Broad Outlines for Budget Proposal OKd : Economy: Senate-House conferees craft compromise that boosts the gasoline tax 4.3 cents. It comes close to meeting Clinton’s $500-billion deficit-reduction target.


The Clinton Administration and Democratic leaders announced Friday night that they have agreed on the broad outlines of an economic plan that increases the federal gasoline tax by 4.3 cents per gallon but falls slightly short of President Clinton’s $500-billion deficit-reduction target.

Negotiators also agreed to back-date tax increases on wealthy Americans to Jan. 1, a move that will raise an additional $6 billion in revenue. Negotiators tentatively agreed last week that the increase would be retroactive to March 1.

The tax increase will apply to individuals with taxable incomes over $115,000 and couples who earn more than $140,000, who will move into a new 36% tax bracket, up from the current 31% ceiling. In addition, those with taxable incomes above $250,000 will pay a 10% surtax.

“A couple of issues remain open but the overwhelming number of issues have been resolved,” House Speaker Thomas S. Foley (D-Wash.) said after marathon negotiations on the politically sensitive bill.


At the White House, a spokesman for Clinton said: “There’s agreement in principle and we’re very encouraged by that.”

Foley and Senate Majority Leader George J. Mitchell (D-Me.) refused to disclose details of the tentative accord but both predicted that the legislation would pass the House and Senate next week.

They said that a finished product would be ready for presentation to Senate-House conferees Monday and that details would be made public then. Negotiators and staff aides will work over the weekend to fill in the remaining blanks and complete the calculations on revenue gains and losses, a White House official said.

“There is no final deal yet,” said George Stephanopoulos, a senior adviser to Clinton, but he indicated that the remaining differences would be resolved by Monday so that Congress can vote on the bill before it begins its scheduled summer recess next Friday.


The marathon negotiations were aimed at finding the delicate balance that was needed to avoid losing any votes in the Senate, where the original legislation passed by one vote, or even a handful of votes in the House, where a differing version passed by six votes.

The decision to limit the gasoline tax increase to 4.3 cents, insisted upon by the Senate despite the Administration’s hopes of adding 6 cents to the existing 14.1-cent-a-gallon tax, meant that negotiators had to seek other sources of funds to protect House-backed anti-poverty provisions in the bill.

It also undercut attempts to get $500 billion worth of deficit reduction. Foley and Mitchell said, however, that red-ink spending would be lowered by $496 billion to $498 billion over the next five years if the bill is enacted.

Among outstanding questions Friday night were the precise amount of Medicare spending cuts and the number of depressed urban areas to be designated as “empowerment zones” for special federal assistance. Conferees had decided earlier to cut Medicare spending by $54 billion over the next five years, splitting the difference between the $50 billion in the House version of the bill and $58 billion in the Senate version.


Friday, however, they agreed to reduce Medicare spending by $56 billion. The size of the cut triggered immediate protests from senior citizens’ groups and medical providers. Congressional aides familiar with the bargaining said that it was the biggest unresolved issue.

Lawrence T. Smedley, executive director of the National Conference of Senior Citizens, said that his organization cannot support cuts beyond the $54-billion figure.

“There is every appearance that key negotiators in the conference view Medicare and senior citizens as kinds of fiscal cash cows to be milked to protect special interests and to make up for shortfalls in fair taxation of energy use, large business and the wealthy,” Smedley said in a statement.

Lonnie R. Bristow, chairman of the AMA’s board of trustees, said that $56 billion in Medicare cuts would “threaten access to health care for people over 65, the fastest growing segment of our population. . . . We recognize the need for the most effective budget package possible but not if it compromises the health of millions of Americans.”


On the empowerment zones, conferees had agreed earlier to spend $1 billion to help 10 urban areas with high jobless rates through programs that include incentives to attract businesses and to hire local residents.

In addition, negotiators looked for other sources of revenue to pay for anti-poverty programs, such as a tax break for low-income working families, known as the earned income tax credit.

Although the bargaining has gone on for two weeks, the final stages proceeded slowly in a room near the House floor during the morning and in Mitchell’s office in the afternoon and evening.

While Democrats struggled to nail down an agreement, Republicans kept firing at the President’s budget proposal as a “recipe for disaster” and some argued that the Administration should start thinking about a fallback if the package is defeated.


“The American people don’t like this bill,” said Sen. Trent Lott (R-Miss.). “They don’t like the gasoline tax increases. They don’t like the tax increases generally. . . . I predict that . . . the Senate will defeat this package.”

The House, which passed its version of the legislation by 219 to 213, is expected to vote on Thursday, with a Senate vote following later that day or Friday. Every vote will count in the Senate, which passed an earlier version of the bill when Vice President Al Gore cast a tie-breaking vote.