President Wages a New Budget Battle in House

Less than a week after his victory on the North American Free Trade Agreement, President Clinton faces another critical challenge in Congress today when the House votes on a bipartisan budget-cutting plan that threatens to strangle Clinton’s domestic agenda.

The President and his congressional allies worked furiously against the deficit-reduction measure through the past weekend and seemed to be making progress in their efforts to defeat it.

“We’re moving, we’re moving,” said Rep. Bill Richardson (D-N.M.), chief vote-counter in the House Democratic leadership’s campaign to defeat the budget-cutting plan sponsored by Reps. Timothy J. Penny (D-Minn.) and John R. Kasich (R-Ohio).

Yet the White House remained fearful that a congressional stampede for spending cuts far beyond those imposed by Clinton’s own budget would make it nearly impossible for the President to live up to his campaign promise to fund long-neglected domestic programs such as job training, public works projects, education and health care reform.

If approved, the budget-cutting measure would almost certainly mean that many of the initiatives begun this year--Clinton’s national service program, for instance--would never be able to grow beyond minor pilot projects.

The Penny-Kasich proposal calls for $90.3 billion in new spending cuts over the next five years. If approved, the cuts would come on top of reductions already included in Clinton’s five-year, $500-billion deficit-reduction package passed in August.

The Administration is especially worried about the effect of such large reductions on Clinton’s health care reform effort. The Penny-Kasich measure includes $37 billion in Medicare savings, money that Clinton hopes to use to help finance his health care plan.

Without those funds, the Administration warns that it will have to either phase in its health care plan more slowly or raise more taxes to pay for it.

On Sunday, the White House and its supporters also warned that the Penny-Kasich plan to slash Medicare funding would force the states to pay more for health care services for the poor who are elderly or disabled.

A study by the Center on Budget and Policy Priorities found that the budget-cutting package would require the states to pay $5.1 billion more in Medicaid. It also said the package would require Medicare beneficiaries to pay 20% of the costs of home health care services, now covered entirely by Medicare.

The Penny-Kasich plan would require state Medicaid programs to pick up these co-payments for the nearly one-third of the elderly and disabled on Medicare. That would add $700 million to the cost of the state Medicaid program in California alone over the next five years, according to Robert Greenstein, executive director of the liberal-oriented budget center.

In fighting the Penny-Kasich measure, top House leaders threw hard balls at the huge class of fiscally conscious House freshmen. The 13 chairmen of House Appropriations subcommittees sent letters warning some of the 114 first-termers that specific projects in their districts would be imperiled if the budget-cutting plan went through.

A furious Kasich told reporters that it was “an absolute outrage to threaten freshman members . . . that if they vote to cut the deficit, they are going to be punished.”

Kasich said he thought his plan was “within striking distance” of victory “but with these kinds of tactics, I don’t know how you withstand it.”

With the Administration so fiercely opposed to giving up Medicare cuts for deficit reduction, Sen. Bob Kerrey (D-Neb.) has offered a compromise. Kerrey, who has introduced legislation in the Senate similar to the Penny-Kasich plan, suggested that the cuts be placed in a trust fund earmarked for the Clinton health care reform effort. But there is no indication that the compromise would satisfy Penny-Kasich backers in the House.

To combat the Penny-Kasich bill, the Clinton Administration has introduced its own budget-cutting package, totaling about $37 billion. Clinton’s version, sponsored by House Budget Committee Chairman Martin Olav Sabo (D-Minn.), does not include any of the Medicare reductions in the Penny-Kasich plan.

But the two plans do overlap in other areas. Both call for the elimination of 252,000 federal jobs over the next five years--locking into law a proposal first unveiled in the Administration’s “reinventing government” report in September.

Originally, the Administration hoped that report would provide enough spending cuts to satisfy the deficit hawks in Congress. But the nonpartisan Congressional Budget Office judged that the task force report included far fewer genuine spending reductions than the Administration had claimed.

The Penny-Kasich legislation has its roots in last summer’s budget fight. Penny agreed to vote for the Clinton budget plan only after the White House and the Democratic leadership in Congress agreed to let him propose more spending cuts in the fall. The Clinton plan scraped through with only one vote to spare in both the House and the Senate.

Until the last few days, the White House feared that the Penny-Kasich proposal would pass easily, setting up a fierce struggle in the Senate. But a full-court press by Clinton and the Democratic leadership seems to have shifted the momentum against the House insurgents.

Most notably, the Administration’s decision to introduce its smaller deficit-reduction package helped win support. That proposal will allow lawmakers to vote for deficit reduction while still supporting the President.

“I don’t think we have the votes to win, but I don’t think they have the votes yet to defeat it either,” a legislative strategist for Penny said.

“We’re climbing bit by bit,” said Gene Sperling, a top White House economic adviser who has been working all week to defeat the Penny-Kasich plan. “The more people become aware of how harmful this would be to health care and how it would put pressure on the defense budget for deeper cuts, the more people are thinking twice. I’d say now it is possible for us to win. But it didn’t seem like that a week ago.”

Kerrey said he doesn’t expect his plan to be voted on in the Senate until early next year.

Times staff writer Karen Tumulty contributed to this story.