Feinstein Gains Unusual Clout in Budget Talks

Sen. Dianne Feinstein is no stranger to the power and prestige of high political office, but it’s never been quite like this before.

For the last week or so, congressional negotiators who are hammering out a final version of President Clinton’s economic program have listened attentively to her every demand and done their best to placate her.

No fewer than seven Cabinet secretaries have sought her out. The chief executives of some of the nation’s largest firms have been dropping by and writing to her with regularity. And over the weekend, the President asked if the California Democrat might spare time for a private chat in the White House family quarters.

It might seem unusual that a first-year senator should get such solicitous attention, but Feinstein belongs to an influential group: the short list of Democrats who are considered possible defectors when Clinton’s program comes up for a final vote on the Senate floor next week.

Last month, it passed by one vote, with Vice President Al Gore casting a rare tie-breaking vote. If Clinton loses even one supporter, the whole package could go down.

That gives Feinstein, the former San Francisco mayor who has been increasingly vocal about her misgivings concerning the package, enormous leverage in the critical battle, even though she is not a member of the conference committee shaping the budget plan.

“Shakies rule the day,” Sen. John B. Breaux (D-La.) said of the handful of senators who have yet to commit their votes.

When it comes right down to it, Democrats are betting that Feinstein will vote in favor of the bill; Republicans write off her refusal to commit herself as political posturing in preparation for her 1994 reelection campaign.

But by keeping her options open, congressional sources said, she has had a major role in the conference committee’s decision to eliminate a surtax on capital gains and to restore incentives for long-term investing in small start-up firms.

She also helped win a $366-million tax break for struggling real estate developers whose banks agree to debt forgiveness, and she is continuing her efforts to win additional aid for the industry through the tax code.

“It isn’t over yet. Don’t be surprised if things go in an agreeable way for California real estate,” said one Democratic aide who has been closely involved in the budget talks.

For the record, White House officials say they are sympathetic with Feinstein’s objections and want to do what they can to alleviate them.

“She’s concerned about how the plan impacts on California, and I respect that,” said Leon E. Panetta, director of the White House Office of Management and Budget.

But others in the Administration confide that they are reaching the point of exasperation.

First, it was helping the oil industry, then it was the capital gains tax, one official said. “God knows, next thing she will be on the business-meals deduction. Her concerns about the budget seem to be a kind of moving target. It’s never the fundamental elements of the package but all the nuances of (tax) breaks here and there.”

Another likened trying to pin down her vote to “being on a Mr. Toad’s Wild Ride” at Disneyland. “You don’t know what she is going to do next.”

Yet Lawrence F. O’Donnell Jr., chief of staff of the Senate Finance Committee, said it should not be surprising that a senator representing the nation’s largest and most diverse state should have a broad list of objections to the bill.

Where a senator from North Dakota could focus his effort on the energy and agriculture provisions of the bill, “California has every industry there is and has them in large measure,” O’Donnell said. “It’s the biggest (agricultural) state. It’s the biggest everything state.”

Feinstein is under intense pressure, in part because this is likely to be the most significant vote she casts before facing California voters next year in her first reelection campaign.

Sen. Barbara Boxer (D-Calif.), who is not on the ballot again until 1998, says she shares many of Feinstein’s concerns about the bill but is firmly committed to voting for it.

Rather than publicize her misgivings with the budget proposal, Boxer has labored behind the scenes to win incentives for California business and to obtain funding for various interests in the state.

“I just have chosen to work the way I do best, making my case in hand-to-hand combat with my colleagues who have decision-making power,” Boxer said.

As a longtime House member, Boxer appreciates the subtle, long-term benefits of winning points as a loyal Democrat during a time of need for Clinton, said one top Senate Democratic aide.

“Boxer has been in Washington for 10 years with a Republican Administration,” said the aide, who spoke on condition of anonymity. “She knows you cannot (politically) kill this President. He is trying to turn this economy around.”

On Wednesday, Boxer appealed to her colleagues on the Senate floor to fall in line. “President Clinton’s budget isn’t perfect, but it is the best alternative,” she said. “Any one of us can pick it apart. I could do that. Any senator could do that.”

Feinstein has proven a thorn in the side of the Administration on more than one occasion. Siding with Kern County oil producers, Feinstein was outspoken in her opposition to a wide-ranging energy tax proposed by Clinton. And when the President’s budget reached the Senate floor last month, Feinstein made her reservations clear.

“I intend to vote for the bill now before us, but no one should misconstrue that vote as an indication that I will support the final bill that comes out of the conference committee unless there are significant changes in this legislation,” she said.

Feinstein’s major objection is that the Finance Committee, bowing to oil-state senators’ demands for lower energy taxes, stripped the legislation of almost all the investment incentives Clinton originally proposed and the House approved.

Feinstein noted in an interview that these are precisely the sorts of pro-growth measures that both she and the President promised in their campaigns.

“My points are not far from what President Clinton is trying to do,” she said.

“It’s fine to tax the so-called big boys, but what you want them to do, you see, is invest in the economy, because they can find enough shelters not to pay the taxes,” she said.

She also said she hopes to enlist Clinton’s support for what she described as “a California strategy,” which would include funneling defense-industry-conversion dollars into the state and investing in massive job-creating projects, such as a high-speed rail line and shipbuilding.

But many GOP lawmakers say they are skeptical when they hear Feinstein sounding pro-business themes more generally associated with their party. In the end, some Republicans said, she will vote for the plan--as she has for every Clinton bill thus far--because to oppose it would be to put her finger to the trigger of a gun aimed at the heart of the first Democratic presidency in 12 years.

What is really giving her pause, they said, is the proximity of the next election. While she is still considered the heavy favorite, credible opposition is emerging in possible challenges by Reps. Christopher Cox (R-Newport Beach) and Michael Huffington (R-Santa Barbara). Both would be expected to try to exploit voter distaste for Clinton and his economic plan.

“She always votes for Clinton,” said California GOP Chairman Tirso del Junco. “It would be the surprise of the year if she does not vote for him. She is playing games. She is running for office. She knows the budget issue is very unpopular in California.”

“That’s baloney,” Feinstein retorted angrily, when asked if her reelection figures into her strategy.

Many of the items Feinstein hopes to have restored in the bill are boons to the state’s politically active high-tech industry.

In particular, she is fighting what appears to be a losing battle to have tax credits for research and development made permanent. It was something Clinton promised in his campaign but retreated from in his scramble for revenues to reduce the federal budget deficit. At one point in the congressional negotiations, it appeared that the credit would be allowed to lapse entirely for 18 months. Now, the issue is back on the table.

If it is reinstated, even temporarily, Feinstein will get the credit. And her efforts could win powerful allies in the high-tech industry, which contributed heavily in the last election to her opponent, Republican John Seymour.

Times staff writers James Risen and Dwight Morris contributed to this story.

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