Senate Panel OKs Revised Clinton Economic Plan : Deficit: The bill is vastly different from version passed by the House. The President is caught in the middle of a battle over priorities.

The Senate Finance Committee Friday ratified its version of President Clinton’s economic agenda, putting Clinton in the middle of a House-Senate confrontation over competing and potentially incompatible priorities.

The Finance Committee bill, which was approved on a party-line, 11-9 vote, will go before the full Senate next week. Although Senate Majority Leader George J. Mitchell (D-Me.) predicted that the floor battle will be “difficult and daunting,” debate will be limited and the Republican minority cannot use its filibuster weapon against the budget measure. As a result, the bill is expected to pass in essentially its current form.

This means that on issues ranging from entitlement cuts to energy taxes, the Senate measure will vary significantly from the version of Clinton’s plan that squeaked through the House last month. Those differences will be resolved by a House-Senate conference committee, which is expected to convene next month and could be one of the most divisive in recent memory.

“The conference is really where the bill is going to be written,” said Rep. Robert T. Matsui (D-Sacramento). “There’s no question the President now will be playing a significant role. This is, frankly, what he’s been waiting for.”

House liberals, having backed the President’s unpopular tax increases as the cost of also winning passage of more generous tax breaks for the working poor, say that it is time for Clinton to make good on his commitments to them. Rep. Kweisi Mfume (D-Md.), chairman of the Congressional Black Caucus, which cast all its 39 votes for the House package, said that if the package does not emerge from conference substantially as the House passed it, “it will be a cold day in hell” before the black members will again support the plan unanimously.

Each side will be looking to the President as a broker, but so far it is not clear how he will respond. At his televised news conference Thursday night, for instance, Clinton ducked a question about the most contentious issue in the package--the form that a key energy tax will take.

While the President has promised to fight for the House plan, he also encouraged the negotiations that produced the Senate version. Thus, each side has claimed the White House as its ally.

“I don’t ever remember a President getting himself in this type of jam before,” said one veteran congressional staff member.

“The President is going to be in a very familiar position. He’s going to be in a position where he’s told different people different things, where he’s made commitments to one group and different commitments to (others),” said Sen. Phil Gramm (R-Tex.), one of the President’s most vocal critics. “Clearly, he’s going to have a lot of explaining to do.”

The President has continued to insist that any economic plan must adhere to three general principles: It must cut the deficit by about $500 billion over five years, put those reductions into a “trust fund,” where they could not be used for other purposes, and assure that the bulk of the new taxes are paid by the wealthiest Americans.

Both packages claim to do that, but they differ in critical areas, including:

* Energy/gas tax: While the House bill would raise $71 billion over the next five years with a broad-based tax on most forms of energy, the Senate version would produce only $25 billion over that period with a 4.3-cent-a-gallon tax on gasoline and other transportation fuels. The White House wants to move toward the House version.

“It’s not going to be 4.3 cents. It’s going to be 7 or 8 cents a gallon before it’s finished,” predicted Senate Minority Leader Bob Dole (R-Kan.). “And that’s going to affect everybody.”

* Medicare/Medicaid: The Senate committee went far beyond the House in this area, mandating a five-year, $68-billion reduction in payments to hospitals, doctors and other providers, compared to a $49-billion cut in the House measure. The bill coming out of conference is expected to move toward the House figure.

* Working poor: At Clinton’s suggestion, the House sharply expanded the earned-income tax credit, a program designed to cut taxes of low-income working families and provide government payments for those below the official poverty line. In the Senate committee, however, the proposed outlay of $28 billion to offset lost revenue was trimmed sharply to about $17 billion. Liberal Democrats, especially, hope to do more for the working poor than the Senate committee did.

* Income tax rates: Both the House bill and the Senate committee version call for sharply higher taxes on the wealthiest Americans, generally individuals with incomes above $115,000 and couples with incomes above $140,00. But the Senate bill would shift the effective date from last Jan. 1 to July 1. In addition, the Senate added a 10% surtax on capital gains realized by people with taxable incomes over $250,000 a year--a provision that appears to be controversial.

Sen. Daniel Patrick Moynihan (D-N.Y.), chairman of the Senate panel, termed it “the most progressive change in the tax code since the Second World War” but Dole denounced it as “nothing but a big, big tax package that will be devastating for the American economy.”

* Social Security: The House bill includes Clinton’s plan to raise taxes on better-off recipients of Social Security, with taxes to be required on 85% of government benefits for individuals with incomes above $25,000 and couples over the $32,000 level. The Senate committee modified the provision to impose higher taxes only on individuals with $32,000 or more in income and couples above $40,000.

Although Republicans promised to wage a floor fight to reduce the tax increases, Dole said that they expected to lose most of the battles to the majority Democrats, who outnumber the GOP, 56 to 44. Even so, some liberal Democratic senators may try to alter parts of the bill before it goes to conference with the House to restore some Medicare cuts and do more for the working poor.

“I assume a bill will pass the Senate but the tough part will come in the conference,” Dole said, adding that he expects the Democratic-controlled negotiations to split the difference between the House and Senate measures.

“The conference can only make it worse,” agreed Sen. Bob Packwood of Oregon, ranking Republican on the finance panel.

Given the narrowness of the political straits the President must navigate, some lawmakers are advising that Clinton distance himself from the negotiations.

“The President needs to talk about the things he thinks are basic and leave the details to Congress,” said Rep. Vic Fazio (D-West Sacramento), a member of the House leadership. “I just don’t think we can throw the President into the pit with us. This is our job.”

But the disparities in the two plans have become so great that many believe Clinton will have no choice but to enter the fray.