Senate Rejects GOP Tax-Free Budget Plan

Senate Democrats, rallying behind their version of President Clinton’s economic plan, on Wednesday rejected a Republican “tax-free alternative” that would have relied entirely on deep spending cuts to lower the deficit over the next five years.

Democrats denounced the GOP proposal as “political hocus-pocus,” a Medicare “meat ax” and a “millionaires’ protection act” when it was unveiled only a few hours before a Senate roll-call vote on a parliamentary point of order sealed its fate.

Republicans, however, declared that it would save $367 billion between now and 1998 without raising taxes by placing severe restraints on the growth of Medicare, Medicaid and other mandatory “entitlement” programs, as well as freezing domestic outlays.

While dropping all of Clinton’s proposed tax increases and new spending requests and adopting all of his plans for specific spending reductions, the GOP measure would bring the deficit down to $197 billion after five years, its supporters said.

Democrats torpedoed the Republican plan by objecting that it violated federal budget regulations by improperly imposing new spending caps. Republicans moved to waive the rule, a parliamentary maneuver that requires a 60-vote majority for passage. They were defeated, 55 to 43, falling 17 votes short.

With the Republican effort swept aside, the Senate is expected late today to pass the version of the President’s economic plan that cleared the Senate Finance Committee and send it to a Senate-House conference committee. There the bill will have to be reconciled with a strikingly different House version. The bill in its final form then would have to be resubmitted to both chambers for passage.

The GOP plan would have frozen foreign and domestic spending at current levels for five years while allowing some increases in defense outlays as Clinton has recommended. But the heart of the GOP alternative would have saved another $49 billion in unspecified cuts in mandatory benefit programs starting in 1996.

A summary of the proposal indicated that it would be aimed primarily at Medicare and Medicaid, programs whose costs have risen far faster than the rate of inflation and the growth in population.

Democratic critics pounced on the Republican plan, noting that it would scrap the President’s proposed tax increases on upper-income Americans and save money at the expense of those who depend on government benefits.

“If you like sacrificing the benefits of the majority of the people of this country to help a few wealthy people, you’ll love this program,” said Sen. Jim Sasser (D-Tenn.), chairman of the Senate Budget Committee.

“These are Draconian cuts--they couldn’t possibly be enacted,” Sasser said. “This is political hocus-pocus.”

Even Sen. David L. Boren (D-Okla.), who led a fight inside the Finance Committee for additional spending cuts, described the Republican alternative as “a political charade” that did not specify how two-thirds of the reductions would be made.

But Republicans insisted that voters want Congress to “cut spending first,” and Sen. Kay Bailey Hutchison, the newly elected Republican from Texas, said that she favors the GOP approach. “Let’s take taxes off the table,” she said in her first Senate speech.

Sen. Bob Packwood (R-Ore.) said that the Republican plan showed the difference between the Democratic and Republican parties.

“They would tax, they would spend,” Packwood said of the Democrats. “We would not tax and we will not spend.”

But Sen. Barbara Boxer (D-Calif.) said that the Republicans’ proposed caps on benefit spending would destroy the Medicare program for elderly and disabled people while allowing the wealthiest persons to avoid any tax increase to aid deficit reduction.

“This is an irresponsible and reckless and radical budget,” Boxer said.

The Finance Committee bill would raise the tax rate from 31% to 36%, starting July 1, on taxable incomes of $140,000 and up for couples and $115,000 for single taxpayers. A 10% surtax would be imposed on taxable incomes above $250,000.

In addition, a 4.3 cent-a-gallon tax increase would be levied on gasoline, diesel and jet fuel, replacing the more controversial energy tax based on British thermal units that Clinton proposed and the House passed. The corporate income tax rate would be raised from 34% to 35% while the deductible part of expenses for business meals and entertainment would be lowered from 80% to 50%.

The bill also would raise the maximum percentage of Social Security benefits subject to income tax from 50% to 85%, affecting single people whose other income plus half of their benefits exceeds $32,000 and couples where that total exceeds $40,000.

About $107 billion in mandatory spending would be cut, chiefly by lowering payments to Medicare providers such as hospitals and doctors who treat elderly and disabled people.

While many Democrats expressed anguish over some provisions in the legislation, only Sen. Richard C. Shelby (D-Ala.) said that he would vote against it on grounds that it would “put the brakes on the engine of America’s economic growth.”

Since Democrats now have a 56-44 edge over Republicans, they appeared likely to have the votes to move the bill to Senate-House negotiations--where some Democratic senators’ objections may be addressed by the Democratic-controlled conference.

On another issue, the Senate late Tuesday approved a $1.8-billion supplemental appropriations bill that would provide $200 million for a summer youth employment program and the same amount for grants to state and local governments for hiring additional police officers.

* HEALTH CARE DELAY: Reform plan will not be unveiled until September. A10