-based energy taxes when a powerful coalition of business groups announced its unalterable opposition to the so-called BTU tax.

Jerry Jasinowski, chairman of the National Assn. of Manufacturers, called it “the worst--I underline the worst--possible tax that President Clinton could have come up with to reduce the budget deficit.”

Backed by the leadership of the U.S. Chamber of Commerce and an association of small businesses, Jasinowski asserted that the new tax would cause the loss of as many as 600,000 jobs and boost inflation.

Jack Farris, president of National Federation of Independent Businesses, said the energy tax would throttle businesses emerging from the recession.

“If the goal is to nip an economic recovery in the bud, there is no better way to do it than to impose an energy tax” Farris said. “The BTU tax will set off a mad rush by businesses to find ways to avoid getting burned.

“This is the worst of all possible ideas at the worst of all possible times,” Farris said.

Congressional leaders say that Clinton is rapidly losing business and voter support for his economic program because the public believes he is seeking hundreds of billions of dollars in new taxes not to cut the deficit but to fund expensive new social programs.

“We seem to have lost the perception game,” said Rep. Bill Richardson (D-N. M.), after meeting with Clinton at the White House Tuesday morning.

“It’s going to be a very close vote,” he added. “The President is going to have to invest a lot of prestige in this vote, and a lot of personal visits.”

He and others pushed Clinton to make an urgent televised appeal for public support. White House officials said that such an address is under consideration, but said it was not likely before Thursday’s vote.

A senior White House aide said the President may save his prime-time sales pitch for the eve of the Senate vote on the tax package. Although Administration officials expect House members to swallow hard and pass it, they expect a messy brawl in the Senate.