NEWS ANALYSIS : Clinton’s ’95 Budget Belies Spend Image

When the Clinton Administration unveils its 1995 budget today, it will reveal a surprising new reality about politics and policy-making in this company town: Even an activist Democratic President is willing to dismantle longstanding liberal social programs that do not seem to be working very well.

From almost the moment he took office, Clinton has been characterized by conservatives as a classic tax-and-spend liberal bent on throwing taxpayer money at every problem he confronts. But the $1.5-trillion budget his Administration will deliver to Congress this morning will almost certainly belie that spendthrift image.

Clinton’s plan for the fiscal year beginning next Oct. 1 contains significant cuts in such sacred cows as assistance for poor people with big energy bills, construction of public housing in America’s inner cities and operating subsidies for metropolitan mass transit systems.

“We cannot just constantly rubber-stamp the programs that are in place now,” White House Budget Director Leon E. Panetta said Sunday on ABC-TV’s “This Week With David Brinkley.” “I think that is good management.”

Altogether, Clinton plans to cut $30 billion from existing federal programs next year in order to comply with the harsh spending limits imposed by his own five-year, $500-billion deficit-reduction package, which was approved by Congress last August.

The Clinton budget includes proposals to completely eliminate funding for about 115 programs. While most are relatively small, all have protective constituencies and congressional allies.

Clinton has little choice but to cut. The deficit crisis of the late 1980s and early 1990s finally forced Washington to face up to the harsh reality that America could no longer afford the rich array of social benefits put in place over the previous three decades.

Under separate deficit-reduction agreements passed in 1990 and 1993, taxes were raised, spending was reined in and tough new rules were imposed to make it difficult for either the President or Congress to launch expensive new initiatives.

In one of the ironies of modern politics, the fiscal squeeze forced Clinton, a Democratic activist who believes that government can and should intervene in the economy, to curb his own desire to reinvigorate programs that languished under 12 years of Republican rule.

Of course, Clinton will attempt to increase funding for some of his pet policy initiatives in areas such as job training, preschool programs, high technology and public health. Of the $30 billion that Clinton proposes to squeeze from existing programs, he wants to put at least $16 billion back into his “investment agenda” priorities.

Panetta noted, for instance, that the budget will include $2.7 billion in new funds for the President’s crime-prevention initiative. Similarly, new technology programs designed to help the defense industry convert to civilian enterprises will go up 40% to 50%.

Clinton’s efforts to shift funds toward his priorities will be fiercely opposed by supporters of existing programs slated for cuts. Last year, Clinton’s “investment agenda” received about 69% of the funding the Administration requested because of the tight budget constraints. What’s more, previous Republican administrations proposed many of the same reductions Clinton will announce today, only to see Congress restore funding later.

But the fact that the cuts are being proposed at all could signal that some Democrats are coming to grips with the policy and political consequences of limited financial resources.

One sign of the changing climate is the increasing frequency with which liberals are attacking the agenda of the President they helped elect, accusing Clinton of being too modest in his policy ambitions and too narrowly focused on deficit reduction.

“I’m not going to sit here and say that George Bush would have done the same thing, or Ronald Reagan . . . (but) I think there are similarities in this budget in terms of proposed cuts that this President has offered and what we have seen in previous years from Mr. Reagan or Mr. Bush,” Rep. Kweisi Mfume (D-Md.), chairman of the Congressional Black Caucus, said Sunday on NBC-TV’s “Meet the Press.” “I’m not satisfied with the budget.”

In fact, liberals are already beginning to argue that because the new budget will show a rapidly shrinking deficit, it is time for Washington to ease up on spending constraints and fully fund domestic programs that continue to languish.

“We have gone too far over toward deficit reduction,” said Jeff Faux, president of the Economic Policy Institute, a liberal think tank in Washington. “It is time for Clinton to go back to the investment agenda that he talked about during the campaign.”

Panetta said on the ABC program that the Clinton budget would estimate a 1995 deficit of $176 billion, far below the $302 billion estimate made when Clinton took office a year ago.

Of the $126-billion reduction, Panetta said $22 billion would be attributable to the improving economy; more Americans are working and paying more federal taxes, and the cost of providing assistance to the poor and unemployed is declining. But he said the remaining amount of deficit savings is attributable to passage of the Clinton economic plan, which reduced federal spending and raised taxes in roughly equal amounts.

In late January, the Congressional Budget Office released an even more optimistic deficit forecast, predicting the annual shortfall would drop to $171 billion in 1995.

Panetta dismissed suggestions that the improving budget outlook gives Clinton room to open the spending spigot again. He said the “hard freeze” on discretionary spending imposed by last year’s deficit-reduction agreement should be seen as an opportunity to make strategic decisions about which functions the government should continue to perform for society and which it should abandon or turn over to the private sector.

“I think the opportunity to exercise good fiscal discipline with regard to federal spending provides one great opportunity for this country, which is to prioritize programs, to decide what programs we don’t need, to decide what programs we can cut, to decide what areas we shouldn’t get into and to focus our investments in the areas we think are important,” he said.

Clinton has used that standard in preparing the 1995 budget, he said. For example, in mass transit, the Administration decided it makes sense to help cities build transit systems, but not to subsidize their operating losses. The subsidies, Panetta said, simply allow local officials to keep fares artificially low.