Clinton, Senate Democrats OK Energy Tax Cut

President Clinton and Senate Democrats, seeking new spending cuts to win passage of the Administration’s economic package, agreed Monday to scale back the unpopular energy tax and are moving toward a plan that would wring more savings from the politically sensitive Medicare program.

But the compromise proposal, which would reduce payments to physicians and other Medicare providers so the $71-billion energy tax can be lightened, has alarmed the powerful elderly lobby and risks undermining the President’s health care reform initiative.

The Administration already has proposed $53 billion in cuts in Medicare reimbursements. Any further reductions would directly reduce the amount of money available to fund the health care reform plan being put together by First Lady Hillary Rodham Clinton.

The President discussed the spending and tax plan at a late-afternoon White House meeting with Senate Majority Leader George J. Mitchell (D-Me.) and Finance Committee Chairman Daniel Patrick Moynihan (D-N.Y.), who proposed the combination of a smaller energy tax and larger Medicare cuts.

Treasury Secretary Lloyd Bentsen, speaking to reporters after the meeting with the Senate leaders, confirmed that the energy tax would be trimmed and new spending cuts found to help ease passage of the budget bill. He declined to specify where the Administration planned to reduce spending, however.

“There’ll be a further reduction in the overall broad energy tax and you’re going to see further cuts in spending that will be part of the package,” Bentsen said. “So we’re quite optimistic about the package we’re putting together.”

Bentsen, Mitchell and Moynihan all pledged to make good on the President’s promise to cut the federal budget deficit by a total of $500 billion over the next five years.

Clinton delegated Bentsen, former chairman of the Senate Finance Committee, to shepherd the massive tax bill through the Senate. Bentsen, who was brought into the Administration because of his knowledge of the politics and mores of Capitol Hill, was conspicuously absent during the difficult deliberations on the bill in the House, where it passed 10 days ago by a three-vote margin.

The Moynihan proposal is intended to answer the criticism of Clinton’s deficit-reduction program from moderate and oil state Democrats who oppose the energy tax and want more spending cuts.

While Democratic leaders have said that the proposed concession to centrist lawmakers could make the difference between success and failure for the President’s program in the Senate, the plan was quickly denounced by advocates for the elderly.

The nation’s foremost lobbying organization for Medicare recipients, the American Assn. of Retired Persons, led the charge. “It would be devastating” to seniors, AARP legislative director John Rother said at a news conference.

The $53 billion of Medicare restraints that Clinton already has proposed for deficit reduction “stretches it to the limit,” Rother said, adding that Moynihan’s proposal to trim an additional $35 billion from the program would be unacceptable.

“It’s no longer shared sacrifice, it’s piling on Medicare and Medicaid,” Rother said.

Besides angering seniors’ groups, squeezing further savings from Medicare threatens the Administration’s effort to revamp the nation’s health care system and provide coverage for the estimated 35 million uninsured Americans.

“Medicare savings of that magnitude could jeopardize national health care reform,” Robert Greenstein of the Center on Budget and Policy Priorities, told a news conference Monday.

In the past, Clinton has warned against further encroachment on Medicare, which serves the elderly, and Medicaid, a last-resort health plan for the poor. He has said that the programs would be restructured as part of the health reform package and should not be the cash cow to fund his current budget package.

White House Press Secretary Dee Dee Myers, however, indicated that the President is open to further spending reductions and she did not declare Medicare or Medicaid off limits. She said that the Administration’s overriding goal is the budget reconciliation bill and that health care would have to wait until after that clears Congress.

Mitchell acknowledged that selling additional cuts in programs serving the poor and the elderly will be “very difficult, as will any course of action be.”

But the majority leader expressed confidence that the Senate ultimately will approve the President’s plan with relatively minor modifications.

But he did not say why he believes that his chief obstacle on the committee--conservative Sen. David L. Boren (D-Okla.)--would be brought along. Boren has been the most outspoken Democrat opposed to the energy tax and has vowed not to vote for the bill unless the $71-billion levy is radically scaled back.

Boren conferred with both Democratic and Republican leaders Monday in an effort to win support for an alternative plan that would substitute more spending cuts for Clinton’s energy tax, known as the “BTU tax” because it incorporates a complex formula based on the heat content of various fuels, as measured by British thermal units.

In an interview, Boren called Moynihan’s proposals for additional Medicare cuts “a good step in the right direction.”

But while the White House signaled its willingness over the weekend to trim the energy tax by 25% to 30%, an aide to Moynihan characterized the negotiations as uncertain and suggested that Clinton’s plan may still go to the Senate floor with the energy tax more or less intact.

Emboldened by the decisive victory of Republican Kay Bailey Hutchison over Democrat Robert Krueger in the race to fill Bentsen’s vacated Senate seat, the Republicans, meanwhile, stepped up their attacks on the Clinton plan.

Senate Minority Leader Bob Dole (R-Kan.) said that Hutchison’s “smashing victory” in a state that traditionally has voted for Democrats is a signal that “taxpayers are fed up with paying more taxes.”