Democrats Pursue Social Gains Via Mandate Route : Government: With the Treasury broke, private sector is being targeted. A striking example is in health plan.


Squeezed between expansive ambitions and crimped resources, the Clinton Administration and Democrats in Congress are increasingly pursuing their social goals by seeking to mandate actions by the private sector.

The most vivid example is President Clinton's proposal that all employers be required to pay for health insurance for their workers. But ideas under discussion in the Administration and Congress extend well beyond that--requiring all companies to establish labor-management committees to monitor workplace safety, for example, and mandating that financial institutions such as insurance companies and mutual funds invest in blighted urban areas.

"Government has basically three ways of achieving social objectives," said Thomas E. Mann, director of governmental studies at Washington's Brookings Institution. "They can spend money to buy it. They can offer incentives by forgoing tax revenues. Or they can issue commands. Insofar as the Treasury is broke, that limits the first two options, and I think government is increasingly stuck with third option of issuing commands."

Alarmed business groups--especially groups representing small business--are already arguing that a new wave of mandates will cost jobs and weaken the economy.

"Congress has already bankrupted the federal government with entitlements it can no longer afford to pay," said Mike Roush, chief Senate lobbyist for the National Federation of Independent Business, a small-business lobbying group. "And now it is trying to shift entitlements to employers."

Fearful of being tagged anti-business, Administration officials are skittish about any suggestion that Clinton is too eager to impose new mandates on employers, and the Administration is proceeding cautiously on several such proposals.

While Clinton has proposed the health insurance mandate and signed legislation requiring employers to provide workers with unpaid family and medical leave, he has quietly shelved a campaign proposal that would have required all businesses to spend at least 1.5% of their payroll on worker training.

In regulatory policy--as opposed to social policy--the Administration has displayed interest in alternatives to mandating business action. A plan it will release shortly to reduce the emission of gasses that contribute to global warming, for example, is expected to rely almost exclusively on voluntary measures rather than mandates.

"There is a balance," said one White House economic adviser. "Whether it is an economic balance is another question. But there is definitely a political balance."

But the same logic that attracted the Administration to the employer mandate as a centerpiece of its health care plan may inexorably force it to move in that same direction on other issues.

During the 1980s, Republican Presidents Ronald Reagan and George Bush preferred using the tax code to achieve their goals. Bush proposed tax credits for businesses that granted family leave to new parents, and he asked for tax credits and deductions to help uninsured individuals purchase health insurance.

Democrats, by contrast, are generally quicker to put new burdens on business. Bush twice vetoed family-leave legislation sent to him by the Democratic Congress; Clinton signed it as one of his first acts in office.

Two larger forces--the gigantic federal budget deficit and the declining importance of labor unions and big corporations--are pushing in the same direction.

The federal government's financial squeeze has made new federal spending and tax cuts increasingly difficult to defend. In some instances, mandates can directly replace federal spending.

Health care is a prime example. Some health policy analysts argue that the government should pay for universal coverage--either because they believe such a system would be more efficient or because they consider it more equitable to pay for a broad social need publicly.

Administration officials, joined by many large employers, reject those arguments. An employer mandate, they argue, would eliminate the kinks in the current system that effectively compel firms that provide insurance to subsidize those that don't.

But it is also true that a government-financed health care system would require a huge tax increase that few in Washington are willing to consider. By demanding the contribution from employers who don't provide insurance, Clinton and Congress may be able to expand coverage without an unpopular general tax hike.

The same pattern of substituting private for public dollars runs through a developing debate over how to revive the inner cities. Inside the Administration and among Democrats in Congress, there is a growing consensus that the key to reviving inner cities is not so much inaugurating new social programs as attracting investment capital for small business and housing.

For years, Republicans have unsuccessfully proposed giving tax breaks to businesses that invested in blighted areas designated by the government as "enterprise zones." Congress finally passed such a plan this year but because of the cost in lost revenue, the plan is modest in scope.

To attract more funds, the Administration, has proposed establishing a nationwide network of community development banks to make loans in depressed areas. But the funding squeeze has constrained this initiative too; the Administration proposed only $382 million in federal funds for those banks over the next five years--not enough to make much of a splash.

As an alternative to federal dollars, a growing number of Democratic activists and legislators are suggesting that all financial institutions--including insurance companies, mutual funds and mortgage bankers--be required to invest in inner cities. Only banks now face such mandates under the 1977 Community Reinvestment Act.

The Administration has not yet embraced the idea of expanding community investment responsibilities beyond banks. But Frank N. Newman, the Treasury undersecretary for domestic finance, substantially boosted the notion by urging consideration of it earlier this year.

House Democrats are taking a modest first step by pushing legislation requiring insurance companies to release data on their inner-city loans and investments; the House Energy Committee and the House Banking Committee have already approved competing bills. That could be only the prelude to a much broader debate about how to squeeze more funds from these financial behemoths for inner cities.

"I have seen a tremendous upsurge in interest in the last year around this concept," said Allen J. Fishbein, general counsel of the Center for Community Change. "There's a very great chance that within the next two years, there will be a major proposal in this area."

Changes in the workplace are the second major trend propelling employer mandates to the front of the line. As unions and large corporations have declined relative to non-union and smaller firms, and as employers of all sizes have come to rely increasingly on part-time workers, the post-World War II trend of expanding worker benefits has stalled and in some areas reversed.

According to the Bureau of Labor Statistics, 97% of full-time employees at medium and large companies received health insurance in 1980; by 1991 the figure had dropped to 83%. For workers at smaller companies, the 1991 figure was only 69%.

By ordering employers to provide such benefits as family leave and health insurance, government is effectively assuming the role once played by unions and the Fortune 500: establishing a base line of benefits to which all workers are entitled.

With the health care proposal, according to an early draft of the Clinton plan, the Administration wants employers not only to buy insurance for full-time workers but also to pick up part of the cost for part-time employees working at least 10 hours a week.

That would mark a major expansion of employer responsibilities toward part-time workers; only employees working at least 25 hours a week are entitled to family leave. Currently, only 28% of part-timers at large companies--and only 6% at small companies--receive health insurance benefits, according to BLS figures.

Observers in both business and liberal circles say they believe that if passed, Clinton's health care proposal could establish the principle that employers must provide part-time workers with some of the same basic benefits as full-time workers. That's become an important goal for liberals and labor leaders concerned that employers are replacing full-time with part-time workers to avoid paying health care, pension, vacation and other benefits.

But tackling the disparities between part-time and full-time workers remains several years away at the earliest. After the battle over health care, some believe that new mandates on business could look as politically hazardous to Clinton as new taxes did after this year's budget fight.

"Health care is given a special status because a lot of companies think the mandate will make things cheaper for them," said William T. Archey, senior vice president for policy at the U.S. Chamber of Commerce. "But there is a big reaction building to all of this. To impose a mandate . . . is going to become increasingly more difficult."

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