House, in Cliffhanger, Passes Clinton’s Deficit-Cutting Plan : Budget: $496-billion package is approved by a narrow six-vote margin. President calls the vote ‘courageous.’ Measure faces strong opposition in the Senate.

In one of the most dramatic moments of President Clinton’s fledgling Administration, the House approved his $496-billion deficit-reduction package Thursday by a narrow six-vote margin and sent it to the Senate, where its fate remains uncertain.

Approval of the controversial economic program in a 219-213 vote came shortly before 9 p.m., culminating days of arm-twisting by the White House and Democratic leaders who fought to avert a devastating defeat for their embattled chief executive.

A clearly relieved Clinton, flanked by Treasury Secretary Lloyd Bentsen and Vice President Al Gore, called the House vote “courageous.”

“Tonight the House of Representatives gave America a victory of growth over gridlock,” he said in brief remarks at the White House. “Tonight the House said yes to jobs, yes to lower interest rates, yes to a brighter future.”

Bentsen hailed the outcome as well, saying: “Today’s vote was a victory for the American economy. The vote should send a clear signal of change in Washington.”

In its barest outlines, the bill is designed to reduce the federal deficit by $496 billion over five years. On the revenue side, it would raise taxes by $325 billion between now and 1998, offset by $75 billion worth of tax relief, mainly to business.

The heaviest tax burden would fall on individuals with taxable incomes over $100,000 and couples with taxable incomes over $140,000.

The most controversial provision is an energy tax expected to produce $71.5 billion over the next five years.

Cuts include freezes in foreign aid, defense and other federal programs, along with reductions in payments to Medicare providers.

For Clinton, sliding in the polls and buffeted by self-inflicted wounds in the last week, Thursday’s victory was crucial. Rejection of his program, House leaders agreed, would have been a major setback for his entire legislative agenda.

But the hairbreadth margin fell far short of signaling a clear mandate for the President’s politically painful proposal. No Republican voted for it, and 38 Democrats defected from Clinton’s camp, reflecting their uneasiness over the tax increases.

The bill now faces strong resistance in the Senate from at least a half-dozen moderate Democrats and most, if not all, Republicans.

As if to presage that battle, Senate Minority Leader Bob Dole (R-Kan.) declared that the House-passed bill was “bad news for the economy and bad news for the taxpayers,” and he urged a voter backlash against the measure before the Senate takes it up next month.

Sen. David L. Boren (D-Okla.), the chief critic of the energy tax in the Senate who has offered an alternative to the President’s plan, said “much work remains to be done” on the House-passed bill. Boren seems likely to cast a key vote on the Senate Finance Committee, where the bill will be prepared for the Senate vote.

In the House, Democratic leaders gambled by scheduling a vote on the package before they had commitments from enough members to pass it. But the move paid off.

As evidence of the tensions and uncertainty over the vote count, House members stood riveted on the chamber floor as they watched the results being posted on the electronic scoreboards.

The chamber erupted into wild applause as the 217th vote needed for passage was cast by Rep. Bill Richardson (D-N.M.), who said afterward: “The last five votes were like pulling teeth--the toughest five votes to get ever. They were a godsend, and without them, we would not have won.”

Moments after the final tally was in, Speaker Thomas S. Foley announced the result with an almost audible sigh of relief.

Earlier, he had implored his colleagues to “stand and deliver.”

“This is the time to justify your election,” he said in a thundering voice.

Clinton reportedly spent most of the last two days on the telephone with reluctant Democrats, pleading with them to support his plan despite the political pain it might cause and promising cooperation to satisfy their needs in return for backing.

The victory was attributed in part to an agreement reached early Thursday morning on a new procedure to review spending overruns on mandatory benefit programs--such as the skyrocketing costs for Medicare and Medicaid. It apparently convinced some conservative Democrats to vote for the package.

But the recurring refrain among Democrats who favored the plan was that they could not turn their backs on a President who had advocated the only deficit-cutting program with a chance of passing Congress this year.

“If we don’t vote for this package, we cut him (Clinton) off at the knees and we can’t do that,” Rep. Charles E. Schumer (D-N.Y.) said.

Opponents argued that the bill--which provides for net tax increases of $250 billion and an equal amount of spending reductions over the next five years--would destroy jobs and endanger House Democrats’ survival at the polls if they supported the President.

Even the strongest supporters acknowledged that the plan would be painful for members of Congress who supported it--as well as for constituents who would face higher taxes and cuts in popular programs if the bill becomes law. But they said that there was no alternative if the nation hopes to curb its enormous deficits and revive the economy.

The single-most controversial provision is a broad-based tax on most forms of energy, based on heat content measured in British thermal units, or BTUs. Opponents said it would kill jobs, add to inflation and affect middle-income taxpayers. Its defenders said the tax was a modest levy that would add only $17 a month to the average family’s tax bill when it becomes fully effective in 1998.

Opponents also criticized an increase in taxation of Social Security benefits for individuals with incomes above $25,000 and for couples with incomes of $32,000 and up. This would affect one-quarter of Social Security retirees with the highest incomes. In addition, the package includes a major expansion of the earned income tax credit that is designed to offset the impact of the energy tax on “working poor” families with incomes below $29,000 a year.

The bill also would repeal the luxury tax on boats, airplanes, furs and jewelry, and moderate the tax on luxury cars selling for $30,000 or more.

On the spending side, the bill would lock in a “hard freeze” at current levels on outlays for defense, foreign aid and other federal programs governed by the regular appropriations process. This would produce savings of $102 billion over the next five years, requiring Congress to make hard choices among competing programs.

Spending for mandatory benefits and other direct-spending programs would be cut by $87 billion over the five-year period, including a $50-billion cut in payments to Medicare providers. Savings of $7 billion were attributed to debt management changes and another $50 billion less would be paid for interest payments on the debt because of less borrowing.

Despite optimistic statements early Thursday by Foley and his lieutenants, Democratic leaders carried on their battle for votes all afternoon as zero-hour approached. Tensions rose as intensive one-on-one lobbying made progress but failed to produce a definite majority in the House.

“We are not over the magic number yet,” an aide to the Democratic leadership said as the verbal warfare continued on the floor. “This will be a squeaker.”

The agreement between the House leaders and Rep. Charles W. Stenholm (D-Tex.) provided some impetus for the President’s plan, with some proponents saying it sealed the victory.

Stenholm, a leader among conservatives in his party, agreed to vote for the bill while reserving the right to oppose it later if the energy tax is not modified to his satisfaction in the Senate.

One Democrat familiar with the search for votes said the leadership was five short in mid-afternoon. Even so, loyalists assured that voting down the massive budget bill was unthinkable.

“We’re within spittin’ distance,” Rep. Jolene Unsoeld (D-Wash.) said as the sun set. “We’re going to make it.”

Republicans, who seemed unanimous against the measure, repeatedly warned that voters would take revenge on Democrats who supported the President.

“If the Democrats hang together and pass this bill, they will certainly hang separately in the next election,” said Rep. Deborah Pryce (R-Ohio).

Where the Clinton Tax Bill Would Hit IMPACT ON YOUR POCKETBOOK A typical household with income in the range of $40,000 to $50,000 would pay an extra $270 a year under the tax plan, according to the Congressional Budget Office. Spending increases designed to shield the poor from the energy tax would actually result in a tax cut for more than 40% of families with children. The estimate of how family incomes would be affected by the tax bill:

Current Federal Income Taxes $ Change % Change Under $10,000 $455 $-120 -26.5% $10,000-20,000 1,718 -59 -3.4 $20,000-30,000 4,240 24 0.6 $30,000-40,000 6,891 161 2.3 $40,000-50,000 9,667 270 2.8 $50,000-75,000 14,295 368 2.6 $75,000-100,000 21,604 491 2.3 $100,000-200,000 33,910 765 2.3 $200,000 and up 133,359 23,217 17.2 Average $10,107 $463 4.6

THE ENERGY TAX President Clinton’s proposed tax on nearly all forms of energy would raise $70.5 billion over five years, with the cost of gasoline expected to go up 8 cents a gallon in the final two years, according to White House estimates. The impact of President Clinton’s proposed energy tax on residential energy prices, as calculated by the Treasury Department:

1994 price Tax as of (before tax) 7/94 7/96 Electric bill $67.60 $0.692 $2.077 Home heating oil $1.04 $0.012 $0.037 Gasoline per gallon $1.31 $0.025 $0.076

The impact of the tax as reflected in the price of various manufacturered goods, as estimated by the Republican staff of the Joint Economic Committee of Congress:

Grocery item Cost now With Energy Tax Orange Juice $2.49 $2.55 Laundry detergent 4.99 5.11 Diapers 8.99 9.21 Average grocery bill 80.00 81.92 Other consumer items Maytag Washer 499.99 511.99 Camcorder 799.00 818.18

Source: Congressional Budget Office